U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUER UNDER SECTION 12(b)
OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
ZIASUN TECHNOLOGIES, INC.
--------------------------------------------
Name of Small Business Issuer in Its Charter
NEVADA 84-1376402
- ---------------------------------- --------------------
(State or other Jurisdiction of (IRS Employer
of Incorporation or Organization) Identification No.)
N/A
----------------
SEC File No.
462 Stevens Avenue, Suite 106, Solana Beach, California 92075
- ------------------------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (619) 350-4060
--------------------
Securities to be registered pursuant to Section 12(b) of the Act:
NONE
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 Par Value Per Share
----------------------------------------
Title of Class
Documents Incorporated by Reference: See Exhibit Index herein.
1
<PAGE>
PART I.
Item 1. Description of Business
-----------------------
(a) Business Development
ZiaSun Technologies, Inc. (the "Company") was organized under the laws of
the State of Nevada on March 19, 1996, under the name "Carlisle Enterprises,
Inc." The Company was incorporated for the purpose of executive search and
recruitment of employees for businesses. The Company was initially authorized to
issue a total of 50,000,000 shares of common stock having a par value of $0.001
per share. A copy of the Company's initial Articles of Incorporation are
attached hereto and incorporated herein by reference. See the Exhibit Index,
Part III.
At the Company's inception, the Board of Directors authorized the issuance
of 50,000 "unregistered" and "restricted" shares of its common stock at a price
of $0.10 per share to Jennifer C. McMinn, a former executive officer who may be
deemed to have been a founder of the Company.
Commencing on February 20, 1996, pursuant to an exemption provided by Rule
504 of Regulation D and Section 4(6) of the Securities Act of 1933 (the "1933
Act"), the Company publicly offered and sold an aggregate total of 750,000
shares of its common stock to approximately 50 non-U.S. investors at a price of
$0.10 per share. The offering was completed with the Company receiving aggregate
proceeds of $75,000 before payment of legal, accounting and printing expenses.
On April 9, 1996, the Company's common stock became quoted on the OTC Bulletin
Board under the trading symbol "CLEP."
Following completion of its public offering, the Company initially
evaluated acquiring exclusive North American distribution rights for beverage
centers and other products of Fountain Fresh International ("FFI"), a Utah
corporation.
On January 6, 1997 the Company sold 5,000,000 restricted shares of its
common stock pursuant to Regulation S of the 1933 Act to several non-U.S.
foreign corporations, at a price of $0.10 per share, for total cash
consideration to the Company of $500,000.
On February 3, 1997, the Company sold 10,000,000 shares of its common stock
pursuant to Section 4(2) of the 1933 Act to several non-U.S. foreign
corporations, at a price of $0.10 per share, for total cash consideration to the
Company of $1,000,000.
On April 17, 1997, the Company acquired all right, title and interest of
Katori Consultants, Ltd. ("Katori"), of that certain License Agreement between
Katori and FFI. Under the terms of that License Agreement, the Company, as the
Licensee acquired the exclusive USA distribution rights for the beverage centers
and other products of FFI. In exchange for these distribution rights, the
Company agreed to pay a total of $5,000,000 in annual payments through the year
2016, with a $15,000 royalty fee for the first year and a $30,000 royalty fee
for the second year. Copies of that License Agreement and Assignment of License
Agreement are attached hereto and incorporated herein by reference. See the
Exhibit Index, Part III.
On April 29, 1997 the Board of Directors, in accordance with Section
78.315(2) of the Nevada Revised Statutes, authorized a company name change to
BestWay, USA. A copy of the Certificate of Amendment of the Articles of
Incorporation changing the name of the Company is attached hereto and
incorporated herein by reference. See the Exhibit Index, Part III.
2
<PAGE>
During July 1997, the Company authorized the private placement of 1,000,000
shares of the Company's common stock at a price of $2.50 per share. The Company
sold a total of 129,994 shares and received $324,984 in cash from this private
placement.
On September 2, 1997, the Company qualified to do business in the State of
Utah as a foreign corporation. On October 31, 1997, the Company qualified to do
business in the State of California as a foreign corporation. On September 4,
1998, following written consent of the Company's stockholders and in accordance
with Section 78.320(2) of the Nevada Revised Statutes, the Articles of
Incorporation were amended to: (a) authorize a 1-for-2 reverse split of issued
and outstanding common stock of the Company, and (b) change the name of the
Company to its current name "ZiaSun Technologies, Inc." The reverse split and
name change became effective upon the filing of the Certificate of Amendment of
the Articles of Incorporation with the Secretary of State of Nevada on September
10, 1998. A copy of the Certificate of Amendment of the Articles of
Incorporation effecting the reverse stock split and name change are attached
hereto and incorporated herein by this reference. See the Exhibit Index, Part
III.
During 1998, the Company identified numerous design problems with the
beverage centers manufactured by FFI which would require major redesign before
those beverage centers could be successfully reintroduced into the marketplace.
Accordingly, on October 1, 1998, the Company wrote down the License Agreement
between FFI and the Company to its then estimated value of $50,000, and
effectuated a spin-off of the License Agreement to a newly formed, wholly-owned
subsidiary of the Company named BestWay Beverages, Inc. ('BestWay"), a Nevada
Corporation. Currently BestWay is inactive, pending the completion of design
modifications and successful testing of the new beverage center now being
developed by BEVEX (FFI was renamed BEVEX Inc. in August 1998).
During the last quarter of 1998 and first half of 1999, the Company
undertook several acquisitions and/or mergers to diversify and enter some
technology-based arenas.
Acquisition of Momentum Internet
--------------------------------
On October 5, 1998, the Company acquired Momentum Internet Incorporated,
("Momentum Internet"), a corporation organized under the laws of the British
Virgin Islands in a stock-for-stock exchange, whereby the Company issued
1,130,000 (post split adjusted) shares of restricted common stock in exchange
for all capital stock of Momentum Internet, thereby making Momentum Internet a
wholly-owned subsidiary of the Company. Momentum Internet, whose main offices
are located in Hong Kong and Manila in the Philippines, has a range of Internet
products and services, including an international online stock trading portal, a
premium web-based e-mail service, an Internet advertising banner network, a
finance website, and an Asia-focused search engine. The acquisition of Momentum
Internet was, for accounting purposes treated as a recapitalization of Momentum
Internet. A copy of the Acquisition Agreement and Plan of Reorganization is
attached hereto and incorporated herein by this reference. See the Exhibit
Index, Part III.
Acquisition of Momentum Asia
----------------------------
On October 5, 1998, the Company acquired Momentum Asia, Inc., ("Momentum
Asia"), a corporation organized under the laws of the Republic of the
Philippines in a stock-for-stock exchange, whereby the Company issued 4,000,000
(post-split adjusted) shares of restricted common stock in exchange for all
capital stock of Momentum Asia, thereby making Momentum Asia a wholly- owned
subsidiary of the Company. Momentum Asia, whose main offices are located in the
Clark Economic Zone, in the Philippines, provides a wide range of compatible
graphic design, copy writing, printing, database management, and e-mail customer
service operations. The acquisition of Momentum Asia was, for accounting
purposes treated as a recapitalization of Momentum Asia. A copy of the
Acquisition Agreement and Plan of Reorganization is attached hereto and
incorporated herein by this reference. See the Exhibit Index, Part III.
3
<PAGE>
Acquisition of Asia4sale
------------------------
On March 25, 1999, the Company entered into an Acquisition Agreement and
Plan of Reorganization, under which the Company would acquire Asia4sale.com,
Ltd., ("Asia4sale"), a Hong Kong Registered Company. In exchange for 99 of the
100 shares of Asia4sale, the Company issued 100,000 (post-split adjusted) shares
of restricted common stock and paid $15,000 cash to the majority holder of the
capital stock of Asia4sale, thereby virtually making Asia4sale a wholly-owned
subsidiary of the Company. In addition, the Company made an unsecured loan of
$50,000 to Asia4sale upon closing of the acquisition and agreed to issue one (1)
additional share of restricted common stock for each two dollars ($2.00) of
actual earnings of Asia4sale for the period from April 1, 1999, through
September 31, 2000. Asia4sale is in the business of Internet related
international e-commerce. In addition, the Company was granted the option to
repurchase the 50,000 shares issued in the acquisition of Asia4sale for a period
of one (1) year at a price of $3.00 per share in the event that Asia4sale fails
to reach positive cash flow from its operations by September 30, 2000. The
acquisition was completed on May 12, 1999. The acquisition of Asia4sale was
accounted for as a purchase. All shares are recorded as being issued, even
though contingent, in accordance with EITF 97-8. Copies of the Acquisition
Agreement and Plan of Reorganization, Unsecured $50,000 Note and the Stock
Option are attached hereto and incorporated herein by this reference. See the
Exhibit Index, Part III.
Acquisition of Online Investors Advantage, Inc.
-----------------------------------------------
On March 31, 1999, the Company entered into an Acquisition Agreement and
Plan of Reorganization, under which the Company would acquire Online Investors
Advantage Incorporated ("OIA"), a Utah corporation. In exchange for all of the
capital stock of OIA, the Company issued 1,000,000 (post-split adjusted) shares
of restricted common stock and paid $400,000 in cash, all of which was
distributed pro-rata to the shareholders of OIA, thereby making OIA a
wholly-owned subsidiary of the Company. In addition, the Company issued
5,000,000 (post-split adjusted) shares pro-rata to the shareholders of OIA.
Those shares are currently being held in escrow in accordance with the terms of
the adjustment provision set forth in the acquisition agreement, based on
anticipated earnings of at least $2,500,000 for OIA for the period from April 1,
1999, through March 31, 2000. As set forth in the terms of the acquisition
agreement, in the event that the actual earnings of OIA are less than
$2,500,000, for the specified period, then the total number of shares being held
in escrow shall be reduced on a one-share basis for each $1.00 of actual
earnings of OIA less than $2,500,000. In the event that the actual earnings of
OIA is greater than $2,500,000, then the Company shall issue such additional
shares on the basis of one additional share for each $1.00 of actual earnings of
OIA greater than $2,500,000. The acquisition was completed on April 7, 1999. The
acquisition of OIA was accounted for as a purchase. All shares are recorded as
being issued, even though contingent, in accordance with EITF 97-8. A copy of
the Acquisition Agreement and Plan of Reorganization is attached hereto and
incorporated herein by this reference. See the Exhibit Index, Part III.
On February 12, 1999, the Company entered into an agreement with Global
Direct Marketing, Ltd., (Global), a corporation organized under the laws of the
British Virgin Islands, whereby Global was to be paid 75,000 shares of
restricted common stock upon the successful conclusion of negotiations to
acquire Online Investors. Global had introduced the Company to Online Investors.
Under this agreement, the shares are to be issued exactly nine months after the
date of formal acquisition of OIA, (i.e. December 7, 1999). A copy of the
Agreement is attached hereto. See Exhibit Index, Part III.
4
<PAGE>
On April 9, 1999, the Board of Directors, by written consent, declared a
two-for-one forward stock split for all shareholders of record as of May 14,
1999. A copy of the Certificate Pursuant to Nevada Revised Statute Section
78.207, whereby the Company effectuated this forward stock split, is attached
hereto and incorporated herein by this reference. See the Exhibit Index, Part
III.
On July 15, 1999, by written consent of the Stockholders, and in accordance
with Section 78.320(2) of the Nevada Revised Statutes, the Company restated its
Articles of Incorporation and Bylaws. Copies of the Restated Articles of
Incorporation and Restated Bylaws are attached hereto and incorporated herein by
this reference. See the Exhibit Index, Part III.
Operating Strategy and Business Revenue Model
---------------------------------------------
(b) Business of Issuer
The Company currently owns Internet based operations and holdings. The
Company believes the demographic shifts and huge growth potential of Asian
Internet usage will provide significant growth opportunities for its e-commerce
and other portals and divisions.
The Company actively seeks to acquire, structure, manage and consolidate
other select holdings through its wholly-owned subsidiaries operating in the
U.S. and in foreign markets. The objective is to acquire holdings which will
provide marketing and operating synergy with one another, are well positioned
and profitable in their targeted markets, and/or have demonstrated technical
expertise in certain areas of e-commerce. While the Company pursues certain
business opportunities, alliances and joint ventures which will enhance
profitable growth and development, and help maximize the shareholders' equity,
the company does not typically openly advertise to attract such opportunities.
The relative infancy of users of online financial services in the foreign
markets is another key to the Company's future growth. The Company is focused on
capturing a large market share of these foreign users and a significant
percentage of the growing number of U.S. users of Internet tools and services.
The U.S. domestic market is also projected to sustain its growth in domestic
e-commerce and online financial services usage, and is still developing in terms
of the number of educated users of these services.
The Company's business model is simple and proven in the Internet market
and presents continued long-term growth prospects. Substantial front-end revenue
is created by selling packages of Internet educational and e-commerce services
to businesses and/or consumers worldwide. The services and products sold contain
features designed to cross promote other portals, products and services of the
Company. These other products and services rely on backend commissions, fees,
profit sharing, and high-traffic to create revenue and operate with very low
overhead. This is expected to result in high profit margins for the Company.
Profit created by front-end sales of services, combined with net cash flow
generated by gains on investments and non-Internet divisions, is being invested
in the further development of the high profit margin Internet divisions. As this
operating model grows, the Company's base of loyal users, subscribers and
visitors to their websites and services will also grow. It will also build the
credibility necessary to establish further relationships, strategic alliances,
co-branding and licensing agreements with Internet companies with similar
interests.
The Company is diversified enough to not be dependent on any single product
or service. Rather, the wholly-owned subsidiaries publish, market and service
many web products and services, and maintain the necessary value-added support
for these products and services. Therefore, any of the Company's divisions,
Internet products or services, or joint ventures could be a stand-alone company.
This creates opportunities for sale or spin off of any holdings in order to
maximize shareholder equity.
5
<PAGE>
The Company may divest or "spin off" equity interest in one or more of its
entities when it is strategically and economically advantageous to shareholders.
This could increase the shareholders' equity, and, at the same time, allow the
Company to focus on its core operations and holdings, once it has adequately
entrenched itself in the most profitable targeted markets. It is expected that
stock dividends or warrants resulting from a spin off or stock exchange, or cash
dividends resulting from a cash sale, would be issued to company shareholders if
and when the Company divests itself of any given entity. No revenues from such
divestitures are included in the Company's financial projections, because it is
impossible to accurately forecast when such divestitures might occur.
(1) Principal products or services and their markets.
The Company's primary revenues are derived from their subsidiaries'
respective products and services, organized into the following divisions:
Internet Consumer Services Division
-----------------------------------
<TABLE>
<CAPTION>
Primary
Revenue From Operating Subsidiary Product/Service
-------------------------- ----------------------- --------------------
<S> <C> <C>
Online Education OIA Investors Toolbox
Off line Education OIA Live Workshops, Home Study
E-Commerce Sales Asia4sale/ Momentum Internet Asia4sale.com
Online Financial Services Momentum Internet/ Swiftrade Swiftrade
</TABLE>
This is the Company's largest revenue producing division. Education and
training are a major part of the Company's current business. Front-end revenues
are generated from memberships, subscriptions, attendance fees for live
workshops in major cities worldwide; and sales of Internet, audio, and video
home study programs. At the same time, the education division builds loyalty
for, and cross promotes other Internet Consumer Services offered by the Company.
The Company's online financial services portal, Swiftrade, generates front-end
revenue from referral fees per trading account; but projects substantially
higher future revenues from backend fees from transactions (orders), and profit
sharing agreements with its broker/dealer partners on various stock exchanges.
Asia4sale will generate front-end revenue from sales of regional e-commerce
franchises, while building a substantial free retail franchise structure to
serve as the distribution base for the products and services offered by the
Asia4sale "store."
Internet Media Sales
--------------------
<TABLE>
<CAPTION>
Primary
Revenue From Operating Subsidiary Product/Service
-------------------------- ----------------------- --------------------
<S> <C> <C>
Advertising on Websites Momentum Internet All Websites
Banner Advertising Momentum Internet PINmail/MediaHits
E-Mail List Rental Momentum Internet All Websites
Online Marketing Momentum Internet All Websites
</TABLE>
The company generates flat fees and fees per impression, visit,
click-through, or sign up for online advertisers of all types. Impressions are
generated by high traffic to the websites and by a large volume of banners
placed on PINmail pages used by the general public.
6
<PAGE>
Internet Support Services
<TABLE>
<CAPTION>
Primary
Revenue From Operating Subsidiary Product/Service
-------------------------- ----------------------- --------------------
<S> <C> <C>
E-Mail Customer Service Momentum Asia ServiceLive
Telephone Customer Service Momentum Asia ServiceLive
Database Management Momentum Asia ServiceLive/ Momentum Direct
</TABLE>
This division currently provides service and support for the Company's
high-traffic websites and portals. Future revenue will come from monthly fees
paid by non-related customers. The support services are being offered to
webmasters of other websites, which are currently being serviced from high-cost
areas of the world. The Company has space for substantial expansion, operates
out of a very low-cost region, and is negotiating with several potentially large
users of the service. Quantifiable cost savings can be achieved by client users
of the ServiceLive service, at the same time allowing the Company to generate
positive cash flow due to its established low cost base.
Printing and Direct Mail
------------------------
<TABLE>
<CAPTION>
Primary
Revenue From Operating Subsidiary Product/Service
-------------------------- ----------------------- --------------------
<S> <C> <C>
List Rental Momentum Asia Momentum Direct
Design/layout Momentum Asia Momentum Direct
Printing Momentum Asia Momentum Direct
Lettershop Momentum Asia Momentum Direct
</TABLE>
The wholly-owned subsidiary Momentum Asia has a substantial base of
clients, for which it provides printing and direct mail services. Momentum
Direct, a newly formed division of Momentum Asia is actively marketing these
services to large multi-national corporations. This division is profitable, and
will continue to grow by the addition of new clients.
Internet Investment Ventures
----------------------------
This division is managed through the Company and its subsidiary Momentum
Asia, and has a portfolio of holdings in public and private companies, held as
Marketable Securities and Investments Held to Maturity, depending on the
Company's strategy at the time of acquisition. This division continues to
aggressively pursue further investments in startup Internet related companies
with solid management and realistic business plans. Both short-term and
long-term gains are available from this division.
Summary:
--------
The Company is currently increasing its front-end sales revenues from
non-Internet related operations and cash gains on sales of investments. It is
anticipated that sales from these areas will continue to increase substantially
in the next two years. However, the Company's business plan projects backend
revenue in the form of commissions, transaction fees, and profit sharing from
its Internet Consumer Services division (e-commerce and online financial
services) will outgrow and exceed front-end revenue within the next two years.
7
<PAGE>
The Company's Subsidiaries and the Nature of Products and Services Offered
--------------------------------------------------------------------------
"OIA" provides in-depth consumer training via workshops, home study, and
online subscriptions (in optimum use of Internet investment and financial
management tools and services). OIA recently expanded into the International
marketplace. In addition, OIA currently has a working relationship with
Optioninvestor.com and Telescan. OIA and its data providers have formed
"Investors' Toolbox" (www.investorstoolbox.com), a proprietary website for its
subscribers and members for ongoing investment analysis.
"MOMENTUM INTERNET," either publishes its own online publications or enters
into Joint Venture agreements with suitable partners. The company then develops,
hosts, manages and promotes their own websites. Most sales are in U.S. Dollars,
and the Asian economic crisis has had a positive impact on operations due to
favorable exchange rates and lower facility costs. Momentum Internet manages all
online activities for its clients, including Barclays International Funds Asia
from its Manila and Hong Kong main offices. Following is Momentum Internet's mix
of products and services:
"SWIFTRADE" (www.swiftrade.com), is an online trading and financial
services portal, which provides Internet access for retail and
institutional users to international electronic stock trading. Currently,
the Swiftrade site is utilized in a joint venture with West America
Securities Corporation, a fully registered broker dealer located in the
United States, which provides users direct electronic access to trading of
stocks, options, mutual funds and other financial instruments available on
U.S. markets and exchanges. West America Securities has agreed to pay
Swiftrade, (a wholly-owned subsidiary of Momentum Internet, incorporated
under the laws of the British Virgin Islands) referral fees for each new
account. It is the first online trading system designed specifically for,
and targeted at, overseas investors trading in the U.S. stock markets.
Trades are cleared through West America Securities and its clearing agent,
Emmett A. Larkin, Inc.
Swiftrade plans to facilitate online trading from a single Internet
portal on several of the world's largest stock markets, including London,
Hong Kong Sydney, Singapore, and Frankfurt in 1999, with others to be added
in the future. In addition to the joint venture with West America
Securities for the U.S. markets, Momentum Internet has entered into
strategic partnership agreements in the brokerage industries in Hong Kong
and London. Swiftrade's proprietary "plug and play" technology, developed
by Momentum Internet for the purpose of linking Swiftrade users with stock
exchanges in London and Hong Kong, provides a direct link to the floor of
these and other non-U.S. Stock Exchanges. The software, complete with live
feeds from the exchange floors through Reuters Hong Kong Limited ("Reuters
HK"), ensures accurate trade execution, instant confirmation of trades and
accurate balances and positions. Momentum Internet receives transaction
(order) fees from its partner brokerages in London and Hong Kong.
Neither the Company or any of its subsidiaries is directly involved in
the brokerage business, or owns or operates an "online brokerage." The
Company is in the business of the web site creation, management and
exposure. The Company exposes the web site to the general public using a
variety of methods, including some of its own high traffic Internet
technology.
Swiftrade can represent more than one broker in each market and be
readily positioned in any other market where the Company sees growth
opportunities. Minimal spending is required for advertising and
infrastructure that brokerage house typically must spend to maintain market
share. Swiftrade shares in transaction fees without the burden of
increasing costs.
"PINMAIL" (www.pinmail.com) gives all websites the ability to offer
web-based e-mail from their pages, as do major sites like Netscape and
Yahoo!. PINmail also provides customized corporate versions and premium
e-mail accounts for individuals.
8
<PAGE>
"PINmail for Webmasters" is the free system for those who wish to add
e-mail service to their own website This service is completely free to
webmasters and users. Webmasters can add this service to any website by
simply downloading some HTML code and pasting it onto their pages.
"PINmail for Corporations", is a completely customized system using
corporate logos and colors. The Company's software interface is custom
designed to suit the clients' needs. This tailored corporate account will
then operate with any client's unique domain name. There is no setup charge
for this service. However, a monthly, tiered rate is charged for the number
of e-mail users registered for the service at the end of each month.
"PINmail for Individuals" is a premium version for business travelers
and others who need their e-mail in a single easily managed location. A
small annual fee is charged, and users of the premium service enjoy three
PINmail addresses, auto-forwarding to other e-mail accounts, and an
auto-responder, which can be set to answer messages when the user is
offline.
"MFINANCE" (www.mfinance.com) is an online financial publication
providing comprehensive data on US, Asian, and European stock markets, plus
additional finance and investment information for individual investors in
Europe and Asia. MFinance is continually being upgraded, and additional
news feeds and stock data from Reuters On-Line S.A. ("Reuters Online") will
enhance the site's position as a world-class resource for financial and
investment information. Revenue comes from subscriptions to a premium
service and advertising. Regular advertisers include Barclays International
Funds Asia and the Far Eastern Economic Review.
"SEARCH DRAGON" (www.searchdragon.com), an online business directory
and search engine, is a popular destination for those looking for
information on the Asian region. The website now covers Hong Kong,
Indonesia, Macau, Malaysia, the Philippines, Singapore, Taiwan and
Thailand. The Company's proprietary software allows webmasters of business
related sites to submit their own listings and update them whenever
necessary.
All websites are hosted on dedicated high-speed servers in Los Angeles,
California, directly connected to the Internet backbone with 24-hour technical
support.
"MOMENTUM ASIA" is a second subsidiary which provides a wide range of
compatible graphic design, copy writing, printing, database management, and
e-mail customer service operations. Through its service known as ServiceLive,
this subsidiary, provides compatible e-mail response service and database
management for the high-traffic websites and services managed by Momentum
Internet and other subsidiaries of the Company.
A Partial List of Momentum Asia's International Client Base Includes:
Federal Express (United States)
Enron Power (United States)
Neo-Art, Inc. (Netherlands)
IDESS Maritime Training Schools (Norway)
Ritchie Brothers Auctioneers, Ltd. (Canada)
Metroplex Casinos (Malaysia)
The Philippine Government (Philippines)
Subic Telecommunications Co., Inc. (Philippines)
(A joint venture between AT&T (U.S.). and PLDT (Philippines))
9
<PAGE>
"ASIA4SALE" is a wholly-owned subsidiary of the Company which is a
three-part e-commerce facility serving the global market:
1. Part 1 provides Home Shopping, so online shoppers anywhere in the
world will be able to order goods direct from manufacturers in Asia,
and have these purchases delivered direct to their door.
2. Part 2 provides Business-To-Business Barter. To provide a truly
professional service Asia4sale.com has acquired the assets of Pacific
Barter Ltd., a company specializing in barter in Asia.
3. Part 3 provides Industrial Auctions. Businesses, dealers or
individuals all over the world will be able to buy or sell heavy
equipment, vehicles, machinery, stock lots, etc. in the Asian region,
through online auctions.
"BESTWAY" also a wholly-owned subsidiary is currently inactive. However, it
still holds the exclusive distribution franchise in the USA, Canada and Mexico
for a patented in-store beverage bottling center manufactured by BEVEX, Inc.
BestWay Beverages consists of what was formerly the core business of BestWay USA
before the recapitalization of Momentum Internet and Momentum Asia.
TARGET MARKETS
--------------
Internet-based business is perhaps the most dynamic industry the world has
ever seen. It is rapidly becoming the primary worldwide medium for data
exchange, commerce, education and news. Moreover, the Company believes the
international growth rate of both business and individual Internet users will
increase dramatically over the next five years.
As the number of Internet users rapidly increases over the next few years,
the Company intends to continue developing investment and finance management
products, services and technologies, which will effectively fulfill the
information, commerce and education needs of these users to maximize their
beneficial use of all the features the Internet has to offer.
The Company has selected three categories of international, Internet-based
business as their primary target market(s).
1. International online stock trading and investment services with unique
educational capabilities and ongoing investor support services.
---------------------------------------------------------------------------
The Company believes there are several primary factors, which attract
Internet users to online investing. These include: ease of use, low transaction
fees, real-time, comprehensive information and a self-service environment.
OIA, a pioneer in financial/investment training for consumers in the US
market, is already moving into key international markets as well. As the
popularity of online trading grows, the demand for OIA's products and services
is expected to grow accordingly.
Swiftrade, an online trading service, facilitates international online
trading. The Company expects Swiftrade to become an international online trading
network in the future.
The synergy between OIA and Swiftrade effectively positions the Company to
capitalize on the stock trading and investment services market. The Company
believes the Internet will continue to attract additional online investors,
especially as those investors who have completed the OIA training program
realize that effectively self-managing their investment portfolio is made
possible by following the guidelines developed by OIA.
10
<PAGE>
As stock exchanges around the world move to the Internet, the Company
expects to continually strengthen its competitive position in the international
marketplace, and to be on the ground floor to service these markets.
2. E-commerce to facilitate the purchase and/or sale of goods and services
between and/or among businesses and individuals throughout the Pacific Rim.
---------------------------------------------------------------------------
The Company believes e-commerce will probably become the major vehicle for
the sale and/or barter of goods and services on an international basis.
Accordingly, the Company and its subsidiaries have developed products and
services like SearchDragon, Mfinance and the e-commerce based Asia4Sale. The
ability to effectively market these products and services will be enhanced by
the additional bandwidth capabilities and reduced transmission times, which are
becoming more readily available on the Internet on an international level.
Further, because the potential market is so large, the Company believes it could
establish and maintain a profitable operation from a relatively small percentage
of that market.
Emerging global procurement will require international vendor expertise to
create and manage complex electronic supply chains composed of thousands of
manufacturers, distributors, forwarders and buyers located throughout the world.
The overlap between e-commerce in the Pacific Rim and e-commerce in the USA is
substantial. American companies continually outsource many labor-intensive
manufacturing processes in this region.
The Company believes the business futures of the two regions are
inextricably linked. In various conversations with clients and/or potential
clients in the Pacific Rim, those clients have identified the effective use of
the Internet as a primary key to restoring their international competitive
position. Moreover, it appears their expenditures on Internet services are
rising at a pace that outstrips even that of the US.
The Company's e-commerce products and services provide:
o A worldwide shopping service, which offers a wide variety of
Asian-made products to wholesalers, retailers, and franchise
storefronts, which can be owned and managed by anyone, anywhere, with
a computer and an Internet connection
o Auction and barter sites aimed specifically at the rapidly growing
Pacific Rim business-to-business market.
The Company believes Internet-based business in the Pacific Rim is going to
expand rapidly. Moreover, long-term links will be established with global
procurement networks over the next five years. The products and services the
Company has developed thus far, along with other products and services currently
in the planning stage, should give the Company a strong presence early on in
this fast-growing area of e-commerce.
11
<PAGE>
3. Web-based and non web-based marketing development and support services
for Internet-oriented companies, who do not have the wherewithal internally
for the development of same.
---------------------------------------------------------------------------
Every day, an increasing number of businesses around the world are
expanding their marketing and sales activities into cyberspace. In order to do
so, many of these companies have had to retain the services of specialists in
website development and management.
As more and more companies utilize the Internet for global marketing, the
demand for Internet-based marketing, customer service and sales support systems
is increasing. This seems to be particularly true in the Pacific Rim, where use
of the Internet is growing rapidly. The Company intends to establish itself on
the ground floor of this rapidly growing market niche.
The Company is currently developing a mix of web marketing and compatible
support services for this niche. Because this subsidiary is in the Philippines,
they are able to provide services, which are equivalent to US-based competitors,
at much lower prices.
This subsidiary has had ongoing operations in the Pacific Rim for several
years now. As a result, they have specific knowledge regarding the prevailing
business principles and practices in this region of the world. The company
believes this business experience, along with the contact network, which has
already been developed, gives the Company a potential advantage over many
US-based companies who have little or no experience doing business in the
Pacific Rim. The Company expects this to be a beneficial leverage point in
establishing a presence in this niche market.
Marketing Plan
--------------
The Company's marketing plan is a combination of vertical integration and
cross-pollination. It is intended to build exposure and market share while
maintaining profitable operations. This differs from some Internet-based
companies who have focused significant effort on establishing a customer base,
but given minimal thought to ensuring return on investment.
While this latter approach generates a considerable amount of web traffic,
it does not necessarily contribute significant revenues. The Company's plan
emphasizes both aggressive pursuit of a user base and market share, along with
the marketing of value added products to this user base
The Marketing Plan includes three levels of marketing activity:
LEVEL 1.
-------
The first level follows the traditional Internet paradigms, wherein
several of the Company's products include free services to attract the
largest possible number of users. PINmail (projected at one million
impressions per day by the end of 1999) and Media Hits (projected at
10,000,000 impressions per month by the end of 1999) are the major
products in this category. Search Dragon and Mfinance are expected to
attract a lesser numbers of users.
LEVEL 2.
--------
The second level includes two categories:
(1) Those products and services marketed primarily to individuals,
which include the online and offline financial services education
capabilities of OIA, the online trading capability of Swiftrade, and
the Asia4Sale e-commerce operation. Asia4sale is promoted to both
potential customers and potential operators of franchised stores.
Asia4sale and Swiftrade are expected to be low-cost operations with
good contributions to margin.
12
<PAGE>
(2) Those products and services marketed primarily to businesses,
which include the database management, direct mail, and telephone
e-mail customer service products offered by the Company's ServiceLive
and Momentum Direct Internet support. The relatively low facility and
labor costs in the Company's Asian operations allows the Company to
offer these products and services at very competitive prices and
generate targeted margins.
LEVEL 3.
--------
The third level includes backend revenues generated by commissions,
fees and profit sharing agreements. These revenues, which are
generated automatically as services are used, increase in proportion
with the use of services provided. This requires minimal additional
overhead spending or monitoring.
The same direct marketing capacity the Company offers to contract customers
is used to promote the Company's frontline revenue generators. Impressions on
the high-traffic free sites are recorded and classified in a tailored database,
which is in itself a valuable asset. The sales force then selectively and
directly promotes the appropriate services to each category of net user. While
the Company's revenue-earning services also use the more traditional marketing
methods employed by their competitors, the large base of potential customers
developed by the Company's high-traffic sites should provide a leverage point
over competition.
The Company's marketing plan also relies heavily on cross-pollination at
every level of the vertical integration program. The Company's products and
services are clustered into compatible groups, each of which will be served by a
single web portal. For example, a Swiftrade customer will immediately be exposed
to the compatible services offered by OIA. The two are combined with an advanced
Reuters news/data feed in the Company's Stock Trading & Finance Portal.
Swiftrade and other services will in turn be promoted at OIA seminars and in OIA
marketing materials.
OIA home study programs and live workshops are promoted both online and
through a traditional multistage marketing program. Television commercials are
used to advertise OIA's free online trading seminars, and attract both two-day
workshop attendees and home study candidates. OIA's brochures and audio tapes
are used to build further interest and customer loyalty. The two-day workshops
are OIA's principal revenue generator.
Those introduction seminar attendees, who do not elect to attend the
two-day training workshops, are candidates for video-based educational
materials. OIA is well positioned to continue providing both
financial/investment education and services, while developing a growing customer
base for itself, Swiftrade and other compatible products and services.
Individuals and businesses interested in doing business in the Pacific Rim
will be drawn to the Pacific Rim business portal at Dragonasia.com, where they
will find the Search Dragon search engine, the Dragon Warehouse Store, Mfinance
and Asian-specific co-branded editions of OIA and Swiftrade.
The Company's web marketing and support services are grouped under the
Logistical Internet Media Essentials (www.limesystems.com) site. These include a
variety of services aimed at businesses developing a web presence and a
compatible sales support system. Included are the PINmail free e-mail service,
the MediaHits advertising banner network, business Internet showrooms (in
cooperation with Asia4Sale), and the database management, direct mail, and
telephone and e-mail customer service products offered by the Company's
ServiceLive and Momentum Direct Internet support services. Any customer who is
drawn to one service will be immediately presented with a wide range of
compatible services, with interconnections to the other portals.
13
<PAGE>
This cross-pollination will be initiated by grouped exposure of compatible
products. It will also be aggressively promoted via the same direct marketing
system used to facilitate the vertical integration program. At every step of the
process, tailored databases will be maintained. Also, the sales staff will
select and present services which are likely to add customer value at
competitive prices.
The combination of vertical integration, diversification, and
cross-pollination places the Company in a unique position among web companies.
It provides a broad enough base to withstand competition, a mechanism by which
the growth of any one component can be quickly capitalized upon by others and
the capacity to rapidly and flexibly adapt to changing market conditions. By
presenting customers with compatible packages of useful, value-oriented goods
and services, the Company enhances its own revenue-generating capabilities.
(2) Distribution methods of the products or services.
Management will seek out and investigate business opportunities through
every reasonably available fashion, including personal contacts, professionals,
securities broker dealers, venture capital personnel, members of the financial
community and others who may present unsolicited proposals. Strategic Alliances
The Company will continue to seek high profile, interrelated companies as
strategic business partners to enter new markets or territories. On August 18,
1999, the Company's subsidiary OIA entered into an agreement with
"investorweb.com" of Melbourne, Australia, to be represented by Investor Web
under its proper authority with the Australia Securities and Investment
Commission in Australia and incorporate investorweb's financial website into
OIA's workshops in Australia.
(3) Status of any publicly announced new product or services.
Acquisition of Momentum Internet and Momentum Asia - On October 28, 1998
the Company announced the completion of its first two acquisitions, the
acquisition of Momentum Internet a diversified Internet services firm and
Momentum Asia, a provider of graphic design, prepress, printing, database
management and direct mail services in the Philippines.
Swiftrade - On February 2, 1999, the Company announced that its subsidiary,
Momentum Internet Incorporated, launched their "Plus and Play" online trading
software, a program designed to allow brokerage houses around the world to offer
secure online stock trading. The program was developed to work in almost any
market with brokerage firms through their own websites and under their own brand
names, or through the Swiftrade website operated by Momentum Internet. The
program has been contracted for use by brokerages in Hong Kong and the U.K.
Opening of Manila Office - On February 25, 1999, Momentum Internet
announced that it opened a new Internet development facility in Manila,
Philippines, in order to access a large pool of local, well educated,
technically skilled design and marketing talent. The focus of the Manila office
is the development of Internet platforms for global online stock treading,
web-based e-mail applications, online auction and barter software and
international financial news delivery systems.
Acquisition of Asia4sale and launch of Asian e-Commerce Portal - On March
24, 1999, the Company announced the launch of an Asian oriented e-commerce
portal Asia4sale, through the acquisition of Asia4sale.com, Ltd. Asia4sale is a
three-part e-commerce facility which caters to the global market offering home
shopping, industrial auctions and business barter.
14
<PAGE>
Intention to Offer Free E-Mail to all Websites - On March 29, 1999, the
Company announced that it plans to provide an e-mail service free to every
website on the Internet. The new system is based on the Company's existing
e-mail program, PINmail, which is offered through its subsidiary Momentum
Internet. The new PINmail service is intended to give all websites the ability
to offer web-based e-mail, from their pages, in the same manner as major sites
like Netscape and Yahoo!, free of charge to webmasters and users.
ServiceLive.com - On April 1, 1999, the Company announced the launch of its
new Internet customer service program, ServiceLive, a 24-hour e-mail and
telephone response center, developed by the Company in the Philippines. The
service is being offered on a contract basis to Internet companies worldwide.
Acquisition of Online Investors Advantage Inc. - On April 8, 1999, the
Company announced the acquisition of Online Investors Advantage, Inc., a Utah
based company ("OIA") specializing in online stock trading education and
training. OIA teaches investors who wish to trade securities by computer, how to
access and use the tools available on the Internet for optimum investing
results.
Approval by London Stock Exchange of Swiftrade - On April 14, 1999, the
Company announced that the London Stock Exchange gave approval for its live
stock price feed to be made available through the Company's online trading
system, Swiftrade.
Investors Toolbox - On May 27, 1999, the Company announced that its
subsidiary, OIA launched a comprehensive financial website, developed by
Telescan, Inc., for the exclusive use of OIA's students and graduates. Investors
Toolbox offers an in-depth range of financial information and tools which are
available on the web and was created by Telescan for the exclusive use of
individuals who complete OIA's workshops.
Agreement with First Ecom and Bank of Bermuda - On July 23, 1999,
Asia4sale, a subsidiary of the Company announced that it reached an agreement
with First Ecom to handle its multi-currency credit card web processing. First
Ecom operating under a license from the Bank of Bermuda will be able to process
MasterCard and Visa Card payments for the purchase of goods and services in a
variety of major currencies.
Global Launch of Online Investing Education Seminars - On July 29, 1999 the
Company announced that OIA, was launching its Online investing seminars and
workshops in Australia and New Zealand. OIA held workshops in Melbourne and
Sydney, Australia, in August and in Auckland and Wellington, New Zealand, in
August and September 1999.
Free E-mail Service for All Websites Available - On August 11, 1999, the
Company announced that Momentum Internet launched its new service which will
provide free e-mail to webmaster and users. This new service will give websites
the ability to offer web-based e-mail from their web pages. In return for the
free service each website will carry banner ads on the e-mail pages, which will
be hosted and controlled from the Company's recently upgraded servers in
California.
Receipt of Purchase Bid for Asia4Sale.com - On August 31, 1999, the Company
announced that it had received and is considering two proposals for the purchase
of Asia4sale.com, a subsidiary of the Company. As of the date of this
Registration Statement, the company is evaluating the proposals and no decision
has been made.
15
<PAGE>
(4) Competitive business conditions and the Company's competitive position
in the industry and methods of competition.
There are hundreds of thousands of companies that are engaged in endeavors
similar to those engaged in by the Company; many of these companies have
substantial current assets and cash reserves. Competitors also include thousands
of other publicly held companies whose business operations have proven
unsuccessful, and whose only viable business opportunity is that of providing a
publicly held vehicle through which a private entity may have access to the
public capital markets. There is no reasonable way to predict the competitive
position of the Company or any other entity in these endeavors; however, the
Company will no doubt, be at a competitive disadvantage in competing with
entities which have recently completed IPO's, have significant cash resources,
and have operating histories when compared with the lack of substantive
operations.
(5) Sources and availability of raw materials and names of principal
suppliers.
The Company does not utilize any specialized raw materials. All necessary
required materials, if any, are readily available. The Company is not aware of
any existing or future problem that will materially affect the source and
availability of any materials which would be required by the Company.
(6) Dependence on one or a few major customers.
The Company believes that the diversity of the products and services
offered alleviates the dependence on any customer. Through the widespread use of
the Company's and its subsidiaries' products and services, in multimedia,
electronic commerce, publishing, Internet and other developing industries, the
Company will develop a wide base of customers. However, one customer accounted
for approximately 26% of the Company's revenues for the year ended December 31,
1998.
(7) Patents, trademarks, license, franchises, concessions, royalty
agreements or labor contracts.
PATENTS, COPYRIGHTS AND TRADEMARKS
----------------------------------
Neither the Company nor any of its subsidiaries presently holds any
patents, copyrights or trademarks for their products or services offered or the
names under which they operate. However, the Company and its subsidiaries are
currently in the process of seeking copyright and trademark protection of its
trade names and website addresses.
LICENSES AND ROYALTY AGREEMENTS
-------------------------------
The Company has entered into license and royalty agreements with the
following entities:
On April 18, 1997 the Company, as the assignee, entered into an Assignment
of License Agreement with Katori Consultants, Ltd., a British Virgin Island, as
the assignor, under which Katori assigned all of its rights and interest in the
License Agreement dated April 17, 1997, between Katori and FFI (now known as
Bevex, Inc.). Bevex is the developer and manufacturer of a patented in-store,
self service pressure fill, mini bottling unit (the "Beverage Center"). Pursuant
to the terms of the License, the Company obtained the rights to be Bevex's
distributor for the Beverage Centers and optional equipment associated with the
Beverage Centers on an exclusive basis in the United States. These rights
include the placement, service, repair, marketing and promotion of the Beverage
Centers. Copies of the License Agreement between Katori and Bevex and the
Assignment of License Agreement between Katori and the Company are attached
hereto and incorporated herein by this reference. See Exhibit Index, Part III.
16
<PAGE>
OTHER AGREEMENTS
----------------
The Company has entered into the following agreements:
On March 29, 1999, Asia4sale entered into an agreement with Hong Kong
Telecom IMS (now known as Cable & Wireless HKT ("HKT"). HKT provided, in
consideration of a payment by Asia4Sale to HKT of the sum of HK$34,200
(approximately US$4,685), a basic program to enable Asia4Sale to recruit store
owners and provide its members with virtual storefronts and unique URL
addresses. This basic program has since been enhanced by programmers from
Momentum Internet. HKT will promote the on-line shopping to subscribers of the
their Netvigator service. Netvigator is the Internet portal operated by HKT.
Under the terms of the agreement Asia4Sale will pay HKT a commission of three
percent (3 %) of all sales made by Netvigator subscribers. A copy of the
agreement with HKT is attached hereto and incorporated herein by this reference.
See Exhibit Index, Part III.
On April 1, 1999, Momentum Internet entered into a Consulting Agreement
with Hays Business Systems ("Hays") under which Hays will provide all
administrative, promotional and technical support as required for Momentum
Internet to carry on its Internet publishing and marketing operations,
including, but not limited to, the assistance in the Internet publishing and
marketing of Momentum Internet's products Swiftrade, Mfinance, PINmail,
MediaHits, Search Dragon and such others as developed by Momentum Internet from
time to time. Momentum Internet shall pay Hays a monthly service fee US$2,000
per month from April 1, 1999, forward unless the agreement is terminated by
either party on one-month written notice. A copy of the Agreement with Hays is
attached hereto and incorporated herein by this reference. See Exhibit Index,
Part III.
On April 22, 1999, Momentum Internet entered into a Reuters Investor
Distribution Agreement with Reuters On-Line S.A. ("Reuters On-line") of Geneva,
Switzerland, under which Momentum Internet would have access to the Reuters
Investor Service, which includes without limitation, certain news, information,
database, stock and securities market information and general company, political
sports and market information compiled and developed by Reuters Online. Momentum
Internet's information service users and subscribers to its various sites (i.e.
Swiftrade, etc.) would have the right to access and view such content. Under the
terms of the agreement, Momentum Internet shall pay access fees equal to US$9.60
per Access ID (i.e. User or Subscriber of Momentum Internet who accesses the
site), with a minimum month payment of US$9,000 per calendar month. In
additional Momentum Internet shall pay a start up charge of HK$14,000 (i.e.
approximately US$1,900). A copy of the Reuters Investor Distribution Agreement
is attached hereto and incorporated herein by this reference. See Exhibit Index,
Part III.
On May 1, 1997, Momentum Asia entered into a Loan Agreement with Touchstone
Transport Services, Inc., a Philippines corporation under which Momentum Asia
made a loan of US$250,000) to Touchstone. Said loan is secured by a Real Estate
Mortgage against certain real property located in the City of Olongapo,
Philippines. The loan accrues interest of five percent (5.0%) per annum payable
at the end of each year. The loan has a maturity date of five (5) years from the
date of the loan. After the first anniversary date of the loan, the principal of
the loan or fifty percent (50%) of the appraised value of the property which is
the security for said loan shall be due and payable on demand. On August 20,
1999, Momentum Asia agreed to extend the loan repayment date by an additional
ten years, and consented to the real estate being leased to an outside
developer. The borrower agreed to pay Momentum Asia, US$75,000 for the extension
and consent by September 30, 1999. Copies of the Loan Agreement and Real Estate
Mortgage are attached hereto and incorporated herein by this reference. See
Exhibit Index, Part III.
17
<PAGE>
On May 3, 1999, Momentum Internet entered into a Market Datafeed Service
Agreement with Stock Exchange Information Services Limited ("SEIS"), a
wholly-owned subsidiary of the Stock Exchange of Hong Kong Limited, under which
SEIS granted to Momentum Internet a non-exclusive license to use stock
information compiled by The Stock Exchange of Hong Kong or SEIS, through Reuters
Hong Kong Limited ("Reuters HK") for the onward transmission of said information
to subscribers of Momentum Internet's information services. Under the terms of
the agreement, Momentum Internet shall pay a standard minimum subscriber fee of
no less than HK$6,000 (i.e. approximately US$820) per month, along with an
annual port Fee of no less than HK$24,000 (i.e. approximately US$3,280).
Momentum Internet has paid a deposit to SEIS in the amount of HK$200,000
(approx. US$25,870). A copy of the Market Datafeed Service Agreement is attached
hereto and incorporated herein by this reference. See Exhibit Index, Part III.
On May 18, 1999, Momentum Internet entered into an Agreement with Options
Direct (Europe), a stock broker duly licensed under the laws of England, under
which Momentum Internet would provide Internet connectivity, technical support,
design and construction of Option's Direct web pages to be hosted on Momentum
Internet's Swiftrade websites. Momentum Internet will also host Option's Direct
trading and portfolio management software on Swiftrade's website. The term of
this agreement is for a period of five (5) years. As compensation for the
services to be provided by Momentum Internet, Options Direct agrees to pay 15%
of the gross commissions earned by Options Direct arising directly or indirectly
from the utilization of the services developed by Momentum Internet for Options
Direct for the first 50 trades per trading day, and 25% of the gross commissions
earned by Options Direct on trades over 50 per day. A copy of the Agreement with
Options Direct is attached hereto and incorporated herein by this reference. See
Exhibit Index, Part III.
On June 25, 1999, Asia4sale entered into an Agreement with Karrex (Hong
Kong) Ltd., a Hong Kong corporation in the business of sales of Music CDs,
worldwide, exclusive of North America. Under the terms of the agreement Karrex
will supply music products to Asia4sale for the sale and distribution of said
goods through its e-commerce interactive website. A copy of the Agreement with
Karrex is attached hereto and incorporated herein by this reference. See Exhibit
Index, Part III.
On June 29, 1999 Momentum Internet entered into an Agreement with United
Mok Ying Kie Limited ("UMYK"), a broker and registered dealer in Hong Kong,
under which Momentum Internet would provide Internet technical support, design
and construction of UMYK's web pages on Momentum Internet's Swiftrade websites,
as well as the hosting of UMYK's web pages on the Internet. The term of this
agreement is for a period of five (5) years. As compensation for the services to
be provided by Momentum Internet, UMYK agrees to pay 40% of the gross
commissions earned by UMYK arising directly or indirectly from the utilization
of the services developed by Momentum Internet for UMYK. A copy of the Agreement
with United Mok Ying Kie Limited is attached hereto and incorporated herein by
this reference. See Exhibit Index, Part III.
On June 30, 1998, Momentum Asia entered into a Subscribers Agreement with
Torquay Associates Ltd., a direct marketing consulting firm with offices in Hong
Kong, Thailand and the U.K., under which Momentum Asia will provide 540 square
meters of office space, along with furniture, equipment, computer network,
database software, telecommunications, Internet service, mailing services and
employees as required by and for Torquay's business operations. The term of the
agreement is for a period from June 30, 1998, through June 30, 2003. Under the
terms of this agreement, Torquay shall pay Momentum Asia US$20,000 payable
monthly. A copy of the Subscribers Agreement with Torquay Associates Ltd., is
attached hereto and incorporated herein by this reference. See Exhibit Index,
Part III.
18
<PAGE>
On June 30, 1999, Momentum Internet entered into a Services Contract with
Reuters Hong Kong Limited ("Reuters HK"), under which Reuters HK will provide
stock, futures and commodities information to Momentum Internet for the onward
transmission of said information to subscribers of Momentum Internet's
information services. A copy of the Reuters Services Contract is attached hereto
and incorporated herein by this reference. See Exhibit Index, Part III.
On July, 1999, Swiftrade entered into an Online Stock Trading Agreement
with WdoT.rade, Inc., a division of West American Securities Corporation ("West
America"), a registered broker-dealer and member of the NASD. Under the terms of
the agreement Swiftrade will design, host and manage a website for WdoT.rade as
an online trading portal to provide international investors with 24-hour direct
access to the United States Securities market through West America.
WdoT.rade/West America shall pay Swiftrade a referral fee of $40 per account
opened through the services and facilities provided by Swiftrade. A copy of the
Online Stock Trading Agreement is attached hereto and incorporated herein by
this reference. See Exhibit Index, Part III.
(8) Need for Government approval.
With the exception of the requirement that the Company and its subsidiaries
be registered or qualified to do business in the States and foreign countries in
which they will do business, the products and services provided through use of
the Company's technology are not subject to approval of any government
regulation.
(9) Effect of existing or probable governmental regulations on the
business.
The Company has voluntarily filed this Registration Statement on Form 10-SB
in order to register its common stock pursuant to Section 12(g) of the
Securities Exchange Act of 1934.
As a result of the effectiveness of its Registration Statement on Form
10-SB, the Company shall be subject to Regulation 14A of the Securities Exchange
Act of 1934, as amended (the "1934 Act"), which regulates proxy solicitations.
Section 14(a) requires all companies with securities registered pursuant to
Section 12(g) thereof to comply with the rules and regulations of the Commission
regarding proxy solicitations, as outlined in Regulation 14A. Matters submitted
to stockholders of the Company at a special or annual meeting thereof or
pursuant to a written consent will require the Company to provide its
stockholders with the information outlined in Schedules 14A or 14C of Regulation
14; preliminary copies of this information must be submitted to the Commission
at least 10 days prior to the date that definitive copies of this information
are forwarded to stockholders.
The Company will also be required to file annual reports on Form 10-KSB and
quarterly reports on Form 10-QSB with the Commission on a regular basis, and
will be required to timely disclose certain events (e.g., changes in corporate
control; acquisitions or dispositions of a significant amount of assets other
than in the ordinary course of business; and bankruptcy) in a Current Report on
Form 8-K.
The Company's Management believes that it is in the Company's best interest
to become subject to the periodic reporting requirements as set forth above, in
order to provide a mechanism for the disclosure and publication of material
information about the Company and its financial condition to its shareholders
and the financial community. In the event that the Company's obligation to file
periodic reports is suspended under the Securities Exchange Act, it is the
intention of the Company to continue to voluntarily file period reports as if so
required to do so.
19
<PAGE>
Management believes that these reporting obligations will increase the
Company's annual legal and accounting costs, but it is expected that revenues
will be sufficient to meet these costs.
The Company is not aware of any other governmental regulations now in
existence or that may arise in the future that would have an effect on the
business of the Company.
In the recent years Federal and State securities laws, rules and
regulations have made the participation in or the conducting of an Initial
Public Offering ("IPO") substantially easier for certain small and developmental
stage companies, reducing the time constraints previously involved, the legal
and accounting costs and the financial periods required to be included in the
financial statements. The integrated disclosure system for small business
issuers adopted by the Securities and Exchange Commission in Release No.
34-30968 and effective as of August 13, 1992, substantially modified the
information and financial requirements of a "Small Business Issuer," defined to
be an issuer that has revenues of less than $25 million; is a U.S. or Canadian
issuer; is not an investment company; and if a majority owned subsidiary, the
parent is also a small business issuer; provided, however, an entity is not a
small business issuer if it has a public float (the aggregate market value of
the issuer's outstanding securities held by non-affiliates) of $25 million or
more.
A number of state securities commissions have adopted the use of Form U-7
for SCOR, which also substantially simplifies the registration process for
IPO's; Form U-7 is primarily used in connection with offerings conducted
pursuant to Rule 504 of the Securities and Exchange Commission, but is not
limited to this use.
The Securities and Exchange Commission, state securities commissions and
the North American Securities Administrators Association, Inc., ("NASAA") have
expressed an interest in adopting policies that will streamline the registration
process and make it easier for a small business issuer to have access to the
public capital markets. The present laws, rules and regulations designed to
promote availability for the small business issuer to these capital markets and
similar laws, rules and regulations that may be adopted in the future may
substantially limit the demand for companies like the Company.
(10) Estimate of the amount spent during each of the last two fiscal years
on research and development activities.
Research and Development ("R&D") expenditures for the last two fiscal
years, 1998 and 1997, were a total of $400,000 comprise of the cost of man power
and personnel in the development of its products and services. In some cases (as
described above), customer contracts require direct payment for specific
development requirements. In general, R&D activities will be recovered through
the application of a burden rate to all quotes.
(11) Costs and effects of compliance with environmental laws (Federal,
State and Local)
The Company does not plan to manufacture the products that are derived from
the application and use of its technology. The Company does not feel that it is
effected by any rules which have been enacted or adopted regulating the
discharge of material into the environment. However, environmental laws, rules
and regulations may have an adverse effect on any business venture viewed by the
Company as an attractive acquisition, reorganization or merger candidate, and
these factors may further limit the number of potential candidates available to
the Company for acquisition, reorganization or merger.
20
<PAGE>
(12) Number of total employees and number of full time employees.
At the present time the Company and its subsidiaries cumulatively employ a
total of 91 persons of which 60 are full time employees. These full time
employees include, but are not limited to, D. Scott Elder, Ross W. Jardine,
Allen D. Hardman and Anthony Tobin, who are also officers and directors of the
Company.
RISK FACTORS
------------
Consideration should be given to the risks described below before making an
investment decision in the company. The risks and uncertainties described below
are not the only ones facing the company and there may be additional risks that
are not presently known or are currently deem immaterial. All of these risks may
impair business operations.
Forward Looking Statements. When used in this Registration Statement, the
words or phrases "will likely result," "are expected to," "will continue," "is
anticipated," "estimate," "projected", "intends to" or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act. Such statements are subject to certain
risks and uncertainties, including but not limited to, market conditions,
competition, factors affecting the Company's ability to implement its growth
strategy, the Company's dependence on future financing, fluctuations in
operating results, the Company's ability to sustain levels of growth,
diversification of the Company's business, contingent risks, state and federal
regulation and licensing requirements, and environmental concerns that could
cause the Company's actual results to differ materially from those presently
anticipated or projected. Such factors, which are discussed in "Risk Factors,"
"Business," and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the notes to consolidated financial statements, could
affect the Company's financial performance and could cause the Company's actual
results for future periods to differ materially from any opinions or statements
expressed with respect to future periods in this Registration Statement. As a
result, all parties are cautioned not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. The Company's
independent accountants have not examined or compiled the accompanying
forward-looking statements and, accordingly, do not provide any assurance with
respect to such statements.
The Company's present and proposed business operations will be highly
speculative and subject to the same types of risks inherent in any new or
unproven venture, as well as risk factors particular to the industries in which
it will operate, and will include, among other things, those types of risk
factors outlined below.
In any business venture, there are substantial risks specific to the
particular enterprise which cannot be ascertained until a potential acquisition,
reorganization or merger candidate has been identified; however, at a minimum,
the Company's present and proposed business operations will be highly
speculative and subject to the same types of risks inherent in any new or
unproven venture, and will include those types of risk factors outlined below.
Competition. There are numerous corporations, firms and individuals which
are engaged in the type of business activities in which the Company is presently
engaged. Many of those entities are more experienced and possess substantially
greater financial, technical and personnel resources than the Company or its
subsidiaries. Many of the Company's competitors have longer operating histories
and significantly greater financial, technical, marketing and other resources
than the Company. In addition, many of the Company's competitors offer a wider
range of services and financial products than the Company, and thus may be able
to respond more quickly to new or changing opportunities, technologies and
customer requirements. Many of the Company's competitors also have greater name
recognition and larger customer bases that could be leveraged, thereby gaining
market share from the Company. Such competitors may conduct more extensive
promotional activities and offer better terms and lower prices to customers than
the Company can. Moreover, certain competitors have established cooperative
21
<PAGE>
relationships among themselves or with third parties to enhance their services
and products. Accordingly, it is possible that new competitors or alliances
among existing competitors may significantly reduce the Company's market share.
General financial success within the securities industry over the past several
years has strengthened existing competitors. The Company believes that such
success will continue to attract new competitors to the industry, such as banks,
software development companies, insurance companies, providers of online
financial and information services and others, as such companies expand their
product lines. The current trend toward consolidation in the commercial banking
industry could further increase competition in all aspects of our business.
While the Company cannot predict the type and extent of competitive services
that commercial banks and other financial institutions ultimately may offer, or
whether legislative barriers will be modified, the Company may be adversely
affected by such competition or legislation. To the extent the Company's
competitors are able to attract and retain customers based on the convenience of
one-stop shopping, the Company's business or ability to grow could be adversely
affected. In many instances, the Company is competing with such organizations
for the same customers. In addition, competition among financial services firms
exists for experienced technical and other personnel. There can be no assurance
that the Company will be able to compete effectively with current or future
competitors or that such competition will not have a material adverse effect on
the Company's business, financial condition and operating results. While the
Company hopes to be competitive with other similar companies, there can be no
assurance that such will be the case.
Volatile Market for Common Stock. The Company's common stock is quoted on
the OTC Bulletin Board of the National Association of Securities Dealers, Inc.
(the "NASD") under the symbol "ZSUN." The market price of the Company's Common
Stock has been and is likely to continue to be highly volatile and subject to
wide fluctuations due to various factors, many of which may be beyond the
Company's control, including: quarterly variations in operating results;
announcements of technological innovations or new software, services or products
by the Company or its competitors; and changes in financial estimates and
recommendations by securities analysts. In addition, there have been large price
and volume fluctuations in the stock market which have affected the market
prices of securities of many technology and services companies, often unrelated
to the operating performance of such companies. These broad market fluctuations,
as well as general economic and political conditions, may adversely affect the
market price of the Company's common stock. In the past, volatility in the
market price of a company's securities has often led to securities class action
litigation. Such litigation could result in substantial costs and aversion of
the Company's attention and resources, which could have a material adverse
effect on the Company's business, financial condition and operating results.
Risks of "Penny Stock." The Company's common stock may be deemed to be
"penny stock" as that term is defined in Reg. Section 240.3a51-1 of the
Securities and Exchange Commission. Penny stocks are stocks (i) with a price of
less than five dollars per share; (ii) that are not traded on a "recognized"
national exchange; (iii) whose prices are not quoted on the NASDAQ automated
quotation system (NASDAQ-listed stocks must still meet requirement (i) above);
or (iv) of an issuer with net tangible assets less than US$2,000,000 (if the
issuer has been in continuous operation for at least three years) or
US$5,000,000 (if in continuous operation for less than three years), or with
average annual revenues of less than US$6,000,000 for the last three years.
Section 15(g) of the 1934 Act and Reg. Section 240.15g-2 of the Commission
require broker-dealers dealing in penny stocks to provide potential investors
with a document disclosing the risks of penny stocks and to obtain a manually
signed and dated written receipt of the document before effecting any
transaction in a penny stock for the investor's account. Potential investors in
the Company's common stock are urged to obtain and read such disclosure
carefully before purchasing any shares that are deemed to be "penny stock."
22
<PAGE>
Moreover, Reg. Section 240.15g-9 of the Commission requires broker-dealers
in penny stocks to approve the account of any investor for transactions in such
stocks before selling any penny stock to that investor. This procedure requires
the broker-dealer to (i) obtain from the investor information concerning his or
her financial situation, investment experience and investment objectives; (ii)
reasonably determine, based on that information, that transactions in penny
stocks are suitable for the investor and that the investor has sufficient
knowledge and experience as to be reasonably capable of evaluating the risks of
penny stock transactions; (iii) provide the investor with a written statement
setting forth the basis on which the broker-dealer made the determination in
(ii) above; and (iv) receive a signed and dated copy of such statement from the
investor, confirming that it accurately reflects the investor's financial
situation, investment experience and investment objectives. Compliance with
these requirements may make it more difficult for investors in the Company's
common stock to resell their shares to third parties or to otherwise dispose of
them.
Dependence on Key Employees. Historically, the Company and its subsidiaries
have been heavily dependent on the ability of D. Scott Elder, Ross W. Jardine,
Anthony Tobin, Eric Montandon, Allen D. Hardman, Scott Harris, David McCoy and
Peter Graham Daley, who contribute essential technical and management
experience. In the event of future growth in administration, marketing,
manufacturing and customer support functions, the Company may have to increase
the depth and experience of its management team by adding new members. The
Company's success will depend to a large degree upon the active participation of
its key officers and employees. Loss of services of any of the current officers
and directors could have a significant adverse effect on the operations and
prospects of the Company. There can be no assurance that it will be able to
employ qualified persons on acceptable terms to replace officers that become
unavailable.
Discretionary Use of Proceeds. Because of management's broad discretion
with respect to the acquisition of assets, property or business, the Company may
be deemed to be a growth oriented company. Although management intends to apply
substantially all of the proceeds that it may receive through the issuance of
stock or debt to suitable acquisitions, subject to the criteria identified
above, such proceeds will not otherwise be designated for any more specific
purpose. The Company can provide no assurance that any allocation of such
proceeds will allow it to achieve its business objectives.
Unascertainable Risks Associated with Potential Future Acquired Businesses.
To the extent that the Company may acquire a business in a highly risky
industry, the Company will become subject to those risks. Similarly, if the
Company acquires a financially unstable business or a business that is in the
early stages of development, the Company will become subject to the numerous
risks to which such businesses are subject. Although management intends to
consider the risks inherent in any industry and business in which it may become
involved, there can be no assurance that it will correctly assess such risks.
Risks Associated with Acquisitions, Strategic Relationships. The Company
may acquire other companies or technologies in the future, and the Company
regularly evaluates such opportunities. Acquisitions entail numerous risks,
including: difficulties in the assimilation of acquired operations and products;
diversion of management's attention from other business concerns; amortization
of acquired intangible assets; and potential loss of key employees of acquired
companies. The Company has limited experience in assimilating acquired
organizations into our operations. No assurance can be given as to the Company's
ability to integrate successfully any operations, personnel, services or
products that might be acquired in the future. Failure to successfully
assimilate acquired organizations could have a material adverse effect on the
Company's business, financial condition and operating results. The Company has
established a number of strategic relationships with online and Internet service
providers and software and information service providers. There can be no
assurance that any such relationships will be maintained, or that if they are
maintained, they will be successful or profitable. Additionally, the Company may
not develop any new such relationships in the future. Due to the foregoing
factors, quarterly revenues and operating results are difficult to forecast. The
23
<PAGE>
Company believes that period-to-period comparisons of the Company's operating
results will not necessarily be meaningful and you should not rely on them as
any indication of future performance. The Company's future quarterly operating
results may not consistently meet the expectations of securities analysts or
investors, which in turn may have an adverse effect on the market price of the
Company's Common Stock. Additionally, to the extent that the Company may acquire
a business in a highly risky industry, the Company will become subject to those
risks. Similarly, if the Company acquires a financially unstable business or a
business that is in the early stages of development, the Company will become
subject to the numerous risks to which such businesses are subject. Although
management intends to consider the risks inherent in any industry and business
in which it may become involved, there can be no assurance that it will
correctly assess such risks.
Uncertain Structure of Future Acquisitions. Management has had no
preliminary contact or discussions regarding, and there are no current plans,
proposals or arrangements to acquire any other specific assets, property or
business. Accordingly, it is unclear whether such any such acquisition would
take the form of an exchange of capital stock, a merger or an asset acquisition.
Conflicts of Interest; Related Party Transactions. Although the Company has
not identified any new potential acquisition targets and management does not
believe there is any "present potential" for such transactions, the possibility
exists that the Company may acquire or merge with a business or company in which
the Company's executive officers, directors, beneficial owners or their
affiliates may have an ownership interest. Although there is no formal bylaw,
stockholder resolution or agreement authorizing any such transaction, corporate
policy does not forbid it and such a transaction may occur if management deems
it to be in the best interests of the Company and its stockholders, after
consideration of the above referenced factors. A transaction of this nature
would present a conflict of interest to those parties with a managerial position
and/or an ownership interest in both the Company and the acquired entity, and
may compromise management's fiduciary duties to the Company's stockholders. An
independent appraisal of the acquired company may or may not be obtained in the
event a related party transaction is contemplated. Furthermore, because
management and/or beneficial owners of the Company's common stock may be
eligible for finder's fees or other compensation related to potential
acquisitions by the Company, such compensation may become a factor in
negotiations regarding such potential acquisitions.
Risks Associated with Systems Failures. Many of the services and products
offered by the Company and its subsidiaries are through and over Internet,
online service providers and touch-tone telephone. Thus, the Company depends
heavily on the integrity of the electronic systems supporting this activity,
including the Company's internal software programs and computer systems. The
Company's systems or any other systems of third parties whom the we utilize
could slow down significantly or fail for a variety of reasons including:
undetected errors in the Company's internal software programs or computer
systems; the Company's inability to effectively resolve any errors in the
Company's internal software programs or computer systems once they are detected;
or heavy stress placed on the Company's system during certain peak hours of
usage of either the Company's own or its third party provider systems. If the
Company's systems or any other systems which the Company relies on slow down
significantly or fail even for a short time, the Company's customers would
suffer delays and dissatisfaction. The Company could experience future system
failures and degradations. The Company could experience a number of adverse
consequences as a result of these systems failures including the loss of
existing customers and the inability to attract or retain new customers. There
can be no assurance that the Company's network structure or those of third party
service providers will operate appropriately in any of the following events:
subsystem, component or software failure; a power or telecommunications failure;
human error; an earthquake, fire or other natural disaster; or an act of God or
war. There can be no assurance that in any such event, we will be able to
prevent an extended systems failure. Any such systems failure that interrupts
the Company's operations could have a material adverse effect on the Company's
business, financial condition and operating results.
24
<PAGE>
Risks Associated with Encryption Technology. A significant barrier to
online commerce is the secure transmission of confidential information over
public networks. The Company rely on encryption and authentication technology to
provide secure transmission of confidential information. There can be no
assurance that advances in computer and cryptography capabilities or other
developments will not result in a compromise of the encryption and
authentication technology we use to protect customer transaction data. If any
such compromise of the Company's security were to occur, it could have a
material adverse effect on the Company's business, financial condition and
operating results.
Risks Associated with Significant Fluctuations In Quarterly Operating
Results. The Company expects to experience large fluctuations in future
quarterly operating results that may be caused by many factors, including the
following: the timing of introductions or enhancements to online investing
services and other products by the Company or its competitors; market acceptance
of online investing services and products; the pace of development of the market
for online commerce; changes in trading volume in securities markets; trends in
securities markets; domestic and international regulation of the brokerage
industry; changes in pricing policies by the Company or its competitors; changes
in strategy; the success of or costs associated with acquisitions, joint
ventures or other strategic relationships; changes in key personnel; seasonal
trends; the extent of international expansion; the mix of international and
domestic revenues; changes in the level of operating expenses to support
projected growth; and general economic conditions. The Company have also
experienced fluctuations in the average number of customer transactions per day.
Thus, the rate of growth in customer transactions at any given time is not
necessarily indicative of future transaction activity.
Risks Associated with Management of a Changing Business. The Company has
grown rapidly and the Company's business and operations have changed
substantially since the Company began offering online investing services and
products, and the Company expects this trend to continue. Such rapid change and
expansion places significant demands on the Company's administrative,
operational, financial and other resources. The Company expects operating
expenses and staffing levels to increase substantially in the future. In
particular, the Company intends to hire a significant number of additional
skilled personnel, including persons with experience in both the computer and
brokerage industries. Competition for such personnel is intense, and there can
be no assurance that the Company will be able to find or keep additional
suitable senior managers or technical persons in the future. the Company also
expects to expend resources for future expansion of the Company's accounting and
internal information management systems and for a number of other new systems
and procedures. In addition, the Company expects that future expansion will
continue to challenge the Company's ability to successfully hire and retain
associates. If the Company's revenues do not keep up with operating expenses,
the Company's information management systems do not expand to meet increasing
demands, the Company fails to attract, assimilate and retain qualified
personnel, or the Company fails to manage the Company's expansion effectively,
there would be a material adverse effect on the Company's business, financial
condition and operating results. The rapid growth in the use of the Company's
services may strained the Company's ability to adequately expand
technologically. As the Company acquires new equipment and applications quickly,
the Company has less time and ability to test and validate hardware and
software, which could lead to performance problems. The Company also relies on a
number of third parties to process the Company's transactions, including online
and Internet service providers, back office processing organizations, service
providers and market-makers, all of which will need to expand the scope of the
operations they perform for us. Any backlog caused by a third party's inability
to expand sufficiently to meet the Company needs could have a material adverse
effect on our business, financial condition and operating results. As trading
volume increases, the Company may have difficulty hiring and training qualified
personnel at the necessary pace, and the shortage of licensed personnel could
cause a backlog in the processing of orders that need review, which could lead
to not only unsatisfied customers, but also to liability for orders that were
not executed on a timely basis.
25
<PAGE>
Risks Associated with Early Stage of Market Development; Dependence on
Online Commerce and the Internet. The market for online investing services,
particularly over the Internet, is at an early stage of development and is
rapidly evolving. Consequently, demand and market acceptance for recently
introduced services and products are subject to a high level of uncertainty. For
the Company, this uncertainty is compounded by the risks that consumers will not
adopt online commerce and that commerce on the Internet will not adequately
develop or flourish to permit the Company to succeed. Sales of many of the
Company's services and products will depend on consumers adopting the Internet
as a method of doing business. This may not occur because of inadequate
development of the necessary infrastructure, such as a reliable network
infrastructure, or complementary services and products such as high-speed modems
and communication lines. The Internet has grown and is expected to grow both in
number of users and amount of traffic. There can be no assurance that the
Internet infrastructure will continue to be able to support the demands placed
on it by this continued growth. In addition, the Internet could lose its
viability due to slow development or adoption of standards and protocols to
handle increased Internet activity, or due to increased governmental regulation.
Moreover, critical issues including security, reliability, cost, ease of use,
accessibility and quality of service remain unresolved and may negatively affect
the growth of Internet use or commerce on the Internet. Because use of the
Internet for commerce is new and evolving, there can be no assurance that the
Internet will prove to be a viable commercial marketplace. If these critical
issues are not resolved, if the necessary infrastructure is not developed, or if
the Internet does not become a viable commercial marketplace, the Company
business, financial condition and operating results will be materially adversely
affected. Adoption of online commerce by individuals that have relied upon
traditional means of commerce in the past will require such individuals to
accept new and very different methods of conducting business. Moreover, the
Company 's online trading and investing services over the Internet involve a new
approach to investing research and trading which will require intensive
marketing and sales efforts to educate prospective customers regarding the
Internet's uses and benefits. For example, consumers who trade with more
traditional brokerage firms, or even discount brokers, may be reluctant or slow
to change to obtaining brokerage services over the Internet. Also, concerns
about security and privacy on the Internet may hinder the growth of online
investing research and trading, which could have a material adverse effect on
the Company 's business, financial condition and operating results.
Risks Associated with the Securities Industry; Concentration of Services.
Most of the Company's revenue in the past have been from the Company's online
investor services and products, and the Company expects this business to
continue to account for most of the Company's revenue in the foreseeable future.
The Company, like other companies in the Internet securities industry, are
directly affected by economic and political conditions, broad trends in business
and finance and changes in volume and price levels of securities and futures
transactions. In recent months, the U.S. securities markets have fluctuated
considerably and a downturn in these markets could effect customers interest in
our products and services and adversely affect the Company's operating results.
In October 1987 and October 1989, the stock market suffered major declines, as a
result of which many company's and firms suffered financial losses, and the
level of individual investor trading activity decreased after these events.
Reduced trading volume and prices have historically resulted in reduced revenues
to company's such as the Company's. When trading volume is low and investor and
customer interest or use of the Company's products and services diminishes, the
Company's operating results may be adversely affected because the Company's
overhead remains relatively fixed. Severe market fluctuations in the future
could have a material adverse effect on the Company's business, financial
condition and operating results. Some of the Company's competitors with more
diverse product and service offerings might withstand such a downturn in the
securities industry better than the Company would.
26
<PAGE>
Risks Associated with Delays In Introduction of New Services and Products.
The Company's future success depends in part on the Company's ability to develop
and enhance the Company's services and products. There are significant technical
risks in the development of new services and products or enhanced versions of
existing services and products. There can be no assurance that the Company will
be successful in achieving any of the following: effectively using new
technologies; adapting the Company's services and products to emerging industry
standards; developing, introducing and marketing service and product
enhancements; or developing, introducing and marketing new services and
products. The Company may also experience difficulties that could delay or
prevent the development, introduction or marketing of these services and
products. Additionally, these new services and products may not adequately meet
the requirements of the marketplace or achieve market acceptance. If the Company
is unable to develop and introduce enhanced or new services and products quickly
enough to respond to market or customer requirements, or if they do not achieve
market acceptance, the Company's business, financial condition and operating
results will be materially adversely affected.
Risks Associated with Dependence on Intellectual Property Rights. Neither
the Company or any of its subsidiaries presently holds any patents, copyrights
or trademarks for their products or services offered or the names under which
they operate. However, the Company and its subsidiaries are currently in the
process of seeking copyright and trademark protection of its trade names and
website addresses. The Company's success and ability to compete are dependent to
a degree of the Company's and its subsidiary's name and product recognition.
Accordingly, the Company will primarily rely on copyright, trade secret and
trademark law to protect our product, services and brand names offer or under
which the Company and its subsidiaries conduct their business. Effective
trademark protection may not be available for the Company's trademarks. There
can be no assurance that the Company will be able to secure significant
protection for the Company's trademarks. The Company's competitors or others may
adopt product or service names similar to the Company's, thereby impeding the
Company's ability to build brand identity and possibly leading to customer
confusion. The Company's inability to adequately protect our product, brand,
trade names and trademarks would have a material adverse effect on the Company's
business, financial condition and operating results. Despite any precautions the
Company takes, a third party may be able to copy or otherwise obtain and use the
Company's software or other proprietary information without authorization or to
develop similar software independently. Policing unauthorized use of the
Company's technology is made especially difficult by the global nature of the
Internet and difficulty in controlling the ultimate destination or security of
software or other data transmitted on it. The laws of other countries may afford
us little or no effective protection for the Company's intellectual property.
There can be no assurance that the steps the Company takes will prevent
misappropriation of the Company's technology or that agreements entered into for
that purpose will be enforceable. In addition, litigation may be necessary in
the future to enforce the Company's intellectual property rights; protect the
Company's trade secrets; determine the validity and scope of the proprietary
rights of others; or defend against claims of infringement or invalidity. Such
litigation, whether successful or unsuccessful, could result insubstantial costs
and diversions of resources, either of which could have a material adverse
effect on the Company's business, financial condition and operating results.
Risks Associated with Infringement. The Company may in the future receive
notices of claims of infringement of other parties' proprietary rights. There
can be no assurance that claims for infringement or invalidity (or any
indemnification claims based on such claims) will not be asserted or prosecuted
against the Company. Any such claims, with or without merit, could be time
consuming and costly to defend or litigate, divert the Company's attention and
resources or require the Company to enter into royalty or licensing agreements.
There can be no assurance that such licenses would be available on reasonable
terms, if at all, and the assertion or prosecution of any such claims could have
a material adverse effect on the Company's business, financial condition and
operating results.
27
<PAGE>
Risks Associated with Entering New Markets. One element of our strategy is
to leverage the Company's brand names and services that the Company and its
subsidiaries provide. No assurance can be given that the Company will be able to
successfully adapt the Company's products and services for use in other markets.
Even if the Company does adapt the Company's to other markets, no assurance can
be given that the Company will be able to compete successfully in any such new
markets. There can be no assurance that the Company's marketing efforts or the
Company's pursuit of any new opportunities will be successful. If the Company's
efforts are not successful, the Company could realize less than expected
earnings, which in turn could result in a decrease in the market value of the
Company's Common Stock. Furthermore, such efforts may divert management
attention or inefficiently utilize the Company's resources.
Risks Associated with International Strategy. One component of the
Company's strategy is a planned increase in efforts to attract additional
international customers and to expand the Company's Online Investors seminars,
services and products into international markets. To date, the Company has
limited experience in providing investment services internationally. There can
be no assurance that the Company's and the Company's subsidiaries will be able
to market the Company's branded services and products successfully in
international markets. In addition, there are certain risks inherent in doing
business in international markets, such as: unexpected changes in regulatory
requirements, tariffs and other trade barriers; difficulties in staffing and
managing foreign operations; political instability; fluctuations in currency
exchange rates; reduced protection for intellectual property rights in some
countries; seasonal reductions in business activity during the summer months in
Europe and certain other parts of the world; and potentially adverse tax
consequences. Any of the foregoing could adversely impact the success of the
Company's international operations. Under these agreements, the Company relies
upon third parties for a variety of business and regulatory compliance matters.
The Company has limited control over the management and direction of these third
parties. The Company runs the risk that their action or inaction could harm the
Company's operations and/or the goodwill associated with the Company's brand
names. As a result, the risk to our operations and goodwill is higher. There can
be no assurance that one or more of the factors described above will not have a
material adverse effect on the Company's future international operations, if
any, and, consequently, on our business, financial condition and operating
results.
Equity Price Risk. The Company through its subsidiary Momentum Asia holds a
small portfolio of marketable-equity traded securities that are subject to
market price volatility. Equity price fluctuations of plus or minus 15 percent
would not have a material impact on the Company. For its working capital and
reserves that are required to be segregated under Federal or other regulations,
the Company invests in money market funds, resale agreements, certificates of
deposit, and commercial paper. Money market funds do not have maturity dates and
do not present a material market risk. The other financial instruments are fixed
rate investments with short maturities and do not present a material interest
rate risk.
YEAR 2000 INFORMATION
---------------------
Year 2000 Issues - Uncertainty Of The Effects Of The Year 2000 On Computer
Programs And Systems. Many currently installed computer systems and software
programs were designed to use only a two digit date field. These date code
fields will need to accept four digit entries to distinguish 21st century dates
from 20th century dates. Until the date fields are updated, the systems and
programs could fail or give erroneous results when referencing dates following
December 31, 1999. Given that the Company's products operate on certain hardware
platforms and within certain software operating systems and environments, the
Company must rely upon the efforts of the hardware and software vendors and
manufacturers to be in the vanguard with respect to operating systems and
platform issues relating to the Year 2000 compliance.
28
<PAGE>
Present Year 2000 Status. The Company has assessed the impact of the year
2000 issue on the Company's products, services, platforms systmes and internal
information systems in use, and has found them to be Year 2000 compliant. The
Company does not expect the Company's financial results to be materially
affected by the need to address year 2000 issues, but if the costs associated
with addressing these issues are greater than planned, the Company's earnings
and results of operations could be affected. Due to the Company's dependence on
computer technology to conduct the Company's business, the nature and impact of
year 2000 processing failures on the Company's business, financial condition and
operating results could be material.
Business Continuity and Contingency Planning. The Company continues the
process of identifying the reasonably likely year 2000 problem failures that the
Company could experience with the goal of revising, to the extent practical, the
Company's existing business continuity and contingency plans to address the
internal and external issues specific to those problems. Thus far, the Company
has focused as planned on reviewing the Company's critical business processes
and although the Company conducted tests on the various and Platform systems in
use, and has found them to be Year 2000 compliant, the Company's expect to
continuously review, test and revise the Company's existing business continuity
and contingency plans to ensure that all systems are and maintain year 2000
compliant. This will include as required repairing or obtaining replacement
systems; changing suppliers; and reducing or suspending certain non-critical
aspects of our operations.
Possible Consequences of Year 2000 Problems
-------------------------------------------
The Company believes that the Company has put in place the processes and
are devoting the resources necessary to achieve a level of readiness to meet the
Company's year 2000 challenges in a timely and appropriate manner. However,
there can be no assurance that the Company's internal systems or the systems of
others on which we rely will be year 2000 ready in a timely and appropriate
manner or that the Company's contingency plans or the contingency plans of
others on which the Company relies will mitigate the effects of year 2000
problem failures. Currently, the Company believes the most reasonably likely
worst case scenario would be a sustained, concurrent failure of multiple
critical systems (internal and external) that support the Company's operations.
While the Company does not expect that scenario to occur, that scenario if it
occurs could, even despite the successful execution of the Company's business
continuity and contingency plans, result in the reduction or suspension of a
material portion of our operations and accordingly have a material adverse
effect on the Company's business and financial condition.
The preceding "Year 2000 Information" discussion contains various
forward-looking statements that represent the Company's beliefs or expectations
regarding future events. When used in the "Year 2000 Information" discussion,
the words "believes," "expects," "estimates," "plans," "goals," and similar
expressions are intended to identify forward-looking statements. Forward-looking
statements include, without limitation, the Company's expectations as to when
the Company will complete the identification and assessment, remediation
planning, remediation, and testing activities of the Company's year 2000 program
as well as the Company's year 2000 contingency planning; the Company's estimated
cost of achieving year 2000 readiness; and the Company's belief that the
Company's internal systems and equipment will be year 2000 ready in a timely and
appropriate manner. All forward-looking statements involve a number of risks and
uncertainties that could cause the actual results to differ materially from the
projected results. Factors that may cause those differences include availability
of information technology resources; customer demand for the Company's products
and services; continued availability of materials, services, and data from the
Company's suppliers; the ability to identify and remediate all date sensitive
lines of computer code and to replace embedded computer chips in affected
systems and equipment; the failure of others to timely achieve appropriate year
2000 readiness; and the actions or inaction of governmental agencies and others
with respect to year 2000 problems.
29
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
-----------------------------------------------------------------------
For the years end December 31, 1998 and December 31, 1997
Changes in Financial Condition
------------------------------
At December 31, 1997, the assets of the Company included a cash balance of
$73,029 and a license valued at $50,000 for the distribution of beverage
centers. On October 5, 1998 the Company acquired Momentum Internet and Momentum
Asia pursuant to an agreement and plan of reorganization whereby the Company
issued 5,130,000 (post-split adjusted) shares of its common stock in exchange
for all the outstanding stock common stock of Momentum Internet and Momentum
Asia. The reorganization was accounted for as a recapitalization of Momentum
Internet and Momentum Asia and, therefore, these companies were treated as the
surviving entities for accounting purposes. The Company was treated as the
surviving entity for legal purposes. The Company's consolidated balance sheet at
December 31, 1998, includes the assets and liabilities of Momentum Internet,
Momentum Asia, Bestway Beverages, Inc., an inactive wholly owned subsidiary
holding the license for the Beverage Centers, Swiftrade, Inc., and ZiaSun
Technologies, Inc., the parent company.
At December 31, 1998, the Company's current assets were $2,250,933 while
the current liabilities, consisting of accounts payable, were $600,013 resulting
in a current ratio of 3.8:1. The Company is in a positive cash flow position
resulting from the sale of internet services by Momentum Internet, the sale of
marketable equity securities by Momentum Asia and capital contributions from a
prior shareholder of Momentum Asia. The cash balance was $517,781 at December
31, 1998. Current assets at December 31, 1998 also include accounts receivable
of $899,879, inventory of $50,000, prepaid expenses of $7,370 and marketable
equity securities with a current market value of $775,903.
The balance of marketable equity securities was $775,903 at December 31,
1998. The majority of these shares were sold during 1999 and the previously
unrealized gain was realized. There were no marketable equity securities at
December 31, 1997. The Company classifies its marketable equity securities as
"trading" securities. Trading securities are stated at fair value. Realized and
unrealized gains and losses are included in other income.
The balance of equipment at December 31,1998, of $503,779 is shown net of
accumulated depreciation of $209,518. Equipment consists primarily of the
printing and office equipment, vehicles and leasehold improvements of Momentum
Asia and the office equipment of Momentum Internet and the Company at its
corporate offices.
The balance of other assets of $2,009,848 at December 31, 1998 includes
memberships in the Subic Bay Yacht Club valued at cost of $43,956 and the Mimosa
Golf and Country Club valued at cost of $98,901 and a real estate mortgage for
$250,000 for land at Subic Bay in Olangapo, Philippines. Additionally, other
assets includes security deposits on office and building rentals of $25,583 and
a receivable from Bevex for advances for operating expenses which was collected
in 1999, and common stock classified as held to maturity of $857,143.
At December 31, 1998, the Company had no long-term debt and had sufficient
cash flow from operations and the sale of marketable securities to cover
operating expenses. The Company is not planning any new debt borrowings, or for
the sale of its own equity securities to raise capital.
30
<PAGE>
Results of Operations
---------------------
Sales for the years ended December 31, 1998, and 1997 included primarily
internet services of Momentum Internet and printing and contract support of
Momentum Asia. Sales for the year ended December 31, 1998, were $2,289,158
compared to sales of $884,764 for the same period in 1997, an increase of
$1,404,394 (i.e. 159%). The increased sales resulted from the increase in
customer base and the increased value of contracted services. Cost of goods sold
for 1998 was $811,571 representing 36% of sales, resulting in a gross profit of
$1,477,587 representing 64% of sales. For the year ended December 31, 1997 the
Company had cost of goods sold of $552,210 representing 62% of sales, and a
gross profit of $332,554 representing 38% of sales.
Depreciation expense in 1998 was $98,496 compared to $49,200 in 1997, an
increase of $49,296, 100%. During 1998 and 1997 depreciation expense related
primarily to the printing equipment, office furniture and equipment, leasehold
improvements and vehicles of Momentum Asia and the office furniture and
equipment of the Company at its corporate office. General and administrative
expenses increased from $202,035 in 1997 to $1,334,303 in 1998, an increase of
$1,132,268 (i.e. 560%), due to the growth of Momentum Asia resulting in an
increase in personnel, office space and related overhead expenses.
Other income increased from $60,832 in 1997 to $1,124,080 in 1998, an
increase of $1,063,248 (i.e. 1,748%). The increase was due to realized gains
from the sale of marketable equity securities of $535,801. There were no
realized gains during 1997. Additionally, the Company had unrealized gain on
marketable securities of $712,438 in 1998. This stock was sold in 1999 and the
gain was realized. There was no unrealized gain in 1997.
Net income for the year ended December 31, 1998, was $1,152,210 compared to
net income of $141,546 for the year ended December 31, 1997. The increase of
$1,010,664 (i.e. 714%) was due to the growth of the operations of Momentum
Internet and Momentum Asia.
June 30, 1999 and December 31, 1998
Changes in Financial Condition
------------------------------
On March 25, 1999, the Company acquired Asia4sale by issuing restricted
common stock of the Company for virtually all of the stock of Asia4sale.
Additionally, on March 31, 1999, the Company acquired OIA for restricted common
stock of the Company and cash. These acquisitions were accounted for as
purchases. The acquisition of OIA has made a substantial, positive contribution
to the financial condition of the Company. The balance of current assets at June
30, 1999 was $6,662,781 compared to a balance of $2,250,933 at December 31,1998.
The balances of current liabilities were $1,961,713 and $600,013 for the same
periods respectively. The resulting current ratio at June 30, 1999, of 3.4:1 is
actually less than the current ratio of 3.8:1 at December 31, 1998. This
decrease in current ratio is due primarily to the $1,227,995 of income taxes
payable at June 30, 1999, resulting from the second quarter income of OIA.
Momentum Internet is a British Virgin Islands company and not subject to income
tax, Momentum Asia, a Philippine company and Asia4sale is a Hong Kong company.
These companies are subject to income taxation of the respective countries of
their registration. OIA is a Utah corporation and therefore subject to United
States income tax.
The increase of current assets at June 30, 1999, over December 31, 1998, is
due primarily to the increase of cash from $517,781 to $5,483,031, an increase
of $4,965,250 (i.e. 959%). The increase of cash is due primarily to the positive
cash flow generated from the operations of Online Investors, the cash generated
from the sale of marketable equity securities and the collection of accounts
receivable. (See further discussion of income below.) Additionally, current
assets at June 30, 1999, increased due to the increase of prepaid expenses from
$7,370 to $565,223, an increase of $557,853 (i.e. 7,569%). The increase in
prepaid expenses is primarily due to the cost of advertising and marketing of
educational programs and the program related printed materials of OIA.
31
<PAGE>
The increases in prepaid expenses at June 30, 1999, were offset by the
decreases in marketable equity securities and accounts receivable. The balance
of marketable equity securities at June 30, 1999 was $164,016 compared to a
balance of $775,903 at December 31, 1998. The decrease of $611,887 (i.e. 79%),
is due to the sale of marketable equity securities during the first and second
quarter of 1999. Also, accounts receivable decreased from $899,879 at December
31, 1998, to $427,615 at June 30, 1999 due to the collection of certain
balances.
The balance of equipment increased from $503,779 to $772,939, an increase
of $269,160 (i.e. 53%), from December 31, 1998, to June 30, 1999. The increase
is due to the addition of approximately $360,000 of Online Investor office
equipment offset by depreciation expense for the six-month period of
approximately $91,000.
Other assets increased $13,676,924 (i.e. 680%), from $2,009,848 at December
31, 1998, to $15,686,772 at June 30, 1999. The increase is due to the addition
of $14,401,732 of goodwill, (net) resulting from the acquisition of OIA and
Asia4sale which is being amortized over five years. Goodwill is the book value
given to the difference between the purchase price and the estimated fair market
value of the net assets of OIA and Asia4sale. The increase of other assets
attributable to goodwill was offset slightly by the decrease in receivable from
related party of $734,265 resulting from the collection of that balance.
At June 30, 1999, the Company has no long-term debt and has sufficient cash
flow from operations and the sale of marketable equity securities to meet its
cash obligations. The Company anticipates continued positive cash flow from
existing operations during the next six months, and will continue to look for
possible acquisitions of companies that will contribute in a positive way to the
Company's operating strategy.
Results of Operations
---------------------
For the three months ended June 30, 1999 and June 30, 1998
As explained above the Company acquired OIA on March 31, 1999. This
acquisition has had considerable impact on the operating income of the Company
since that date.
Sales for the three months ended June 30, 1999, were $9,013,320 as compared
to $372,217 for the same period in 1998, an increase of $8,641,103 (i.e.
2,322%). The 1999 sales attributable to OIA were $7,977,843. Cost of goods sold
for the Company for 1999 was $5,154,469 representing 57% of sales, resulting in
gross profit of $3,858,851, representing 43% of sales. Cost of goods sold for
the same period in 1998 was $65,253, representing 18% of sales, resulting in a
gross profit for that period of $306,964, representing 92% of sales. The gross
profit increased $3,551,887 (i.e. 1,157%). The gross profit margin for OIA is
lower than that of Momentum Internet and Momentum Asia due to higher costs
associated with advertising, marketing and presenting OIA's educational
programs.
Operating expenses include depreciation and amortization expense and
general and administrative expenses. Depreciation and amortization expense for
the three months ended June 30, 1999, includes depreciation of $45,248 and
amortization of goodwill of $369,275. The Company recorded goodwill for the
March, 1999 acquisitions of Asia4sale and OIA and is amortizing the goodwill
over five years. For the three-months ended June 30, 1999, the Company reported
32
<PAGE>
depreciation expense of $15,644 on the equipment of Momentum Internet, Momentum
Asia and the Company 's corporate offices. General and administrative expenses
were $1,476,178 for the same three-month period in 1999 and $206,657 for the
same period in 1998. The increase was $1,269,521 (i.e. 614%). The increase is
related to the acquisitions in 1999 of Asia4sale and OIA for the general and
administrative expenses of these subsidiaries.
For the three months ended June 30, 1999, other income (expense) increased
from $12 of other income for the three months ended June 30, 1998, to $363,068
of other income, an increase of $363,056. The increase is attributable to the
realized gain from the sale of marketable securities.
For the Six months ended June 30, 1999 and June 30, 1998
Sales for the six months ended June 30, 1999, were $9,899,191 as compared
to $873,576 for the six months ended 1998, an increase of $9,025,615 (i.e.
1033%). The 1999 sales attributable to OIA were $7,977,843. Cost of goods sold
for the Company for 1999 was $5,547,892 representing 56% of sales, resulting in
gross profit of $4,351,299, representing 44% of sales. Cost of goods sold for
the same period in 1998 was $198,518, representing 23% of sales, resulting in a
gross profit for that period of $675,058, representing 77% of sales. The gross
profit increased $3,676,241 (i.e. 545%).
For the six month ended June 30, 1999, proforma basis, including the
operations of OIA, the Company had revenues of $14,525,418 as compared to the
six months ended June 30, 1998 actual revenue of $873,576. The increase in
revenues over 1998 on a proforma basis is $13,651,842, 1,563%. Cost of goods
sold would have been $8,674,600, representing 60% of sales, resulting in gross
profit of $5,850,818, representing 40% of sales. The gross profit would have
increased by $1,499,519 (i.e. 35%), over actual.
Operating expenses include depreciation and amortization expense and
general and administrative expenses. Depreciation and amortization expense for
the six months ended June 30, 1999, includes depreciation of $78,841 and
amortization of goodwill of $369,275. The company recorded goodwill for the
March, 1999 acquisitions of Asia4sale and OIA and is amortizing the goodwill
over five years. For the six-months ended June 30, 1998, the Company reported
depreciation expense of $31,288 on the equipment of Momentum Internet, Momentum
Asia and the ZiaSun corporate offices. General and administrative expenses were
$2,084,278 for the same six-month period in 1999 and $508,566 for the same
period in 1998. The increase was $1,575,712 (i.e. 310%), and was attributable to
the acquisitions in 1999 of Asia4sale and OIA for the general and administrative
expenses of these subsidiaries.
For the six months ended June 30, 1999, other income (expense) increased
from $137,236 other expense for the six months ended June 30, 1998, to $411,934
other income, an increase of $549,170. The other income in 1999 is attributable
to the realized gain from the sale of marketable securities. While other expense
for the same period in 1998 was attributable to the write off of certain
equipment.
Item 3. Description of Property
-----------------------
The Nature and Extent of The Company's Facilities
Lease No. 1 - Solana Beach, California Office
---------------------------------------------
The Company's main office is located at 462 Stevens Avenue, Suite 106,
Solana Beach, California 92075. This leased office facility serves as the
corporate headquarters for the Company and houses the corporate offices of the
BestWay Beverages, Inc., a wholly owned subsidiary. The leased premises consists
of approximately 4,658 square feet and is on an initial lease term of 60 months.
The Company leases this space from Propco, L.P., a California Limited
Partnership. Propco L.P., is not affiliated in any way with the Company or its
subsidiaries and the terms of the lease were negotiated at arms-length.
A summary of the terms of the lease are as follows:
Lease Term: 60 Months commencing January 1, 1998.
Security Deposit: $50,000 Letter to Credit which shall be reduced to
$10,000 after the 36th month of the lease provided there have been no
defaults by ZiaSun.
Rental rate: Months 01-12.........$8,384 per month;
Months 13-24.........$8,720 per month;
Months 15-36.........$9,069 per month;
Months 37-48.........$9,431 per month;
Months 49-60.........$9,809 per month;
33
<PAGE>
Option to Renew: One option to renew the lease for a period of five (5)
years provided that written notice of the Company's intent to renew is
delivered to Landlord at least six (6) months before expiration of the
initial term. Monthly rent during the renewal term will be fair market
rental value of the leased premises, as determined pursuant to the
terms of the lease.
Real Property Taxes
and other Expenses: As additional rent, the Company is responsible for the
payment of 9.25% of the Direct Expenses associated with operation and
maintenance of the leased premises.
Personal
Property Taxes: The Company shall pay all taxes assessed against and levied
upon trade fixtures, furnishings, equipment and all other personal
property of the Company contained in the premises.
Utilities: The Company shall pay for all gas, heat, light, power telephone
and other utilities and services supplied to the premises, together
with any taxes thereon.
Subleasing: Consent of Landlord is required.
Copies of the Office Lease and Addendum to Office Lease for the premises
located at 462 Stevens Avenue, Suite 106, Solana Beach, California 92075, are
attached hereto and incorporated herein by reference. See the Exhibit Index,
Part III.
Lease No. 2 - Wanchai, Hong Kong Office - (Momentum Associates Limited)
-----------------------------------------------------------------------
Momentum Associates Limited ("MAL") a Hong Kong registered company and
wholly subsidiary of Momentum Internet leases the corporate facilities located
at the 12th Floor, First Pacific Bank Centre, 56 Gloucester Road, Wanchai, Hong
Kong. This office space comprises 2,000 square feet and is leased until November
30, 2000. This office is occupied by Anthony Tobin, the Company's President and
is shared by Momentum Internet administration and development staff. These
facilities are leased from Hong Kong Finance Property Company Limited which is
not affiliated in any way with the Company or its subsidiaries and the terms of
the lease were negotiated at arms-length.
A summary of the terms of the lease are as follows:
Lease Term: Two years commencing December 1, 1998.
Security Deposit: HKD$133,297 (i.e. approximately US$17,173).
Rental rate: HKD$55,000 (i.e. approximately US$7,085) per month.
Option to Renew: One option to renew the lease for a period of five (5)
years provided that written notice of our intent to renew is delivered
to Landlord at least six (6) months before expiration of the initial
term. Monthly rent during the renewal term will be fair market rental
value of the leased premises, as determined pursuant to the terms of
the lease.
Additional Rent: As additional rent MAL pays HKD$11,649 (i.e. approximately
US$1,500) per month for management and air conditioning charges.
Personal
Property Taxes: MAL shall pay all taxes assessed against and levied upon
trade fixtures, furnishings, equipment and all other personal property
of MAL contained in the premises.
Utilities: MAL shall pay for all gas, heat, light, power telephone and
other utilities and services supplied to the premises, together with
any taxes thereon.
Subleasing: Consent of Landlord is required.
A copy of the Wanchai, Hong Kong Office Lease for the premises located at
12th Floor, First Pacific Bank Centre, 56 Gloucester Road, Wanchai, Hong Kong,
entitled "Tenancy Agreement", is attached hereto and incorporated herein by
reference. See the Exhibit Index, Part III.
34
<PAGE>
Lease No. 3 - Pasig City, Philippines Office - (Momentum Internet Phils.
Inc.)
---------------------------------------------------------------------------
Momentum Internet Phils, Inc., ("MIP") a Philippines registered company and
wholly subsidiary of Momentum Internet Incorporated, a wholly owned subsidiary
of the Company, leases offices located at Pearl Drive Corner Gold Loop Street,
Ortigas Center, Pasig City, Philippines. The initial term of this lease is from
January 1, 1999, through December 31, 1999, and is subject to renewal by mutual
agreement of the parties. This office space is leased from Rebecca A, Ynares,
who is not affiliated in any way with the Company or its subsidiaries and the
terms of the lease were negotiated at arms-length.
A summary of the terms of the lease are as follows:
Lease Term: One year (January 1, 1999 through December 31, 1999.
Security Deposit: Two Months Rent - P$180,000 Pesos (i.e. US$4,500)
Rental rate: P$90,000 Pesos (i.e. US$2,250 per month.
Option to Renew: MIP can renew this lease upon providing the Landlord 60
days prior notice to renew before the expiration of the lease and MIP
are able to negotiate mutually acceptable renewable lease terms with
the landlord.
CAM (Common
Area Charges): As additional rent MIP pays P$20.00 Pesos ($US0.50) per
square meter of the total leased are.
Personal
Property Taxes: MIP shall pay all taxes assessed against and levied upon
trade fixtures, furnishings, equipment and all other personal property
of MIP contained in the premises.
Utilities: MIP shall pay for all gas, heat, light, power telephone and
other utilities and services supplied to the premises, together with
any taxes thereon.
Subleasing: Consent of Landlord is required.
Copies of the Contract of Lease and First Amendment to the Contract of
Lease for the office space located at Pearl Drive Corner Gold Loop Street,
Ortigas Center, Pasig City, Philippines, are attached hereto and incorporated
herein by reference. See the Exhibit Index, Part III.
Lease No. 4 - Clark Field, Philippines Office - (Momentum Asia Inc.)
--------------------------------------------------------------------
Momentum Asia leases a 30,500 square foot office/industrial property
located in the Clark Special Economic Zone, Philippines (former Clark Air Base),
located at building PTI-07 at Mitchell Highway 1961st Are, Clark Field,
Pampanga. This facility houses all operations of Momentum Asia, and is leased
until November 30, 2016. Current rent is US $5,300 per month until November 30,
2000, with an annual 6.0% escalation thereafter. Substantial tenant improvements
have been completed by Momentum Asia at its own expense. These facilities are
subleased from Philexcel Textiles, Incorporated (PTI), a Philippines corporation
which is not affiliated in any way with the Company or its subsidiaries and the
terms of the lease were negotiated at arms-length.
A summary of the terms of the lease as amended are as follows:
Lease Term: Twenty years commencing December 1, 1996.
Security and
Rental Deposit: US$15,000 Security Deposit and US$5,000 Rental Deposit
Rental rate: Currently US$5,300 per month with an increase of six percent
(6.0% every year compounded annually except for year 3 from December
1, 1999 through November 30, 2000.
Option to Renew: Momentum Asia can renew this lease provided Momentum Asia
is able to negotiate mutually acceptable renewable lease terms with
the landlord and subject to approval and consent of the original
lessor.
35
<PAGE>
Personal
Property Taxes: Momentum Asia shall pay all taxes assessed against and
levied upon trade fixtures, furnishings, equipment and all other
personal property of Momentum Asia contained in the premises.
Utilities: Momentum Asia shall pay for all gas, heat, light, power
telephone and other utilities and services supplied to the premises,
together with any taxes thereon.
Subleasing: Consent of Landlord is required and as a condition to any
sublease, we must pay the landlord 10% of the gross proceeds of any
sublease proceeds Momentum Asia receives.
Copies of the Sublease Agreement and Amended Sublease Agreement between
Momentum Asia, Inc., and Philexcel Textiles, Inc., for the premises located at
building PTI-07 at Mitchell Highway 1961st Are, Clark Field, Pampanga. are
attached hereto and incorporated herein by reference. See the Exhibit Index,
Part III.
Lease No. 5 - Provo, Utah Office Lease - (Online Investors Advantage, Inc.)
---------------------------------------------------------------------------
OIA, a wholly owned subsidiary of the Company, leases offices located at
5252 North Edgewood Drive, Provo Utah 84604. The leased premises consists of
approximately 3,340 square feet net rentable area. OIA leases this space from
EsNET Properties L.C., a Utah limited liability company which is not affiliated
in any way with the Company or its subsidiaries and the terms of the lease were
negotiated at arms-length.
A summary of the terms of the lease are as follows:
Lease Term: August 1, 1999 through July 20, 2004
Security Deposit: Two Months of current base rent.
Base Rental rate: Year 1 .............. Letter of Credit
against first 12 Months Rent;
Year 2............... $4,157 per month;
Year 3............... $4,282 per month;
Year 4............... $4,410 per month;
Year 5............... $4,542 per month;
Pursuant to the terms of the Lease, if lieu of OIA paying Landlord
regular monthly rent payments during the fist 12 months of the lease,
OIA deposited with Landlord a letter of credit in the amount of
$72,265 which is the amount of rents from commencement of the lease
and a prepayment of rents for the balance of the first year, including
12% interest paid on the first year's rent. If OIA fails to pay
Landlord the full amount due as of rental consideration for the first
12 months of occupancy by April 15, 2000, then Landlord may drawn down
on said line of credit.. In the event that OIA pays said amount due
without Landlord having to drawn down on said line of credit, the OIA
shall deposit a security deposit equal to two months of the then
current base rent.
36
<PAGE>
Additional Rent: OIA shall pay as additional rent that amount equal to (a)
the Net Rentable Area of the leased premises multiplied by (b) the
Operating Expense of the building, divided by the Net Rentable Are of
the Building.
Option to Renew: OIA has the option to renew the lease for one additional
term of 5 years provided there has been no event of default. In the
event of a renewal the Base Rental rate would be as follows:
Option Term Base Rental Rate:
----------------------------
Year 6 .............. $4,679 per month;
Year 7 .............. $4,819 per month;
Year 8 .............. $4,964 per month;
Year 9 .............. $5,112 per month;
Year 10 ............. $5,266 per month;
Personal
Property Taxes: OIA shall pay all taxes assessed against and levied upon
trade fixtures, furnishings, equipment and all other personal property
of OIA contained in the premises.
Utilities: OIA shall pay for all gas, heat, light, power telephone and
other utilities and services supplied to the premises, together with
any taxes thereon.
Subleasing: Consent of Landlord is required.
A copy of the Lease Agreement for the premises located at 5252 North
Edgewood Drive, Provo Utah 84604, is attached hereto and incorporated herein by
reference. See the Exhibit Index, Part III.
Lease No. 6 - Orem, Utah Office Lease - (Online Investors Advantage, Inc.)
---------------------------------------------------------------------------
OIA, a wholly owned subsidiary of the Company, also leases offices located
at 852 North 1430 West, Unit #3, Westpoint Business Park, Orem Utah 84057. The
leased premises consists of approximately 1,940 square feet and is for a term of
three (3) years. OIA leases this space from DC Mason, Ltd., which is not
affiliated in any way with the Company or its subsidiaries and the terms of the
lease were negotiated at arms-length.
A summary of the terms of the lease are as follows:
Lease Term: Three (3) years (November 1, 1998 through October 31, 2001
Security Deposit: $1,100.00
Base Rental rate: Year 1 .............. $1,100 per month;
Year 2............... $1,133 per month;
Year 3............... $1,167 per month;
37
<PAGE>
Additional Rent: OIA shall pay as additional rent all Common Area
Maintenance Charges associated with the leased premises estimated to
be $40.00 per month.
Option to Renew: The lease does not provide us with the right to renew and
as such any such renewal would be on mutually acceptable terms to both
parties.
Real Property Taxes
and other Expenses: OIA shall pay all real estate taxes levied and
assessed against the lease premises which are estimated to be $46 per
month.
Personal
Property Taxes: OIA shall pay all taxes assessed against and levied upon
trade fixtures, furnishings, equipment and all other personal property
of OIA contained in the premises.
Utilities: OIA shall pay for all gas, heat, light, power telephone and
other utilities and services supplied to the premises, together with
any taxes thereon.
Subleasing: Consent of Landlord is required.
A copy of the Lease Agreement for the premises located at located at 852
North 1430 West, Unit #3, Westpoint Business Park, Orem Utah 84057., is attached
hereto and incorporated herein by reference. See the Exhibit Index, Part III.
Lease No. 7 - Orem, Utah Office Lease - (Online Investors Advantage, Inc.)
---------------------------------------------------------------------------
OIA, a wholly owned subsidiary of the Company, also leases offices located
at Turnberry Office Park, 211 East 840 South, Unit #15, Orem Utah 85058. The
leased premises consists of approximately 2,000 square feet. OIA leases this
space from Gordon Jacobson, who is not affiliated in any way with the Company or
its subsidiaries and the terms of the lease were negotiated at arms-length.
A summary of the terms of the lease are as follows:
Lease Term: Month to Month with 60 days notice to terminate
Security Deposit: $1,900
Base Rental rate: $1,900 per month
Option to Renew: Month to Month lease
Real Property Taxes
and other Expenses: OIA shall pay our proportionate amount of the real
property taxes for any given year which are in excess of the real
property taxes for the fiscal year ended as of the beginning of our
lease.
Personal
Property Taxes: OIA shall pay all taxes assessed against and levied upon
trade fixtures, furnishings, equipment and all other personal property
of OIA contained in the premises.
Utilities: OIA shall pay for all gas, heat, light, power telephone and
other utilities and services supplied to the premises, together with
any taxes thereon.
38
<PAGE>
Subleasing: Consent of Landlord is required.
A copy of the Lease Agreement for the premises located at located at
Turnberry Office Park, 211 East 840 South, Unit #15, Orem Utah 85058, is
attached hereto and incorporated herein by reference. See the Exhibit Index,
Part III.
Item 4. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners
The following table sets forth security ownership information as of the
close of business on August 31, 1999, for any person or group, known by the
Company to own more than five percent (5%) of the Company's voting securities,
based on a total of 27,030,018 shares issued and outstanding as of such date.
<TABLE>
<CAPTION>
Title of Name of Amount of Percent of
Class Beneficial Owner Ownership Class
---------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock D. Scott Elder 2,100,000 7.8%
1156 East 100 North
Orem, UT 84097
Common Stock Ross W. Jardine 2,100,000 7.8%
116 S. Pfeifferhorn Drive
Alpine, Utah 84004
Common Stock Momentum Media Ltd. 3,499,980 12.8%
304 Dominion Centre
43 Queen's Road
East Wanchai
Hong Kong
</TABLE>
(b) Security Ownership of Management
The following table sets forth security ownership information as of the
close of business on August 31, 1999, for any director, executive officer or
group of the Company's voting securities:
<TABLE>
<CAPTION>
Title of Name of Amount of Percent of
Class Beneficial Owner Ownership Class
---------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock D. Scott Elder 2,100,000 7.8%
1156 East 100 North
Orem, UT 84097
Common Stock Ross W. Jardine 2,100,000 7.8%
116 S. Pfeifferhorn Drive
Alpine, Utah 84004
</TABLE>
39
<PAGE>
Each of the persons listed in the above table possesses sole investment
power and sole voting power over the shares set forth in the above table.
(c) Change in Control.
There are no present arrangements or pledges of the Company's securities
which may result in a change in control of the Company.
Item 5. Directors, Executive Officers, Promoters and Control Persons
------------------------------------------------------------
(a) Identity of Directors and Executive Officers.
<TABLE>
<CAPTION>
Name and Address Age Position Term Served Since
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
D. Scott Elder 41 CEO, Chairman 1 Year 1999
825 North 1430 West of the Board and
Orem, UT 84057 Director
Anthony L. Tobin 53 President and 1 Year 1998
12A, Pacific Bank Centre Director
56 Gloucester Road
Wanchai, Hong Kong
Allen D. Hardman 58 Vice President 1 Year 1998
452 Stevens Avenue and Director
Suite 106
Solana Beach, CA 92075
Ross W. Jardine 38 Director 1 Year 1999
116 S. Pfeifferhorn Drive
Alpine, Utah 84004
Alfredo Alex S. Cruz III 39 Secretary 1 Year 1999
15 Kalinga Street
La Vista Subdivision
Quezon City, Philippines
</TABLE>
There are no arrangements or understandings between any of the directors or
executive officers, or any other person or person pursuant to which they were
selected as directors and/or officers.
D. Scott Elder, was elected as the Chairman of the Board and Chief
Executive Officer of the Company in 1999. Mr. Elder has a degree in
Communications from Brigham Young University and an M.B.A. from the University
of Phoenix in 1997. Mr. Elder is also currently the Vice President of Online
Investors Advantage, Inc., a Utah Corporation ("OIA"), a company he co-founded
with Ross Jardine in 1997. OIA provides educational workshops and video-based
home study training programs that teach people how to use its Investor Toolbox
web site in order to make sound stock investing decisions and manage their own
stock investments. OIA was recently acquired by the Company.
40
<PAGE>
Before devoting full time to OIA, Mr. Elder was the owner of The Business
Alliance Company, which developed joint-venture marketing and training programs.
Some of the companies Mr. Elder has developed joint-venture projects with
include General Mills, Procter & Gamble, Rubbermaid, and Zane Publishing, a
company that markets educational programs through Amway.
Mr. Anthony Tobin, the President and a Director is 53. Mr. Tobin is also
President of Momentum Internet. The Company selected Mr. Tobin for his Internet
expertise and for his flair in identifying leading edge technologies and
services and commercializing them in a profitable manner. Mr. Tobin has more
than 25 years experience in Asia (Hong Kong, Singapore, and the Philippines) --
in journalism- publishing, public relations, marketing, advertising, government
information. and the Internet. He was the former senior information
communications officer in the Hong Kong and Singapore governments. Mr. Tobin
reported to the Prime Minister's office in Singapore, advising on domestic and
international publicity policies and implementing new strategies in the Ministry
of Information. He has spent the last three years developing and marketing the
Momentum Internet Incorporated product roster.
Mr. Tobin is also a Director and Manager of Crossbow Consultants Ltd., an
Internet publishing company which has a consulting contract with Momentum
Internet Incorporated, a subsidiary of the Company.
Allen D. Hardman, earned an Industrial Engineering Technical Diploma from
the University of Utah in 1966, and a Bachelors Degree in Business
Administration from California State University in 1975. Mr. Hardman has 35
years of varied business experience, some with small companies and some with
mid-to-large corporations. His work experience includes president for a company
furnishing pre-assembled manufacturing systems on a global basis, director of
business development for industrial manufacturing systems, national sales
manager for systems products, manufacturing engineering, product and systems
engineering, consulting engineering, operations management, project management
for multi-million dollar projects installed worldwide, manufacturing quality
control and customer service management.
During the last several years, and particularly the last two years, Mr.
Hardman has restructured several small businesses to either establish their
viability as an enterprise and/or increase their operating proficiency and
potential for profitability. He has also been intimately involved in identifying
and establishing some strategic partner alliances and/or joint ventures. This
allowed the companies involved to improve their respective competitive
position(s) in the marketplace through improved product or intellectual property
designs, which resulted from the synergy realized by combining their individual
product offerings.
Ross W. Jardine, is a director of the Company and the President of Online
Investors Advantage, Inc., a Utah Corporation ("OIA") a wholly owned subsidiary
of the Company. Mr. Jardine graduated cum laude from Brigham Young University in
1987 with a degree in communications. He immediately established himself as a
top producer in the financial services industry, specializing in commodities and
options. He left the financial services business to begin a successful career as
an entrepreneur. Mr. Jardine founded his own sports marketing company in 1989.
He created marketing products and programs for companies like Coca Cola,
Albertsons, Nabisco and many other companies. He also held licenses with many of
the top professional sports organizations including the National Football
League, the Indy 500, the Kentucky Derby, and the America's Cup.
In 1994 he became interested in the Internet and moved his business online.
This experience led him to start a consulting business focused on teaching other
business owners how to get their own businesses online. He also created one of
the first online shopping malls on the Internet, called iMALL (www.imall.com).
Mr. Jardine has spoken to tens of thousands of business owners in seminars and
workshops about doing business on the Internet. The company went public in 1996
was recently sold to Excite@home for $425 million.
41
<PAGE>
In 1997 Mr. Jardine left iMALL to focus on creating a program to train
investors in using the Internet to invest. Together with D. Scott Elder, Mr.
Jardine founded OIA, (www.i-advantage.com), a company focused on teaching people
how to invest using their personal computers and the Internet. The company
quickly established itself as the leader in online investor education. OIA
conducts dozens of workshops and seminars in cities around the country where
investors learn to use the most advanced investment tools available on the
Internet. Mr. Jardine serves as President of OIA and conducts many of the
training programs put on by OIA.
Alfredo Alex S. Cruz III, the Secretary of the Company also serves as a
director of Momentum Asia, Inc., and Momentum Internet Incorporated, both of
which are wholly owned subsidiaries of the Company. Mr. Cruz was admitted to the
Philippine Bar in 1987 having received his Bachelor of Law degree from the
University of the Philippines in 1986 and an A.B. in Economics from the
University of the Philippines in 1982. Mr. Cruz is a founding partner of the law
firm of Bocobo Rondain Mendiola Cruz & Formoso located in Pasig Metro Manila,
Philippines. Mr. Cruz's practice concentration and experience is in the areas of
mergers and acquisitions, joint ventures, incorporations, administrative
licensing, and corporate housekeeping; general exposure in trial and appellate
litigation in Contract, Corporate, Domestic Relations, Entertainment, Insurance,
Injunction, and Libel Law. Mr. Cruz is fluent in English and Filipino.
(1) Directorships
No Director of the Company or person nominated or chosen to become a
Director holds any other directorship in any company with a class of securities
registered pursuant to section 12 of the Exchange Act or subject to the
requirements of section 15(d) of such Act or any other company registered as an
investment company under the Investment Company Act of 1940.
(a) Identity of Significant Employees.
In addition to the executive officers of the Company, the Company or its
subsidiaries rely on the services and expertise of Peter Graham Daley of
Momentum Associates Limited, Brian Hodgson, the President of Asia4sale.com, Ross
W. Jardine, the President of OIA, Scott Harris and David McCoy employees of OIA
and Eric Montandon, the President of Momentum Asia, all of which persons make a
significant contributions to the business of the Company and its subsidiaries.
(b) Family Relationships.
There are no family relationships between any directors or executive
officers of the Company, either by blood or by marriage.
(c) Involvement in Certain Legal Proceedings.
During the past five years, no present or former director, executive
officer or person nominated to become a director or an executive officer of the
Company:
(1) was a general partner or executive officer of any business against
which any bankruptcy petition was filed, either at the time of the
bankruptcy or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a
pending criminal proceeding (excluding traffic violations and other minor
offenses);
42
<PAGE>
(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking
activities; or
(4) was found by a court of competent jurisdiction (in a civil
action), the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have violated a Federal or state securities or
commodities law, and the judgment has not been reversed, suspended or
vacated.
Item 6. Executive Compensation.
-----------------------
The following table sets forth the aggregate compensation paid by the
Company for services rendered during the periods indicated:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
---------------------------
Long Term Compensation
--------------------------------------------------
Annual Compensation Awards Payouts
-----------------------------------------------------------------------------------------------
Securities All
Other Underlying Other
Annual Restricted Options/ LTIP Compen-
Name and Year or Compen- Stock SAR's Payouts sation
Principal Period Salary Bonus sation) Awards (#) ($) ($)
Position Ended ($) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Anthony L. Tobin(1) 1998 $121,800 0 $31,200 0 0 0 0
President
Allen D. Hardman(2) 1998 $132,000 0 0 0 100,000 0 0
Vice President
D. Scott Elder(3) 1998 $ 31,500 0 0 0 0 0 174,127
Chairman of the
Board
And
Chief Executive Officer
Ross D. Jardine(4) 1998 $ 0 0 0 0 0 0 208,520
President of
Online Investors Advantage
Peter Graham
Daley(5) 1998 $ 24,000 0 0 0 0 0 0
Employee of
Momentum Associates Limited
</TABLE>
---------------------------------------------------------------------------
(1) Mr. Tobin is the owner of Crossbow Consultants Limited which receives
$10,000 per month from the Company's subsidiary, Momentum Internet
Incorporated, for the services provided by Crossbow Consultants. Mr.
Tobin through his employment agreement with Momentum Associates
Limited, a subsidiary of Momentum Internet Incorporated, receives a
month housing allowance of approximately $2,600 and a management fee
of approximately $150 per month.
43
<PAGE>
(2) Mr. Hardman, the Vice President of the Company is currently subject to
and Employment Agreement with the Company. See Employment Contracts /
Stock Incentive Plans" below.
(3) Mr. Edler received a base salary of $31,500, consulting fees of
$24,127, and $150,000 in payment of deferred compensation, from OIA
during 1998, for total compensation of $205,627.
(4) Mr. Jardine received consulting fees of $58,520 and $150,000 in
payment of deferred compensation from OIA during 1998, for total
compensation f $208,520.
(5) Mr. Daley through his employment agreement Momentum Associates
Limited, a subsidiary of Momentum Internet Incorporated, receives a
month housing allowance of approximately $2,000 and a management fee
of approximately $150 per month.
There are no standard arrangements pursuant to which the Company's
directors are compensated for any services provided as director. No additional
amounts are payable to the Company's directors for committee participation or
special assignments.
There are no arrangements pursuant to which any of the Company's directors
was compensated during the Company's last completed fiscal year for any service
provided as director.
There are no employment contracts, compensatory plans or arrangements,
including payments to be received from the Company, with respect to any director
or executive officer of the Company which would in any way result in payments to
any such person because of his or her resignation, retirement or other
termination of employment with the Company or its subsidiaries, any change in
control of the Company, or a change in the person's responsibilities following a
change in control of the Company.
Nor are there any agreements or understandings for any director or
executive officer to resign at the request of another person; none of the
Company's directors or executive officers is acting on behalf of or will act at
the direction of any other person.
EMPLOYMENT CONTRACTS / STOCK INCENTIVE PLANS
--------------------------------------------
Allen D. Hardman. Allen D. Hardman, the Vice President and a director of
the Company has an Employment Agreement with the Company which commenced on July
1, 1997 for a term of 5 years at an initial salary of $120,000 per year.
Pursuant to the terms of the agreement, the Company's board of directors may, in
its sole discretion, grant raises, bonuses, etc. in an amount not less that the
cost of living increase for the greater San Diego area. Additionally, Mr.
Hardman's Employment Agreement contains a stock option which entitles Mr.
Hardman the option to one hundred thousand (100,000) shares of the Common Stock
of the Company, at $2.00 per share, (subject to adjustment for splits), in equal
installments of twenty-five (25,000) shares each beginning after one (1) year of
employment for 4 consecutive years. On April 15, 1999 the Board of Directors of
the Company authorized the amendment to Mr. Hardman's Employment Agreement and
the Stock Option contained therein such that the Employment Agreement, as
amended and Stock Option were broken out into two separate agreements. Copies of
Mr. Hardman's Employment Agreement, Amendment to Employment Agreement and
Non-Qualified Stock Option Agreement are attached hereto and incorporated herein
by reference. See the Exhibit Index, Part III.
Peter Graham Daley. Momentum Associates Limited ("MAL"), a Hong Kong
registered company and wholly-owned subsidiary of Momentum Internet
Incorporated, which is a wholly owned subsidiary of the Company has an
employment agreement with Peter Graham Daley under which Mr. Daley will provide
administrative, promotional and technical support services to MAL to enable MAL
to carry on its business as a facilitator of Internet marketing and publishing
44
<PAGE>
service. Under the terms of this agreement Mr. Daley shall be paid a housing
allowance of HK$15,000 (approximately US$2,000) per month for a period from June
1, 1998, through May 31, 1999. The agreement is subject to automatic renewal
unless terminated by either party on one months prior notice. The agreement has
been renewed. A copy of this Employment Agreement with Mr. Daley is attached
hereto and incorporated herein by reference. See the Exhibit Index, Part III.
Anthony L. Tobin. Mr. Anthony L. Tobin, the President and a Director of the
Company has an Employment Agreement with MAL. Under the terms of this agreement
Mr. Tobin is to provide administrative, promotional and technical support
services to MAL to enable MAL to carry on its business as a facilitator of
Internet marketing and publishing service. Under the terms of this agreement Mr.
Tobin shall be paid a housing allowance of HK$19,000 per month plus a management
fee of HK$1,112 per month for a period from June 1, 1998, through May 31, 1999.
The agreement is subject to automatic renewal unless terminated by either party
on one months prior notice. The agreement has been renewed. A copy of this
Employment Agreement with Mr. Tobin is attached hereto and incorporated herein
by reference. See the Exhibit Index, Part III.
Crossbow Consultants, Limited. Mr. Tobin is also the sole owner of Crossbow
Consultants Limited. See Item 7. "Certain Relationships and Related
Transactions."
STOCK INCENTIVE AWARDS
----------------------
Other than the stock options and rights to acquire additional shares of
common stock of the Company as set forth in Item 8. below, Description of
Securities "Options, Warrants and Rights to Acquire Additional Shares of the
Companies Common Stock," there are no other outstanding options, warrants or
rights to acquire additional shares of common stock of the Company.
Any incentive awards, stock options or warrants shall be made at the
discretion of the board of directors or a committee designed by the board of
directors.
Item 7. Certain Relationships and Related Transactions
----------------------------------------------
TRANSACTIONS WITH MANAGEMENT AND OTHERS
---------------------------------------
In August 1998 the Company's subsidiary, Momentum Asia, Inc. made a loan of
$70,000 to Vulcan Consultants Limited, a British Virgin Islands Corporation,
which loan was due and payable in one year, in cash or securities acceptable to
Momentum Asia, Inc. In December 1998, Vulcan Consultants delivered as full
payment of said loan, 65,000 restricted shares of the Company which Vulcan
Consultants received as the sole shareholder of Momentum Internet Incorporated,
through the acquisition by the Company of Momentum Internet Incorporated Mr.
Anthony L. Tobin, the President of the Company is the sole director of Vulcan
Consultants Limited and has sole voting power over the shares owned by Vulcan.
Commencing April 1, 1999, pursuant to an oral agreement between Momentum
Associates Limited, a Hong Kong registered company and wholly subsidiary of
Momentum Internet Incorporated, a wholly owned subsidiary of the Company,
Asia4sale.com Limited, a wholly-owned subsidiary of the Company subleases and
utilizes for its operations, part of the leased premises located at the 12th
Floor, First Pacific Bank Centre, 56 Gloucester Road, Wanchai, Hong Kong.
Asia4sale.com, Limited pays Momentum Associates Limited monthly rent of HK$5,000
(i.e. approximately US$685) per month, on an unlimited basis terminable by
either party upon one months prior notice.
45
<PAGE>
On April 1, 1999, Momentum Internet Incorporated, a wholly-owned subsidiary
of the Company entered into a Consulting Agreement with Crossbow Consultants
Limited, a personal services corporation owned by the Company's President,
Anthony L. Tobin. Under the terms of this agreement, Crossbow will provide all
administrative, promotional and technical support, as required, for Momentum
Internet to carry on its Internet publishing and marketing operations, including
but not limited to the assistance in the Internet publishing and marketing of
Momentum Internet's products Swiftrade, Mfinance, PINmail, MediaHits, Search
Dragon and such others as developed by Momentum Internet from time to time.
Under the terms of this agreement Momentum Internet pays Crossbow a monthly fee
of US$10,000 per month. A copy of the Agreement with Crossbow Consultants
Limited is attached hereto and incorporated herein by this reference. See
Exhibit Index, Part III.
On January 19, 1998, Fountain Fresh International Inc., a Utah Corporation
("FFI"), (Since renamed to BEVEX Inc.) ceased operations due to financial
insolvency. New Age Publications, a Philippine Corporation ("NAP"), (Since
renamed to Momentum Asia, Inc. and BetterStuff AG, a Swiss Corporation ("BSAG"),
both had a significant vested interest in the success of FFI, and, therefore,
were particularly interested in preserving FFI and their beverage center
technology.
To that end, on May 13, 1998, BSAG and NAP entered into a joint venture
agreement known as "Beverage Center Joint Venture", (BCJV) to acquire a majority
ownership of the outstanding shares of FFI. Some 12,800,000 shares of BEVEX were
issued and outstanding that time.
Accordingly, on May 20, 1998, BCJV did acquired 20,000,000 newly issued
shares of FFI for $1,400,000.00, increasing the total shares issued and
outstanding to 32,264,000. Following the acquisition, BCJV beneficially owned
some 62% of the total FFI shares issued and outstanding
In accordance with the terms of the BCJV, the remaining money was used to
complete a creditor workout, wherein some $1,900,000 of overdue FFI trade debt
was settled for $520,000. In addition, an outstanding judgment against FFI for
$426,000 was settled for $280,000. The balance of the money has been, and is
being applied to redesign of the FFI beverage center, because after intensive
design critique by qualified engineers in both Europe and the USA, it was
determined the existing design had too many shortcomings to be successful in the
marketplace for which it was intended.
Following an intensive review of beverage mixing, proportioning and filling
technologies in Europe over the last several months, testing is now underway on
those certain technologies deemed most successful and applicable to self-fill
beverage centers of the type BEVEX Inc. believes will have the highest
probability of success in the targeted markets. Moreover, BEVEX has been
successful in obtaining German Government backed technology development funding
to continue the beverage center redesign and introduction to the marketplace.
Having fulfilled its purpose to preserve FFI, and BCJV was formally
terminated on June 13, 1999.
On March 25, 1999, Momentum Internet Incorporated, a wholly-owned
subsidiary of the Company entered into an agreement with Asia4sale.com, Ltd.,
also a wholly-owned subsidiary of the Company under which Momentum Internet
would provide promotional services to Asia4sale and its internet related barter
and auction site and service. In consideration for the services provided by
Momentum Internet, Asia4sale.com agrees to spilt equally with Asia4sale.com and
Momentum Internet all paid receipts, after deducting all fees paid by Asia4sale
to suppliers, shop franchisees and credit card transaction fees. Payments shall
be made at mutually agreed upon times subject to an account being taken after
receipt of annual audited financial statements for Asia4sale. A copy of the
Agreement between Momentum Internet and Asia4sale.com, Ltd., is attached hereto
and incorporated herein by this reference. See Exhibit Index, Part III.
46
<PAGE>
Other than the transactions set forth above, there have been no material
transactions, series of similar transactions, currently proposed transactions,
or series of similar transactions, to which the Company or any of its
subsidiaries was or is to be a party, in which the amount involved exceeded
$60,000 and in which any director or executive officer, or any security holder
who is known to the Company to own of record or beneficially more than five
percent of the Company's common stock, or any member of the immediate family of
any of the foregoing persons, had a material interest.
There have been no further or additional preliminary contact or discussion
by any of the Company's officers, directors, promoters, their affiliates or
associates with any representatives of the owners of any business or company
regarding the possibility of any acquisitions or mergers transactions, and there
are no present plans, proposals, arrangements or understandings with any person
or company regarding the possibility of any additional acquisitions or merger
transaction.
TRANSACTIONS WITH PROMOTERS
---------------------------
There have been no material transactions, series of similar transactions,
currently proposed transactions, or series of similar transactions, to which the
Company or any of its subsidiaries was or is to be a party, in which the amount
involved exceeded $60,000 and in which any promoter or founder, or any member of
the immediate family of any of the foregoing persons, had a material interest.
However, see the caption "Transactions with Management and Others" of this
Registration Statement Item 8. Description of Securities.
Item 8. Description of Securities.
--------------------------
Common Stock
------------
The Company has one class of security authorized, consisting of 50,000,000
authorized shares of one mill ($0.001) par value common voting stock. The
holders of the Company's common stock are entitled to one vote per share on each
matter submitted to a vote at a meeting of stockholders. The shares of common
stock do not carry cumulative voting rights in the election of directors.
Stockholders of the Company have no pre-emptive rights to acquire
additional shares of common stock or other securities. The common stock is not
subject to redemption rights and carries no subscription or conversion rights.
In the event of liquidation of the Company, the shares of common stock are
entitled to share equally in corporate assets after satisfaction of all
liabilities. All shares of the common stock now outstanding are fully paid and
non-assessable.
As of August 31, 1999 there were 27,030,018 shares of Common Stock issued
and outstanding.
OUTSTANDING STOCK OR RIGHTS TO
ACQUIRE ADDITIONAL SHARES OF THE COMPANIES COMMON STOCK
-------------------------------------------------------
The company currently has three agreements by which certain individuals
have options to purchase or rights to acquire shares of the Company's Common
Stock.
47
<PAGE>
Allen D. Hardman - Stock Option. Pursuant to the Employment Agreement of
Allen D. Hardman, the Vice President and a Director of the Company, the Company
has granted Mr. Hardman an option to purchase one hundred thousand (100,000)
shares of the common stock of the Company, at a purchase price of $2.00. The
right to exercise his option to purchase the one hundred thousand shares shall
vest in four (4) equal installments of twenty five thousand (25,000) shares each
on the completion of each successive year of employment from date of contract.
Asia4sale.com - Acquisition Consideration Adjustment. Pursuant to the terms
of the Acquisition Agreement and Plan of Reorganization under which the Company
acquired 99 of the 100 shares of Asia4sale, thereby making Asia4sale virtually a
wholly owned subsidiary of the Company, the Company agreed to issue one (1)
additional share of restricted common stock for each two dollars ($2.00) of
actual earnings of Asia4sale for the period from April 1, 1999, through
September 31, 2000.
Online Investors Advantage Acquisition Consideration Adjustment. Pursuant
to the terms of the Acquisition Agreement and Plan of Reorganization under which
the Company acquired all of the capital stock of OIA, the Company in addition to
the 1,000,000 (post-split adjusted) shares of restricted common stock issued and
the $400,000 in cash paid to the shareholders of OIA, thereby making OIA a
wholly-owned subsidiary of the Company, the Company issued an additional
5,000,000 (post-split adjusted) shares pro-rata to the shareholders of OIA which
shares are being held in escrow pursuant to the terms of the adjustment
provision set forth in the acquisition agreement, based on anticipated earnings
of $2,500,000 for OIA for the period from April 1, 1999 through March 31, 2000.
Pursuant to the terms of the acquisition agreement, in the event that the actual
earnings of OIA are less than $2,500,000, for the specified period then the
total number of shares being held in escrow shall be reduced on a one share
basis for each $1.00 of actual earnings of OIA less than $2,500,000. In the
event that the actual earnings of OIA is greater than $2,500,000, then the
Company shall issue a such additional shares on the basis of one additional
shares for each $1.00 of actual earnings of OIA greater than $2,500,000.
Global Direct Marketing Limited - Pursuant to the terms of the Agreement
between the Company and Global Direct Marketing Limited, the Company agreed to
issue 75,000 restricted shares of its common stock to Global Direct in
consideration of its referral of OIA to the Company. According to the terms of
this Agreement, these shares are to be issued only in the event that the Company
completes the acquisition of OIA in which event said shares are to be issue 9
months from the consummation of any said acquisition. The acquisition of OIA was
completed on April 7, 1999, and, therefore, said shares are to be issued to
Global Direct on December 7, 1999.
There are no other outstanding options, warrants or rights to acquire
additional shares of Common Stock of the Company.
CHANGE IN CONTROL
-----------------
There is no provision in the Company's Articles of Incorporation, as
amended, or Bylaws, as amended, that would delay, defer, or prevent a change in
control of the Company.
48
<PAGE>
PART II.
--------
Item 1. Market Price Of And Dividends On The Company's Common Equity And Related
Stockholder Matters
---------------------------------------------------------------------------
The Company's common stock is traded on the Electronic Bulletin Board. The
following chart depicts the high and low trading prices for each fiscal quarter
of the last two fiscal years that the Company's common stock has been publicly
traded:
<TABLE>
<CAPTION>
Quarter High Price Low Price
-----------------------------------------------------------------------
<S> <C> <C>
2nd Quarter 1999 $13.063 $6.094
1st Quarter 1999 $17.50 $9.875
4th Quarter 1998 $ 2.51 $2.50
3rd Quarter 1998 $ 2.38 $1.78
2nd Quarter 1998 $ 1.50 $1.50
1st Quarter 1998 $ 2.00 $1.686
4th Quarter 1997 $ 2.613 $2.75
3rd Quarter 1997 $ 6.25 $5.125
</TABLE>
The above high and low trading prices reflect the adjustments as a
result of:
(a) the 1-for-2 reverse stock split which took effect on September
10, 1998, and
(b) the 2-for-1 forward stock split which took effect on May 14,
1999.
These prices do not necessarily reflect actual transactions, retail
markups, markdowns or commissions.
No assurance can be given that any active "established public market" will
develop in the Company's common stock, regardless or whether its current and
proposed business operations are successful, or if any active market does
develop, that it will be sustained for any period of time.
Holders
-------
As of August 31, 1999, the Company had approximately 339 shareholders of
record.
Dividends
---------
The Company has not declared any cash dividends with respect to its common
stock, and does not intend to declare dividends in the foreseeable future. The
future dividend policy of the Company cannot be ascertained with any certainty,
and if and until the Company completes any acquisition, reorganization or
merger, no such policy will be formulated. There are no material restrictions
limiting, or that are likely to limit, the Company's ability to pay dividends on
its securities.
Item 2. Legal Proceedings
-----------------
ZiaSun Technologies, Inc. v. Floyd D. Schneider, et al.
-------------------------------------------------------
The company was a party Plaintiff in the matter of ZiaSun Technologies,
Inc. v. Floyd D. Schneider, et al., United States District Court, Western
District of Washington, C99-1025. This action arises from the defendants
defamatory campaign against the Company and its officers and directors, This
cybersmear campaign involved the defendants postings of false and defamatory
information and statements about the Company and its offices and directors. The
defendants were and are knowingly posting false statements with the intent on
negatively impacting the Company's stock prices in order for defendants to
benefit financially in short selling. To protect the Company, its shareholders
and its officers and directors the Company filed a civil action in the United
States District Court of Washington seeking damages and injunction relief,
alleging among other things, Securities Fraud through the defendants posting of
49
<PAGE>
false and misleading defamatory statements, violation of the Washington Consumer
Protection Act, Intentional Interference with Business Expectancy, Violation of
Federal RICO Statute 28 USA Sec. 1962, and violation of Washington's Criminal
Profiteering Act. The matter is pending at present time.
ZiaSun Technologies, Inc. v. Financialweb.Com, Inc., et al.
-----------------------------------------------------------
The company was a party Plaintiff in the matter of ZiaSun Technologies,
Inc. v. Financialweb.Com, Inc., et al., Circuit Court of Seminole County,
Florida, 990-1136-CA-16-G. This action arises from the defendants posting of a
false and defamatory article about the Company on its website known as "The
Stock Detective." The defendants knowingly posted the false and defamatory
article with the intent on negatively impacting the Company's stock prices in
order for defendants to benefit financially. The Company requested that
defendant publish a retraction but defendant has refused to do so. To protect
the Company, its shareholders and its officers and directors the Company filed a
civil action in the Circuit Court of Seminole County Florida, seeking damages
and injunction relief. The matter is pending at present time.
With the exception of the legal proceedings set forth above, the Company is
not a party to any pending legal proceeding. No federal, state or local
governmental agency is presently contemplating any proceeding against the
Company. No director, executive officer or affiliate of the Company or owner of
record or beneficially of more than five percent of the Company's common stock
is a party adverse to the Company or has a material interest adverse to the
Company in any proceeding.
Item 3. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
-----------------------------------------------------------------------
There has been no change of the independent auditors of the Company and
there are no disagreements with the independent auditors of the Company or its
subsidiaries.
Item 4. Recent Sales of Unregistered Securities
---------------------------------------
The following transactions describe the sales of the Company's securities
over the last three years:
Transaction #1:
---------------
On January 6, 1997, the Company sold 10,000,000 (post-split adjusted)
restricted shares of its common stock pursuant to Regulation S of the
Securities Act of the 1933 Act to non-U.S. foreign corporations, at a price
of $0.10 per share, for total cash consideration to the Company of
$500,000. This transaction is deemed exempt from registration pursuant to
the provisions of Regulation S adopted by the Securities and Exchange
Commission. No underwriters were used and each certificate contained a
restrictive legend.
Transaction #2:
---------------
On February 3, 1997, the Company sold 20,000,000 (post-split adjusted)
"unregistered" and "restricted" shares of its common stock to several
non-U.S. foreign corporations, at a price of $0.10 per share, for total
cash consideration to the Company of $1,000,000. No underwriters were used.
The securities were sold pursuant to an exemption from registration
provided under Section 4(2) of the Securities Act of 1933 and the purchaser
of above referenced shares were accredited and investors had full access to
information on the Company necessary for it to make and informed investment
decision. The certificate representing the shares contained a restricted
legend.
50
<PAGE>
Transaction #3:
---------------
In July 1997 the Company authorized the private placement of 2,000,000
(post-split adjusted) shares of the Company's common stock at a price of
$2.50 per share. The Company sold a total of 259,988 (post-split adjusted)
shares and received $324,984 in cash from this private placement. No
underwriters were used. The securities were sold pursuant to an exemption
from registration provided under Section 4(2) of the Securities Act of 1933
and each of the purchasers of above referenced shares were accredited
investors had full access to information on the Company necessary for them
to make an informed investment decision. The certificate representing the
shares contained a restricted legend.
Transaction #4:
---------------
On October 5, 1998, in conjunction with the acquisition of Momentum
Internet Incorporated, a corporation organized under the laws of the
British Virgin Islands ("Momentum Internet"), the Company issued in a
stock-for-stock exchange 1,130,000 (post-split adjusted) shares of
restricted common stock in exchange for all capital stock of Momentum
Internet thereby making Momentum Internet a wholly owned subsidiary of the
Company. No underwriters were used. The transaction is deemed exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933. The
recipients of the shares in this transaction were shareholders of Momentum
Internet, and possessed more information regarding the business of ZiaSun
than any other person. The certificates representing each of the issued
shares bear an appropriate restrictive legend.
Transaction #5:
---------------
On October 5, 1998, in conjunction with the acquisition of Momentum Asia,
Inc., ("Momentum Asia"), a corporation organized under the laws of the
Republic of the Philippines, the Company issued in a stock-for-stock
exchange 4,000,000 (post-split adjusted) shares of restricted common stock
in exchange for all capital stock of Momentum Asia, thereby making Momentum
Asia a wholly-owned subsidiary of the Company. No underwriters we used. The
transaction is deemed exempt from registration pursuant to Section 4(2) of
the Securities Act of 1933. The recipients of the shares in this
transaction were shareholders of Momentum Asia, and possessed more
information regarding the business of ZiaSun than any other person. The
certificates representing each of the issued shares bear an appropriate
restrictive legend.
Transaction #6:
---------------
On March 25, 1999, in conjunction with the acquisition of Asia4sale.com,
Ltd., ("Asia4sale"), a Hong Kong Registered Company, in exchange for 99 of
the 100 shares of Asia4sale, the Company issued 100,000 (post split
adjusted) shares of restricted common stock and paid $15,000 cash to the
majority holder of the capital stock of Asia4sale, thereby making Asia4sale
virtually a wholly-owned subsidiary of the Company. No underwriters were
used. The transaction is deemed exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933. The recipients of the shares in
this transaction were shareholders of Asia4sale and possessed more
information regarding the business of ZiaSun than any other person. The
certificates representing each of the issued shares bear an appropriate
restrictive legend.
Transaction #7:
---------------
On March 31, 1999, in conjunction with the acquisition of Online Investors
Advantage Incorporated, ("Online Investors"), a Utah Corporation, In
exchange for all of the capital stock of Online Investors, the Company
issued 1,000,000 (post split adjusted) shares of "restricted" common stock
and paid $400,000 in cash, all of which was distributed pro-rata to the
shareholders of Online Investors, thereby making Online Investors a
wholly-owned subsidiary of the Company. In addition, the Company issued an
additional 5,000,000 (post split adjusted) shares (the "Escrow Shares")
pro-rata to the shareholders of Online Investors. The Escrow Shares are
being held in escrow pursuant to the terms of the adjustment provision set
forth in the acquisition agreement. No underwriters were used. The
transaction is deemed exempt from registration pursuant to Section 4(2) of
the Securities Act of 1933. The recipients of the shares in this
transaction were shareholders of Online and possessed more information
regarding the business of ZiaSun than any other person. The certificates
representing each of the issued shares bear an appropriate restrictive
legend.
51
<PAGE>
Item 5. Indemnification of Directors and Officers
-----------------------------------------
Pursuant to Article 9., of the Restated Articles of Incorporation, the
Company shall indemnify its directors, officers, employee, fiduciaries and
agents as those terms are defined in, and to the fullest extent permitted by
under the Nevada Revised Statutes.
Section 78.751(1) of the Nevada Revised Statutes ("NRS") authorizes a
Nevada corporation to indemnify any director, officer, employee, or corporate
agent "who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by or in the right
of the corporation" due to his corporate role. Section 78.751(1) extends this
protection "against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with the action, suit or proceeding if he acted in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful."
Section 78.751(2) of the NRS also authorizes indemnification of the
reasonable defense or settlement expenses of a corporate director, officer,
employee or agent who is sued, or is threatened with a suit, by or in the right
of the corporation. The party must have been acting in good faith and with the
reasonable belief that his actions were not opposed to the corporation's best
interests. Unless the court rules that the party is reasonably entitled to
indemnification, the party seeking indemnification must not have been found
liable to the corporation.
To the extent that a corporate director, officer, employee, or agent is
successful on the merits or otherwise in defending any action or proceeding
referred to in Section 78.751(1) or 78.751(2), Section 78.751(3) of the NRS
requires that he be indemnified "against expenses, including attorneys' fees,
actually and reasonably incurred by him in connection with the defense."
Section 78.751 (4) of the NRS limits indemnification under Sections 78.751
(1) and 78.751(2) to situations in which either (1) the stockholders, (2) the
majority of a disinterested quorum of directors, or (3) independent legal
counsel determine that indemnification is proper under the circumstances.
Pursuant to Section 78.751(5) of the NRS, the corporation may advance an
officer's or director's expenses incurred in defending any action or proceeding
upon receipt of an undertaking. Section 78.751(6)(a) provides that the rights to
indemnification and advancement of expenses shall not be deemed exclusive of any
other rights under any bylaw, agreement, stockholder vote or vote of
disinterested directors. Section 78.751(6)(b) extends the rights to
indemnification and advancement of expenses to former directors, officers,
employees and agents, as well as their heirs, executors, and administrators.
Regardless of whether a director, officer, employee or agent has the right
to indemnity, Section 78.752 allows the corporation to purchase and maintain
insurance on his behalf against liability resulting from his corporate role.
Article VIII., of the Company's Amended and Restated Bylaws restates the
above-referenced indemnification provisions of the NRS. This right to
indemnification continues as to persons who have ceased to be agents of the
Company and inures to the benefit of such persons' heirs, executors and
administrators.
52
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
(Formerly BestWay USA, Inc.)
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997 Audited)
Page
Independent Auditors' Report ........................................... 54
Balance Sheet........................................................... 55
Statements of Operations................................................ 57
Statements of Stockholders' Equity...................................... 58
Statements of Cash Flows................................................ 59
Notes to the Financial Statements....................................... 60
53
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
ZiaSun Technologies, Inc. and Subsidiaries
(Formerly BestWay U.S.A., Inc.)
Solana Beach, California
We have audited the accompanying consolidated balance sheet of ZiaSun
Technologies, Inc. (formerly BestWay U.S.A., Inc.) and Subsidiaries as of
December 31, 1998 and the related consolidated statements of operations,
stockholders' equity, and cash flows for the years ended December 31, 1998 and
1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ZiaSun Technologies,
Inc. (formerly BestWay U.S.A., Inc.) and Subsidiaries as of December 31, 1998
and the results of their operations and their cash flows for the years ended
December 31, 1998 and 1997 in conformity with generally accepted accounting
principles.
Jones, Jensen & Company
Salt Lake City, Utah
April 22, 1999
54
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
(Formerly BestWay U.S.A., Inc.)
Consolidated Balance Sheet
<TABLE>
<CAPTION>
ASSETS
December 31,
-------------
1998
-------------
<S> <C>
CURRENT ASSETS
Cash $ 517,781
Accounts receivable, net (Note 2) 899,879
Inventory (Note 2) 50,000
Marketable equity securities (Note 2) 775,903
Prepaid expenses 7,370
-------------
Total Current Assets 2,250,933
EQUIPMENT (Note 2)
Printing equipment 294,576
Machinery and equipment 218,236
Office equipment 59,571
Vehicles 48,398
Leasehold improvements 92,516
Less: accumulated depreciation (209,518)
-------------
Total Equipment 503,779
-------------
OTHER ASSETS
Receivables - related parties (Note 6) 734,265
Other assets (Note 3) 1,275,583
-------------
Total Other Assets 2,009,848
TOTAL ASSETS $4,764,560
=============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
55
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
(Formerly BestWay U.S.A., Inc.)
Consolidated Balance Sheet (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31,
-------------
1998
-------------
<S> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 600,013
-------------
Total Current Liabilities 600,013
-------------
Total Liabilities 600,013
-------------
COMMITMENTS AND CONTINGENCIES (Note 4)
STOCKHOLDERS' EQUITY
Common stock: 50,000,000 shares authorized of $0.001
par value, 10,465,000 shares issued and outstanding 10,465
Additional paid-in capital 2,983,748
Other comprehensive income 38,794
Retained earnings 1,131,540
-------------
Total Stockholders' Equity 4,164,547
-------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,764,560
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
56
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
(Formerly BestWay U.S.A., Inc.)
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------------
1998 1997
------------- -------------
<S> <C> <C>
SALES, NET $2,289,158 $ 884,764
COST OF GOODS SOLD 811,571 552,210
------------- -------------
Gross Profit 1,477,587 332,554
------------- -------------
OPERATING EXPENSES
Depreciation expense 98,496 49,200
General and administrative 1,334,303 202,035
------------- -------------
Total Operating Expenses 1,432,799 251,235
------------- -------------
Income from Operations 44,788 81,319
------------- -------------
OTHER INCOME (EXPENSE)
Realized gain on marketable securities 535,801 -
Unrealized gain on marketable securities 712,438 18,297
Rental income 34,757 70,688
Interest income 13,048 350
Bad debt expense (36,320) (27,796)
Loss on sale of assets (135,644) (707)
------------- -------------
Total Other Income (Expense) 1,124,080 60,832
------------- -------------
INCOME BEFORE INCOME TAXES 1,168,868 142,151
INCOME TAXES (Note 5) 16,658 605
------------- -------------
NET INCOME $1,152,210 $ 141,546
============= =============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 2,426,200 25,000
============= =============
BASIC INCOME PER SHARE $ 0.47 $ 5.67
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
57
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
(Formerly BestWay U.S.A., Inc.)
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock Additional Other
-------------------------------- Paid-In Comprehensive Retained
Shares Amount Capital Income Earnings
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 25,000 $ 953 $ 700,813 $ 34,028 $ (162,216)
Contribution of capital by shareholder - - 85,099 - -
Currency translation adjustment - - - 7,733 -
Net income for the year ended
December 31, 1997 - - - - 141,546
---------------------------------------------------------------------------------------
Balance, December 31, 1997 25,000 953 785,912 41,761 (20,670)
Contribution of capital by shareholder - - 1,359,449 - -
Recapitalization of Momentum ASIA, Inc.
and Momentum Internet, Inc. 10,440,000 9,512 838,387 - -
Currency translation adjustment - - - (2,967) -
Net income for the year ended
December 31, 1998 - - - - 1,152,210
---------------------------------------------------------------------------------------
Balance, December 31, 1998 10,465,000 $ 10,465 $2,983,748 $ 38,794 $1,131,540
=======================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
58
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
(Formerly BestWay U.S.A., Inc.)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the Years Ended
December 31,
------------- -------------
1998 1997
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $1,152,210 $ 141,546
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation 98,496 49,200
Allowance for bad debts 36,320 27,796
Unrealized gain on securities held for sale (712,438) (18,297)
Loss on sale of assets 135,644 707
Currency translation adjustment 2,967 -
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (330,757) 5,970
(Increase) decrease in inventory 48,783 -
(Increase) decrease in other assets (88,586) (332,694)
(Increase) decrease in prepaids (7,370) -
(Increase) decrease in marketable equity securities (30,205) -
Increase (decrease) in accounts payable and accrued
expenses 377,080 87,906
------------- -------------
Net Cash Used In Operating Activities 682,144 (37,866)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (186,374) (47,943)
------------- -------------
Net Cash Used in Investing Activities (186,374) (47,943)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES - -
------------- -------------
NET INCREASE (DECREASE) IN CASH 495,770 (85,809)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 22,011 107,820
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 517,781 $ 22,011
============= =============
Cash Paid For:
Interest $ - $ -
Income taxes $ 16,658 $ 605
Schedule of Non-Cash Financing Activities:
Contribution of capital by shareholder $1,359,449 $ 85,099
</TABLE>
The accompanying notes are an integral part of these financial statements.
59
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
(Formerly BestWay U.S.A., Inc.)
Notes to the Consolidated Financial Statements
December 31, 1998 and 1997
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
The financial statements presented are those of ZiaSun Technologies, Inc.
(formerly BestWay U.S.A., Inc.) (the "Company"). The Company was
incorporated in the State of Nevada on March 19, 1996. The Company is a
holding company in the business of acquiring companies and operations with
business models developed around the Internet. The Company was considered a
development stage company as defined in SFAS No. 7 until the acquisition of
Momentum Asia, Inc. and Momentum Internet, Inc. in 1998. The Company
changed its name to "BestWay U.S.A., Inc." on April 17, 1997 and,
subsequently, changed its name to Ziasun Technologies, Inc. during 1998.
Momentum Internet, Inc. (MII), a wholly-owned subsidiary, was incorporated
under the laws of the British Virgin Islands on November 7, 1997. MII
controls a range of Internet products and services, including a copyrighted
international on-line stock trading web-site, a premium web-based e-mail
service, an advertising banner network, a finance web-site and an
Asiafocused search engine. MII has its main offices in Hong Kong.
Momentum Asia, Inc. (MAI), a wholly-owned subsidiary, was incorporated in
Manilla, Philippines on September 6, 1994 under the name of New Age
Publications, Inc. On June 17, 1998, the name was changed to Momentum Asia,
Inc. MAI provides a wide range of compatible graphic design, writing,
printing, database management, direct mailing and e-mail customer service
operations.
BestWay Beverages, Inc. (BBI), a wholly-owned subsidiary, was incorporated
in the State of Nevada on September 23, 1998. BBI holds the exclusive
distribution franchise rights in the U.S. and Mexico for a patented
in-store beverage center. BBI is a U.S. based corporation.
On October 5, 1998, the Company completed an agreement and plan of
reorganization whereby Ziasun issued 2,565,000 shares of its common stock
in exchange for all the outstanding common stock of MAI and MII. 2,000,000
shares were issued for MAI and 565,000 shares were issued for MII. The
reorganization was accounted for as a recapitalization of MAI and MII and,
therefore, MAI and MII are treated as the acquiring entities. Accordingly,
there was no adjustment to the carrying value of the assets or liabilities
of MAI and MII. The Company is the acquiring entity for legal purposes and
MAI and MII are the surviving entities for accounting purposes. Also, prior
to the agreement and plan of reorganization, the shareholders of the
Company authorized a reverse stock split of 1-for-2. All references to
shares of common stock have been retroactively restated.
Swiftrade, Inc. (SI), a wholly-owned subsidiary of MII, was incorporated
under the laws of the British Virgin Islands in 1998 to operate an online
trading and financial website. It was inactive in 1998.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected a December 31 year end.
60
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
(Formerly BestWay U.S.A., Inc.)
Notes to the Consolidated Financial Statements
December 31, 1998 and 1997
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
b. Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less to be cash equivalents.
c. Inventory
Inventories of raw materials are stated at the lower of cost or market. The
cost of the inventory includes the purchase price and direct costs such as
freight-in.
d. Accounts Receivable
Accounts receivable are shown net of the allowance for doubtful accounts.
The allowance was $36,320 and $24,141 at December 31, 1998 and 1997,
respectively.
e. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financials statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
f. Foreign Operations
The Company currently conducts printing, database management, customer
service and direct mailing activities in the Philippines, a country with a
developing economy. The Philippines have experienced recently, or are
experiencing currently, economic or political instability. Hyperinflation,
volatile exchange rates and rapid political and legal change, often
accompanied by military insurrection, have been common in this and certain
other emerging markets in which the Company may conduct operations. The
Company may be materially adversely affected by possible political or
economic instability in any one or more of those countries. The risks
include, but are not limited to terrorism, military repression,
expropriation, changing fiscal regimes, extreme fluctuations in currency
exchange rates, high rates of inflation and the absence of industrial and
economic infrastructure. Changes in investment policies or shifts in the
prevailing political climate in any of the countries in which the Company
conducts exploration and development activities could adversely affect the
Company's business. Operations may be affected in varying degrees by
government regulations with respect to production restrictions, price
controls, export controls, income and other taxes, expropriation of
property, maintenance of claims, environmental legislation, labor, welfare
benefit policies, land use, land claims of local residents, water use and
safety. The effect of these factors cannot be accurately predicted.
61
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
(Formerly BestWay U.S.A., Inc.)
Notes to the Consolidated Financial Statements
December 31, 1998 and 1997
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. Equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful life or lease term of
the related asset. Estimated useful lives are as follows:
Printing equipment 7 years
Machinery and equipment 5 years
Office equipment 5 years
Vehicles 10 years
Leasehold improvements 5 years
h. Marketable Equity Securities
The Company has classified its marketable equity securities as "trading"
securities. Trading securities are stated at fair value. Realized and
unrealized gains and losses are included in other income.
Marketable equity securities at December 31, 1998 and 1997 were $775,903
and $33,260 respectively, and have been included in current assets.
i. Basic Income per Share of Common Stock
The basic income per share of common stock is based on the weighted average
number of shares issued and outstanding at the date of the consolidated
financial statements. Fully diluted loss per share of common stock as
disclosed in the accompanying consolidated statements of operations
includes all common stock equivalents.
j. Foreign Currency Translation
Monetary assets and liabilities denominated in foreign currencies are
translated into United States dollars at the period and exchange rate.
Non-monetary assets are translated at the historical exchange rate and all
income and expenses are translated at the exchange rates prevailing during
the period. Foreign exchange currency translation adjustments are included
in the stockholders' equity section.
k. Fair Value of Financial Instruments
As of December 31, 1998, the fair value of cash, accounts receivable and
accounts and advances payable, including amounts due to and from related
parties, approximate carrying values because of the short-term maturity of
these instruments.
l. Advertising
Advertising costs are expensed as incurred.
62
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
(Formerly BestWay U.S.A., Inc.)
Notes to the Consolidated Financial Statements
December 31, 1998 and 1997
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
m. Research and Development
The Company incurred research and development costs of approximately
$400,000 in 1998 and 1997, respectively. These costs are included in
general and administrative expense.
n. Principles of Consolidation
The consolidated financial statements include the Company and its
wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
o. Change in Accounting Principle
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains, and
losses) in a full set of general purpose financial statements. This
statement requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately
from retained earnings and additional paid-in capital in the equity section
of a statement of financial position. SFAS 130 is effective for fiscal
years beginning after December 15, 1997. The Company has retroactively
applied the provisions of this new standard by showing the other
comprehensive income (loss) for all years presented.
NOTE 3 - OTHER ASSETS
Other assets consisted of the following at December 31, 1998:
Memberships in country clubs $ 142,857
Prepaid rental deposits 25,583
Mortgage note receivable 250,000
Common stock held to maturity 857,143
----------
$1,275,583
NOTE 4 - COMMITMENTS AND CONTINGENCIES
The Company currently leases a large facility under a 20 year
non-cancelable operating lease in the Philippines. The Company also leases
office space in California and Hong Kong under 5-year renewable leases
which began in 1998. Rent expense for the years ended December 31, 1998 and
1997 was $198,788 and $58,338, respectively.
63
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
(Formerly BestWay U.S.A., Inc.)
Notes to the Consolidated Financial Statements
December 31, 1998 and 1997
NOTE 4 - COMMITMENTS AND CONTINGENCIES (Continued)
Future minimum lease commitments are as follows:
1999 $ 253,260
2000 176,244
2001 184,633
2002 193,457
2003 80,292
Thereafter 1,593,540
----------
Total $2,481,426
==========
The Company has an employment agreement with an officer for 5 years
beginning on July 1, 1997.
NOTE 5 - INCOME TAXES
For the years ended December 31, 1998 and 1997, income taxes were as
follows:
<TABLE>
<CAPTION>
For the Years Ended
December 31,
------------- -------------
1998 1997
------------- -------------
<S> <C> <C>
Net income earned in the Philippines -
subject to tax $ 333,158 $ 12,100
Net income not subject to taxation jurisdictions 673,294 129,446
------------- -------------
Total Net Income $1,006,452 $ 141,546
============= =============
Income tax due $ 16,658 $ 605
Income tax paid at 5% (16,658) (605)
-------------- -------------
Net Tax Due $ - $ -
============== =============
</TABLE>
NOTE 6 - RELATED PARTY TRANSACTIONS
a. Capital Contributions
During 1998, officers of the Company contributed $1,359,449 to additional
paid-in capital.
b. Receivables
The Company has a receivable from a related company in the amount of
$734,265. This receivable is non-interest bearing, due on demand and
unsecured. Subsequent to year end, the Company has been repaid $525,000 on
this receivable.
64
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
(Formerly BestWay U.S.A., Inc.)
Notes to the Consolidated Financial Statements
December 31, 1998 and 1997
NOTE 7 - ECONOMIC DEPENDENCE AND MAJOR CUSTOMERS
The Company's marketing arrangement with one customer accounted for
approximately 26% of the Company's revenue for the year ended December 31,
1998. Sales to another customer made up approximately 24% of the net sales
in 1998.
NOTE 8 - YEAR 2000
Year 2000 issues may arise if computer programs have been written using two
digits (rather than four) to define the applicable year. In such case,
programs that have time-sensitive logic may recognize a date using "00" as
the year 1900 rather than the year 2000, which could result in
miscalculations or system failures.
The Company has completed its assessment of the Year 2000 issue and
believes that any costs of addressing the issue will not have a material
adverse impact on the Company's financial position. The Company believes
that its existing computer systems and software will not need to be
upgraded to mitigate the Year 2000 issues. The Company has not incurred any
costs associated with its assessment of the Year 2000 problem. In the event
that Year 2000 issues impact the Company's accounting operations and other
operations aided by its computer system, the Company believes, as part of a
contingency plan, that it has adequate personnel to perform those functions
manually until such time that any Year 2000 issues are resolved.
The Company believes that third parties with whom it has material
relationships will not materially be affected by the Year 2000 issues as
those third parties are relatively small entities which do not rely heavily
on information technology ("IT") systems and non-IT systems for their
operations. However, if the Company and third parties, upon which it
relies, are unable to address any Year 2000 issues in a timely manner, it
could result in a material financial risk to the Company, including loss of
revenue and substantial unanticipated costs. Accordingly, the Company plans
to devote all resources required to resolve any significant Year 2000
issues in a timely manner.
NOTE 9 - STOCK OPTIONS
The Company has given its vice-president the option to purchase 100,000
shares of its common stock at $2.00. The shares vest in 25,000 share
increments for each year of service beginning in 1999. The Company will
record as expense the difference between the option price and the value of
the shares at the time they vest.
65
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
(Formerly BestWay U.S.A., Inc.)
Notes to the Consolidated Financial Statements
December 31, 1998 and 1997
NOTE 10 - SUBSEQUENT EVENTS
Acquisition of Asia4sale
------------------------
On March 25, 1999, the Company entered into an Acquisition Agreement and
Plan of Reorganization, under which the Company would acquire
Asia4sale.com, Ltd., ("Asia4sale"), a Hong Kong Registered Company. In
exchange for 99 of the 100 shares of Asia4sale, the Company issued 50,000
shares of restricted common stock and paid $15,000 cash to the majority
holder of the capital stock of Asia4sale, thereby virtually making
Asia4sale a wholly-owned subsidiary of the Company. In addition, the
Company made an unsecured loan of $50,000 to Asia4sale upon closing of the
acquisition and agreed to issue one (1) additional share of restricted
common stock for each two dollars ($2.00) of actual earnings of Asia4sale
for the period from April 1, 1999 through September 31, 2000. Asia4sale is
in the business of Internet related international e-commerce. In addition,
the Company was granted the option to repurchase the 50,000 shares issued
in the acquisition of Asia4sale for a period of one (1) year at a price of
$3.00 per share in the event that Asia4sale fails to reach positive cash
flow from its operations by September 30, 2000. The acquisition was
completed on May 12, 1999.
Acquisition of Online Investors Advantage, Inc.
-----------------------------------------------
On March 31, 1999, the Company entered into an Acquisition Agreement and
Plan of Reorganization, under which the Company would acquire Online
Investors Advantage Incorporated, a Utah corporation ("OIA"). In exchange
for all of the capital stock of OIA, the Company issued 500,000 shares of
restricted common stock and paid $400,000 in cash, all of which was
distributed pro-rata to the shareholders of OIA. In addition, the Company
issued 2,500,000 shares pro-rata to the shareholders of OIA. Those shares
are currently being held in escrow in accordance with the terms of the
adjustment provision set forth in the acquisition agreement, based on
anticipated earnings of at least $2,500,000 for OIA for the period form
April 1, 1999 through March 31, 2000. As set forth in the terms of the
acquisition agreement, in the event that the actual earnings of OIA are
less than $2,500,000, for the specified period, then the total number of
shares being held in escrow shall be reduced on a one-share basis for each
$1.00 of actual earnings of OIA less than $2,500,000. In the event that the
actual earnings of OIA is greater than $2,500,000, then the Company shall
issue such additional shares on the basis of one additional share for each
$1.00 of actual earnings of OIA greater than $2,500,000. The acquisition
was completed on April 7, 1999.
66
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 (Unaudited)
CONTENTS
Page
Balance Sheet........................................................... 68
Statements of Operations................................................ 70
Statements of Stockholders' Equity...................................... 71
Statements of Cash Flows................................................ 72
Notes to the Financial Statements....................................... 73
67
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------- -------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $5,483,031 $ 517,781
Accounts receivable, net 427,615 899,879
Inventory 22,896 50,000
Marketable equity securities 164,016 775,903
Prepaid expenses 565,223 7,370
------------- -------------
Total Current Assets 6,662,781 2,250,933
------------- -------------
EQUIPMENT
Printing equipment 294,576 294,576
Machinery and equipment 218,236 218,236
Office equipment 419,768 59,571
Vehicles 48,398 48,398
Leasehold improvements 92,516 92,516
Less: accumulated depreciation (300,555) (209,518)
------------- -------------
Total Equipment 772,939 503,779
------------- -------------
OTHER ASSETS
Goodwill, net 14,401,732 -
Receivables - related parties - 734,265
Other assets 1,285,040 1,275,583
------------- -------------
Total Other Assets 15,686,772 2,009,848
------------- -------------
TOTAL ASSETS $23,122,492 $4,764,560
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
68
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Continued)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------- -------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 677,038 $ 600,013
Income taxes payable 1,227,965 -
Deferred income 56,710 -
------------- -------------
Total Current Liabilities 1,961,713 600,013
------------- -------------
Total Liabilities 1,961,713 600,013
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock: 50,000,000 shares authorized of
$0.001 par value, 27,055,000 and 20,930,000
shares issued and outstanding, respectively 27,055 20,930
Additional paid-in capital 18,629,175 2,973,283
Other comprehensive income 38,794 38,794
Retained earnings 2,465,755 1,131,540
------------- -------------
Total Stockholders' Equity 21,160,779 4,164,547
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $23,122,492 $4,764,560
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
69
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
------------------------------------------------------------
1999 1998 1999 1998
------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES, NET $ 9,013,320 $ 372,217 $9,899,191 $ 873,576
COST OF GOODS SOLD 5,154,469 65,253 5,547,892 198,518
----------- ---------- ---------- ----------
Gross Margin 3,858,851 306,964 4,351,299 675,058
----------- ---------- ---------- ----------
OPERATING EXPENSES
Depreciation and amortization 414,523 15,644 448,716 31,288
General and administrative 1,476,178 206,657 2,084,278 508,566
----------- ---------- ---------- ----------
Total Operating Expenses 1,890,701 222,301 2,532,994 539,854
----------- ---------- ---------- ----------
Income from Operations 1,968,150 84,663 1,818,305 135,204
----------- ---------- ---------- ----------
OTHER INCOME (EXPENSE)
Realized gain on marketable securities 417,167 - 399,843 -
Rental income 10,501 - 71,421 -
Interest income 29,426 12 34,696 24
Bad debt expense (100,000) - (100,000) -
Gain (loss) on sale of assets 5,974 5,974 (137,260)
----------- ---------- ---------- ----------
Total Other Income (Expense) 363,068 12 411,934 (137,236)
----------- ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME
TAXES 2,331,218 84,675 2,230,239 (2,032)
INCOME TAXES 895,587 1,950 896,024 3,823
----------- ---------- ---------- ----------
NET INCOME (LOSS) $ 1,435,631 $ 82,725 $1,334,215 $ (5,855)
=========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 27,055,000 20,930,000 24,457,500 20,930,000
============ ========== ========== ==========
BASIC INCOME PER SHARE $ 0.05 $ 0.04 $ 0.05 $ 0.00
=========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
70
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock Additional Other
-------------------------------- Paid-In Comprehensive Retained
Shares Amount Capital Income Earnings
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 50,000 $ 1,906 $ 784,959 $ 41,761 $ (20,670)
Contribution of capital by shareholder - - 1,359,449 - -
Recapitalization of Momentum ASIA, Inc.
and Momentum Internet, Inc. 20,880,000 19,024 828,875 - -
Currency translation adjustment - - - (2,967) -
Net income for the year ended
December 31, 1998 - - - - 1,152,210
---------------------------------------------------------------------------------------
Balance, December 31, 1998 20,930,000 20,930 2,973,283 38,794 1,131,540
Purchase of ASIA4Sale.com, Ltd.
(unaudited) 100,000 100 249,900 - -
Purchase of Online Investors
Advantage, Inc. (unaudited) 6,000,000 6,000 14,940,000 - -
Exercise of stock option (unaudited) 25,000 25 12,475 - -
Gain on sale of the Company's
common stock by a Subsidiary
(unaudited) - - 453,517 - -
Net income for the six months
ended June 30, 1999 (unaudited) - - - - 1,334,215
---------------------------------------------------------------------------------------
Balance, June 30, 1999 (unaudited) 27,055,000 $ 27,055 $18,629,175 $ 38,794 $2,465,755
=======================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
71
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
---------------------------------
1999 1998
------------- -------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $1,334,215 $ (5,855)
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 448,716 31,288
Allowance for bad debts 100,000 -
Gain (loss) on sale of assets 5,974 (137,260)
(Increase) decrease in accounts receivable 372,264 (161,418)
(Increase) decrease in inventory 27,104 (5,183)
(Increase) decrease in other assets 1,161,397 406,838
(Increase) decrease in prepaids (557,853) -
(Increase) decrease in marketable equity securities 611,887 -
Increase (decrease) in accounts payable
and accrued expenses 77,025 95,863
Increase (decrease) in income taxes payable 1,227,965 -
Increase (decrease) in deferred income 56,710 -
------------- -------------
Net Cash Used In Operating Activities 4,865,404 224,273
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (366,171) (186,374)
------------- -------------
Net Cash Used in Investing Activities (366,171) (186,374)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of the Company's common stock by a subsidiary 453,517 -
Proceeds from exercise of stock options 12,500 -
------------- -------------
Net Cash Provided by Financing Activities 466,017 -
------------- -------------
NET INCREASE (DECREASE) IN CASH 4,965,250 37,899
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 517,781 22,011
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $5,483,031 $ 59,910
============= =============
Cash Paid For:
Interest $ - $ -
Income taxes $ 8,329 $ 1,873
Schedule of Non-Cash Financing Activities:
Contribution of capital by shareholder $ - $ -
Purchase of subsidiaries for common stock $1,519,600 $ -
</TABLE>
The accompanying notes are an integral part of these financial statements.
72
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
June 30, 1999 and December 31, 1998
NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared by
the Company without audit. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present
fairly the financial position, results of operations and cash flows at June
30, 1999 and for all periods presented have been made.
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with general
accepted accounting principles have been condensed or omitted. It is
suggested that these consolidated financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's December 31, 1998 audited consolidated financial statements. The
results of operations for the periods ended June 30, 1999 and 1998 are not
necessarily indicative of the operating results for the full year.
73
<PAGE>
PART III.
Item 1. Index to Exhibits
The following exhibits are filed as part of this Registration Statement:
Exhibit
Number Description
- --------------------------------------------------------------------------------
2.1 Acquisition Agreement and Plan of Reorganization between ZiaSun
Technologies, Inc. and Momentum Internet Incorporated dated October 5,
1998
2.2 Acquisition Agreement and Plan of Reorganization between ZiaSun
Technologies, Inc. and Momentum Asia, Inc. dated October 5, 1998
2.3 Acquisition Agreement and Plan of Reorganization between ZiaSun
Technologies, Inc. and Asia4sale.com, Ltd., dated March 25, 1999.
2.4 Acquisition Agreement and Plan of Reorganization between ZiaSun
Technologies, Inc. and Online Investors Advantage, Inc., dated March
31, 1999.
3.1(a) Original Articles of Incorporation.
3.1(b) Certificate of Amendment to Articles of Incorporation filed April 29,
1997.
3.1(c) Certificate of Amendment to Articles of Incorporation filed September
10, 1998 changing the name of the Company to ZiaSun Technologies, Inc.
3.1(d) Certificate filed pursuant to NRS Section 78.207.
3.1(e) Restated Article of Incorporation filed August 16, 1999.
3.2 Amended and Restated By-laws.
10.1 License Agreement between Fountain Fresh International and Katori
Consultants, Ltd. dated April 17, 1997.
10.2 Assignment of License Agreement by Katori Consultants Ltd., to the
Company dated April 18, 1999.
10.3 Unsecured Promissory Note for $50,000 from Asai4sale.com in favor of
the Company dated March 31, 1999.
10.4 Stock Option Agreement between Brian Hodgson and the Company dated
March 25, 1999.
10.5 Agreement between the Company and Global Direct Marketing Limited
dated February 12, 1999.
10.6 Agreement between Asia4sale.com, Ltd., and Hong Kong Telecom IMS dated
March 29, 1999.
10.7 Agreement between Momentum Internet, Inc., and Hays Business Systems
dated April 1, 1999.
10.8 Loan Agreement between Momentum Asia, Inc. (formerly New Age
Publications, Inc.) and Touchstone Transport Services, Inc.
10.9 Real Estate Mortgage Momentum Asia, Inc. (formerly New Age
Publications, Inc.) and Touchstone Transport Services, Inc.
10.10 Subscribers Agreement between Momentum Asia, Inc., (formerly New Age
Publications, Inc.), and Torquay Associates Ltd.
10.11 Reuters Investor Distribution Agreement with Momentum Internet Inc.,
dated April 22, 1999.
10.12 Market Datafeed Service Agreement with Stock Exchange Information
Services Limited dated May 3, 1999.
10.13 Agreement between Momentum Internet, Inc., and Options Direct dated
May 18, 1999.
10.14 Agreement between Asia4sale.com, Ltd., and Karrex dated June 25, 1999.
74
<PAGE>
10.15 Agreement between Momentum Internet, Inc., and United Mok Ying Kie
Limited dated June 29, 1999.
10.16 Reuters Service Contract with Momentum Internet Inc.
10.17 Online Stock Trading Agreement between Swiftrade, Inc. and WdoT.rade
Inc. dated July 1, 1999.
10.18 Lease Agreement between the Company and Propco L.P.
10.19 Addendum to Lease between the Company and Propco L.P.
10.20 Tenancy Agreement between Momentum Associates Limited and Hong Kong
Finance Property Company Limited dated December 1, 1998.
10.21 Contract of Lease between Rebecca A. Ynares and Momentum Internet
(Philippines) Inc. dated December 1998.
10.22 First Amendment to Contract of Lease between Rebecca A. Ynares and
Momentum Internet (Philippines) Inc.
10.23 Contract of Lease between Philippine International Trading Corporation
and Momentum Internet (Philippines) Inc.
10.24 Sublease Agreement between Philexcel Textiles Incorporated and
Momentum Asia, Inc. (formerly New Age Publications, Inc.)
10.25 Amended Sublease Agreement between Philexcel Textiles Incorporated and
Momentum Asia, Inc. (formerly New Age Publications, Inc.)
10.26 Lease Agreement between EsNET Properties L.C. and Online Investors
Advantage, Inc., dated May 25, 1999.
10.27 Lease Agreement between Dc Mason Ltd., and Online Investors Advantage,
Inc., dated October 7, 1998.
10.28 Lease Agreement between Gordon Jacobson and Online Investors
Advantage, Inc., dated June 22, 1999.
10.29 Employment Agreement and Stock Option between the Company and Allen D.
Hardman dated July 1, 1997.
10.30 Amendment to Employment Agreement between the Company and Allen D.
Hardman.
10.31 Non-Qualified Stock Option Agreement between the Company and Allen D.
Hardman.
10.32 Agreement between Momentum Associates Limited and Peter Graham Daley.
10.33 Agreement between Momentum Associates Limited and Anthony L. Tobin.
10.34 Agreement between Momentum Internet Inc., and Crossbow Consultants
Limited.
10.35 Agreement between Asia4sale.com Ltd., and Momentum Internet Inc.,
dated March 25, 1999.
21 Subsidiaries of the Registrant
24 Power of Attorney
27 Financial Data Schedule
* Summaries of all exhibits contained within this Registration Statement
are modified in their entirety by reference to these exhibits.
75
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Company has caused this Registration Statement to be signed on its behalf by the
undersigned , thereunto duly authorized.
ZiaSun Technologies, Inc.
Dated: September 10, 1999 /S/ Anthony L.Tobin
-----------------------------------
By: Anthony L. Tobin
Its: President
Dated: September 14, 1999 /S/ D. Scott Elder
-----------------------------------
By: D. Scott Elder
Its: Chief Executive Officer
Dated: September 14, 1999 /S/ Allen D. Hardman
-----------------------------------
By: Allen D. Hardman
Its: Vice President
Dated: September 10, 1999 /S/ Alfredo Alex S. Cruz III
-----------------------------------
By: Alfredo Alex S. Cruz III
Its: Secretary
76
<PAGE>
ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
ZiaSun Technologies, Inc.
A Nevada Corporation
ACQUISITION OF SHARES OF
Momentum Internet Incorporated
A Corporation organized under the laws of
the British Virgin Islands
Dated October 5, 1998
<PAGE>
Table of Contents Page
- --------------------------------------------------------------------------------
1 EXCHANGE OF SECURITIES .................................... 1
1.1 Exchange of Shares ............................... 1
1.2 Exemption from Registration ...................... 1
1.3 Non-taxable Transaction .......................... 2
2. REPRESENTATION AND WARRANTIES OF THE SHAREHOLDERS ......... 2
2.1 Organization ..................................... 2
2.2 Capital Stock .................................... 2
2.3 Options, Warrants, Rights, etc. .................. 2
2.4 Subsidiaries ..................................... 2
2.5 Directors and Officers............................ 2
2.6 Financial Statements.............................. 2
2.7 Absence of Changes................................ 2
2.8 Absence of Undisclosed Liabilities................ 3
2.9 Tax Returns....................................... 3
2.10 Patents, Trade Names and Rights................... 3
2.11 Compliance with Laws.............................. 3
2.12 Litigation........................................ 3
2.13 Authority......................................... 3
2.14 Ability to Carry Out Obligations.................. 3
2.15 Full Disclosure................................... 3
2.16 Assets............................................ 4
2.17 Material Contracts................................ 4
3. REPRESENTATIONS AND WARRANTIES OF ZIASUN .................. 4
3.1 Organization...................................... 4
3.2 Capital Stock..................................... 4
3.3 Options, Warrants, Rights, etc. .................. 4
3.4 Non-Reporting Publicly Traded Status ............. 4
3.5 Subsidiaries ..................................... 4
3.6 Directors and Officers ........................... 5
3.7 Patents, Trade Names and Rights................... 5
3.8 Compliance with Laws.............................. 5
3.9 Litigation........................................ 5
3.10 Authority......................................... 5
3.11 Ability to Carry Out Obligations.................. 5
3.12 Full Disclosure................................... 5
3.13 Assets............................................ 6
4. COVENANTS.................................................. 6
4.1 Investigative Rights.............................. 6
4.2 Conduct of Business............................... 6
5. CLOSING ................................................. 6
5.1 Closing........................................... 6
5.2 Shareholders' Deliveries at Closing............... 6
5.3 ZiaSun's Deliveries at Closing.................... 7
<PAGE>
Table of Contents (continued) Page
- --------------------------------------------------------------------------------
6 CONDITIONS TO OBLIGATIONS TO CLOSE......................... 7
6.1 Conditions to Obligations of Momentum Internet
Shareholders to Close........................... 7
6.2 Conditions to Obligations of ZiaSun .............. 7
7. INDEMNIFICATION............................................ 7
7.1 Indemnification by Shareholders................... 7
7.2 Indemnification by ZiaSun ........................ 7
7.3 Notice and Opportunity to Defend.................. 8
8. MISCELLANEOUS.............................................. 8
8.1 Costs............................................. 8
8.2 Additional Documentation.......................... 9
8.3 Captions and Headings............................. 9
8.4 No Oral Change.................................... 9
8.5 Non-Waiver........................................ 9
8.6 Time of Essence................................... 9
8.7 Choice of Law..................................... 9
8.8 Counterparts and/or Facsimile Signature........... 9
8.9 Notices........................................... 9
8.10 Binding Effect.................................... 10
8.11 Mutual Cooperation................................ 10
8.12 Brokers........................................... 10
8.13 Survival of Representations and Warranties........ 10
Signature Pages .................................. 10
SCHEDULES A ...... List of Momentum Internet Shareholders
EXHIBIT 1.2....... Investment Letter
EXHIBIT 2.4....... Subsidiaries of Momentum Internet
EXHIBIT 2.5....... Present Officers and Directors of Momentum Internet
EXHIBIT 2.6....... Audited Financial Statements of Momentum Internet
EXHIBIT 2.8....... Liabilities of Momentum Internet
EXHIBIT 2.12...... Momentum Internet Legal Proceedings and Litigation
EXHIBIT 2.16...... Exceptions to Good Title to Assets of
Momentum Internet
EXHIBIT 2.17...... Material Contracts of Momentum Internet
EXHIBIT 3.5....... Subsidiaries of ZiaSun
EXHIBIT 3.6....... Present Officers and Directors of ZiaSun
EXHIBIT 3.13...... Exceptions to Good Title to Assets of ZiaSun
EXHIBIT 5.2.3..... Post Closing Officers and Directors of
Momentum Internet
EXHIBIT 8.12...... Brokers
ii
<PAGE>
AGREEMENT
---------
This Acquisition Agreement and Plan of Reorganization (the "Agreement" or
"Acquisition Agreement") made this 5th day of October, 1998, is by and among
ZiaSun Technologies, Inc., a Nevada Corporation ("ZiaSun") and the undersigned
shareholders (the "Shareholders") who are the owners of 100% of the capital
stock of Momentum Internet Incorporated, a corporation organized and existing
under the laws of the British Virgin Islands ("Momentum Internet").
A. Whereas, Shareholders hold all of the issued and outstanding common
stock of Momentum Internet; and
B. Whereas, ZiaSun, a non-reporting public company, desires to exchange
shares of its Common Stock, $0.001 par value (the "Common Stock") for all of the
issued and outstanding capital stock of Momentum Internet held by the
Shareholders, thereby making Momentum Internet a wholly owned subsidiary of
ZiaSun; and
C. Whereas, Shareholders desire to exchange all of the issued and
outstanding capital stock of Momentum Internet for 565,000 shares of the Common
stock of ZiaSun, all as more fully set forth herein below; and
D. Whereas, the Board of Directors of ZiaSun has authorized its proper
corporate officers to effect the transactions contemplated herein.
AGREEMENT
---------
NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree to the following terms
and conditions:
1. EXCHANGE OF SECURITIES.
1.1. Exchange of Shares. Subject to all the terms and conditions of this
Agreement, ZiaSun will deliver to the Shareholders of Momentum Internet 565,000
shares of previously authorized but unissued unregistered and restricted shares
of the Common Stock, $0.001 par value per shares of ZiaSun (the "ZiaSun
Shares"), in exchange for all of the issued and outstanding capital stock of
Momentum Internet owned by the Momentum Internet Shareholders.
1.2. Exemption from Registration. The parties hereto intend that the ZiaSun
Shares to be exchanged shall be exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Act"), pursuant to Section 4(2) of the
Act and the rules and regulations promulgated thereunder and exempt from the
registration requirements of the applicable states. In furtherance thereof,
Shareholders will execute and deliver to ZiaSun on the closing date, investment
letters suitable to legal counsel for ZiaSun, in form substantially as set forth
in Exhibit 1.2 attached hereto.
Page 1 of 13
<PAGE>
1.3. Non-taxable Transaction. The parties intend to effect this transaction
as a non-taxable reorganization pursuant to Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended.
2. REPRESENTATIONS AND WARRANTIES OF MOMENTUM INTERNET AND THE SHAREHOLDERS.
The Officers and Directors of Momentum Internet and certain Shareholders
(the "Warranting Shareholders") hereby represent and warrant to ZiaSun that:
2.1. Organization. Momentum Internet is a corporation duly organized,
validly existing and in good standing under the laws of the Bristish Virgin
Islands, and has all necessary corporate powers to own its properties and to
carry on its business as now owned and operated by it, and is duly qualified to
do business and is in good standing in each of the states where its business
requires qualification.
2.2. Capital Stock. The authorized capital stock of Momentum Internet
consists of 50,000 shares of capital stock, one dollar ($1.00) par value per
share, (United States Currency) (the "Momentum Internet Shares") of which one
(1) share is issued and outstanding. Immediately prior to closing there shall be
only one (1) Momentum Internet Shares issued and outstanding all of which are
owned by the Shareholders. All of the issued and outstanding shares of capital
stock of Momentum Internet are duly and validly issued, fully paid and
nonassessable. There are no other authorized class of capital stock.
2.3. Options, Warrants, Rights, etc. There are no outstanding
subscriptions, options, rights, warrants, debentures, instruments, convertible
securities or other agreements or commitments obligating Momentum Internet to
issue or to transfer from treasury any additional shares of its capital stock of
any class.
2.4. Subsidiaries. Momentum Internet has no subsidiaries and owns no
interest in other enterprises except as set forth on Exhibit 2.4 attached
hereto.
2.5. Directors and Officers. Exhibit 2.5 hereto contains the names and
titles of all present officers and directors Momentum Internet as of the date of
this Agreement.
2.6. Financial Statements. Within sixty (60) days of the Close of the
acquisition contemplated by this agreement, Momentum Internet will provide
audited financial statements to ZiaSun, which financial statements will be
prepared in accordance with generally accepted accounting principles and
practices consistently followed by Momentum Internet throughout the periods
indicated, and will fairly present the financial position of Momentum Internet
as of the dates of the balance sheets included in the financial statements and
the results of operations for the periods indicated.
2.7. Absence of Changes. The financial statements which will be provided
pursuant to paragraph 2.6, will reflect that since the date of said financial
statements, there has not been any change in the financial condition or
operations of Momentum Internet, except for changes in the ordinary course of
business, which changes have not, in the aggregate, been materially adverse.
Page 2 of 13
<PAGE>
2.8. Absence of Undisclosed Liabilities. Except as set forth on Exhibit 2.8
attached hereto, Momentum Internet does not have any material debt, liability or
obligation of any nature, whether accrued, absolute, contingent or otherwise,
and whether due or to become due, that will not be reflected in the balance
sheet of Momentum Internet included in the financial statements to be provided
pursuant to paragraph 2.6.
2.9. Tax Returns. Within the times and in the manner prescribed by law,
Momentum Internet has filed all federal, state and local tax returns required by
law and has paid all taxes, assessments and penalties due and payable. The
provisions for taxes, if any reflected in the Exhibits are adequate for the
periods indicated. There are no present disputes as to taxes of any nature
payable by Momentum Internet.
2.10. Patents, Trade Names and Rights. To the best of its knowledge
Momentum Internet and its subsidiaries (if any) own and hold all necessary
patents, franchise rights, trademarks, service marks, trade names, inventions,
processes, know-how, trade secrets, copyrights, licenses and other rights
necessary to its business, and the business of its subsidiaries as now conducted
or proposed to be conducted. Momentum Internet and its subsidiaries are not
infringing upon or otherwise acting adversely to the right or claimed right of
any person with respect to any of the foregoing.
2.11. Compliance with Laws. Momentum Internet and each of its subsidiaries
have complied with, and is not in violation of, applicable federal, state or
local statutes, laws and regulations (including, without limitation, any
applicable building, zoning or other law, ordinance or regulation) affecting its
properties or the operation of its business.
2.12. Litigation. Except as set forth in Exhibit 2.12 attached hereto,
neither Momentum Internet or any of its subsidiaries is a defendant to any suit,
action, arbitration or legal, administrative or other proceeding, or
governmental investigation which is pending or, to the best knowledge of the
Shareholders, threatened against or affecting Momentum Internet or its
subsidiaries or their business, assets or financial condition. Momentum Internet
and its subsidiaries are not in default with respect to any order, writ,
injunction or decree of any federal, state, local or foreign court, department,
agency or instrumentality applicable to it. Momentum Internet and its
subsidiaries are not engaged in any material lawsuits to recover moneys due it.
2.13. Authority. The Board of Directors of Momentum Internet has authorized
the execution of this Agreement and the consummation of the transactions
contemplated herein, and Momentum Internet has full power and authority to
execute, deliver and perform this Agreement, and this Agreement is a legal,
valid and binding obligation of the Shareholders and is enforceable in
accordance with its terms and conditions.
2.14. Ability to Carry Out Obligations. The execution and delivery of this
Agreement by the Shareholders and the performance by the Shareholders of their
obligations hereunder in the time and manner contemplated will not cause,
constitute or conflict with or result in (a) any breach or violation of any of
the provisions of or constitute a default under any license, indenture,
mortgage, instrument, article of incorporation, bylaw, or other agreement or
instrument to which Momentum Internet is a party, or by which it may be bound,
nor will any consents or authorizations of any party to the Shareholders'
performance of their obligations hereunder be required; (b) an event that would
permit any party to any agreement or instrument to terminate it or to accelerate
the maturity of any indebtedness or other obligation of Momentum Internet; or
(c) an event that would result in the creation or imposition of any lien, charge
or encumbrance on any asset of Momentum Internet.
Page 3 of 13
<PAGE>
2.15. Full Disclosure. None of the representations and warranties made by
Momentum Internet, its officers, directors of the Shareholder herein or in any
exhibit, certificate or memorandum furnished or to be furnished by the
Shareholders, or on their behalf, contain or will contain any untrue statement
of material fact or omit any material fact the omission of which would be
misleading.
2.16. Assets. Except as otherwise indicated in Exhibit 2.16 attached
hereto, Momentum Internet and each of its subsidiaries (if any) has good and
marketable title to all of its property, free and clear of all liens, claims and
encumbrances.
2.17. Material Contracts. Material contracts of Momentum Internet are set
forth in Exhibit 2.17, attached hereto an in corporated herein.
3. REPRESENTATIONS AND WARRANTIES OF ZIASUN.
ZiaSun represents and warrants to Momentum Internet and the Shareholders
that:
3.1. Organization. ZiaSun is a corporation duly organized, validly existing
and in good standing under the laws of the State of Nevada, has all necessary
corporate powers to own its properties and to carry on its business as now owned
and operated by it, and is duly qualified to do business and is in good standing
in each of the states where its business requires qualification.
3.2. Capital Stock. The authorized capital stock of ZiaSun consists of
50,000,000 shares of common stock, $0.001 par value per share (the "Common
Stock") of which 7,900,009 shares are presently issued and outstanding.
Immediately prior to closing there shall be 7,900,009 shares of Common Stock
issued and outstanding. All of the issued and outstanding shares are duly and
validly issued, fully paid and nonassessable. There are no other authorized
class of capital stock.
3.3. Options, Warrants, Rights, etc. There are no outstanding
subscriptions, options, rights, debentures, instruments, convertible securities
or other agreements or commitments obligation ZiaSun to issue or to transfer
from treasury any additional shares of its Common Stock, or any other class of
securities.
3.4. Non-Reporting Publicly Traded Status. The Common Stock of ZiaSun is
currently listed on the OTC Bulletin Board under the symbol "ZTEC". ZiaSun is a
non-reporting public company. It is not subject to the filing and reporting
requirements of the Securities Exchange Act of 1934 and as such does not file
any period or annual reports with the Securities and Exchange Commission.
Page 4 of 13
<PAGE>
3.5. Subsidiaries. Except as set forth in Exhibit 3.5 attached hereto
ZiaSun does not have any other subsidiaries or own any interest in any other
enterprise.
3.6. Directors and Officers. The names and titles of all present officers
and directors of ZiaSun are as set forth on Exhibit 3.6 attached hereto.
3.7. Patents, Trade Names and Rights. To the best of its knowledge ZiaSun
and its subsidiaries own and hold all necessary patents, franchise rights,
trademarks, service marks, trade names, inventions, processes, know-how, trade
secrets, copyrights, licenses and other rights necessary to its business as now
conducted or proposed to be conducted. ZiaSun is not infringing upon or
otherwise acting adversely to the right or claimed right of any person with
respect to any of the foregoing.
3.8. Compliance with Laws. ZiaSun has complied with, and is not in
violation of, applicable federal, state or local statutes, laws and regulations
(including, without limitation, any applicable building, zoning or other law,
ordinance or regulation and all federal and state securities laws (including,
without limitation, the Securities Act of 1933 and the Securities Exchange Act
of 1934) and all material respects NASDAQ rules) affecting its properties or the
operation of its business. To the best of its knowledge all stock of ZiaSun
issued to date has been issued in compliance with all Federal and State
securities laws.
3.9. Litigation. ZiaSun is not a party to any suit, action, arbitration or
legal, administrative or other proceeding, or governmental investigation which
is pending or, to the best knowledge of ZiaSun threatened against or affecting
ZiaSun or its business, assets or financial condition except for suits as
described in its 1934 Act filings. ZiaSun is not in default with respect to any
order, writ, injunction or decree of any federal, state, local or foreign court,
department, agency or instrumentality applicable to it.
3.10. Authority. The Board of Directors of ZiaSun has authorized the
execution of this Agreement and the consummation of the transactions
contemplated herein, and ZiaSun has full power and authority to execute, deliver
and perform this Agreement, and this Agreement is a legal, valid and binding
obligation of ZiaSun enforceable in accordance with its terms.
3.11. Ability to Carry Out Obligations. The execution and delivery of this
Agreement by ZiaSun and the performance by the ZiaSun of the obligations
hereunder in the time and manner contemplated will not cause, constitute or
conflict with or result in (a) any breach or violation of any of the provisions
of or constitute a default under any license, indenture, mortgage, instrument,
article of incorporation, bylaw, or other agreement or instrument to which
ZiaSun is a party, or by which it may be bound, nor will any consents or
authorizations of any party to ZiaSun's performance of its obligation hereunder;
(b) an event that would permit any party to any agreement or instrument to
terminate it or to accelerate the maturity of any indebtedness or other
obligation of ZiaSun; or (c) an event that would result in the creation or
imposition of any lien, charge or encumbrance on any asset of ZiaSun.
Page 5 of 13
<PAGE>
3.12. Full Disclosure. None of the representations and warranties made by
ZiaSun herein or in any exhibit, certificate or memorandum furnished or to be
furnished by ZiaSun or on its behalf, contains or will contain any untrue
statement of material fact or omit any material fact the omission of which would
be misleading.
3.13. Assets. ZiaSun has good and marketable title to all of its property,
free and clear of all liens, claims and encumbrances, except as otherwise
indicated on Exhibit 3.13 attached hereto.
4. COVENANTS RELATING TO THE PERIOD PRIOR TO CLOSING.
4.1. Investigative Rights. From the date of this Agreement until the
Closing Date, each party shall provide to the other party, and such other
party's counsel, accountants, auditors and other authorized representatives,
full access during normal business hours and upon reasonable advance written
notice to all of each party's properties, books, contracts, commitments and
records for the purpose of examining the same. Each party shall furnish the
other party with all information concerning each party's affairs as the other
party may reasonably request.
4.2. Conduct of Business. Prior to Closing, the Shareholders represent that
Momentum Internet shall conduct its business in the normal course. Momentum
Internet shall not amend its Articles of Incorporation or Bylaws (except as may
be described in this Agreement), declare dividends, redeem securities, incur
additional or newly-funded liabilities outside the ordinary course of business,
acquire or dispose of fixed assets, change employment terms, enter into any
material or long-term contract, guarantee obligations of any third party, settle
or discharge any balance sheet receivable for less than its stated amount, pay
more on any liability than its stated amount, or enter into any other
transaction without the prior approval of ZiaSun, not to be unreasonably
withheld.
5. CLOSING.
5.1. Closing. The closing of this transaction shall be held at the offices
of ZiaSun on or prior to October 15, 1998, or at such other place and time as is
mutually agreeable to the parties, or by FAX and Federal Express.
5.2. Shareholders' Deliveries at Closing. At the Closing, the Shareholders
shall deliver the following items:
5.2.1 Certificates representing all of the shares of capital stock
Momentum Internet held by the Shareholders, along with a stock power or
stock powers with signatures guaranteed, duly executed by the Shareholders
in blank or to ZiaSun Technologies, Inc.;
5.2.2 An investment letter in the form of Exhibit 1.2 hereof, duly
executed by the Shareholders;
5.2.3 Resignations of the officers and directors of Momentum Internet
and a resolution concurrently therewith appointing ZiaSun's designated
Officers and Directors as set forth on Exhibit 5.2.3 attached hereto
Page 6 of 13
<PAGE>
5.3. ZiaSun's Deliveries at Closing. At the Closing, ZiaSun shall deliver
the following items:
5.3.1 Either (a) certificates representing the ZiaSun Shares, duly
issued with restrictive legend, to the Shareholders as listed on Schedule A
attached hereto, or (b) a copy of a letter from ZiaSun to its transfer
agent, Signature Stock Transfer, Inc., instructing such transfer agent to
issue the certificates representing the ZiaSun Shares to the Shareholders
as listed on Schedule A.
6. CONDITIONS TO OBLIGATIONS TO CLOSE AND MATERIAL TERMS OF AGREEMENT.
6.1. Conditions to Obligations of Momentum Internet and Shareholders to
Close. The obligations of the Shareholders to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction of the
conditions that the representations and warranties of ZiaSun shall be true in
all material respects on and as of the Closing Date with the same force and
effect as though made on and as of the Closing date, that ZiaSun shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by it on
or prior to the Closing Date.
6.2. Conditions to Obligations of ZiaSun. The obligations of ZiaSun to
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction of the conditions that the representations and warranties of
Momentum Internet and the Shareholders shall be true in all material respects on
and as of the Closing Date with the same force and effect as though made on and
as of the Closing Date, that the Shareholders shall have performed and complied
in all material respects with all covenants and agreements required by this
Agreement and between ZiaSun, its shareholders and Momentum Internet and related
parties, be performed or complied with by it on or prior to the Closing Date.
7. INDEMNIFICATION.
7.1. Indemnification by Shareholders. The Warranting Shareholders agree to
indemnify, defend and hold the ZiaSun shareholders, ZiaSun, its officers and
directors, harmless against and in respect of any and all claims, demands,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties and reasonable attorney fees that it
shall incur or suffer, which arise out of, result or relate to any breach of, or
failure by Momentum Internet perform any of its material representations,
warranties, covenants or agreements in this Agreement or in any schedule,
certificate, exhibit or other instrument furnished or to be furnished by
Shareholders under this Agreement; provided however, that notice of any such
breach shall have been communicated with specificity within two (2) years of the
date hereof.
7.2. Indemnification by ZiaSun. ZiaSun agrees to indemnify, defend and hold
the Shareholders harmless against and in respect of any and all claims, demands,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties and reasonable attorney fees, that
it shall incur or suffer, which arise out of, result or relate to any breach of,
or failure by ZiaSun to perform any of its material representations, warranties,
covenants or agreements in this Agreement or in any schedule, certificate,
exhibit or other instrument furnished or to be furnished by ZiaSun under this
Agreement.
Page 7 of 13
<PAGE>
7.3. Notice and Opportunity to Defend. If there occurs an event which any
Party asserts is an indemnifiable event, the Party seeking indemnification shall
notify the Party obligated to provide indemnification (the "Indemnifying Party")
promptly. If such event involves (i) any claim or (ii) the commencement of any
action or proceeding by a third person, the Party seeking indemnification will
give such Indemnifying Party written notice of such claim or the commencement of
such action or proceeding. Such notice shall be a condition precedent to any
liability of the Indemnifying Party hereunder. Such Indemnifying Party shall
have a period of thirty (30) days within which to respond thereto. If such
Indemnifying Party does not respond within such thirty (30) days period, such
Indemnifying Party shall be obligated to compromise or defend, at its own
expense and by counsel chosen by the Indemnifying Party shall provide reasonably
satisfactory to the Party seeking indemnity, such matter and the Indemnifying
Party shall provide the Party seeking indemnification with such assurances as
may be reasonably required by the latter to assure that the Indemnifying Party
will assume, and be responsible for, the entire liability issue. If such
Indemnifying Party does not respond within such thirty (30) day period and
rejects responsibility for such matter in whole or in part, the Party seeking
indemnification shall be free to pursue, without prejudice to any of its rights
hereunder, such remedies as may be available to such Party under applicable law.
The Party seeking indemnification agrees to cooperate fully with the
Indemnifying Party and its counsel in the defense against any such asserted
liability. In any event, the Party seeking indemnification shall have the right
to participate at its own expense in the defense of such asserted liability. Any
compromise of such asserted liability by the Indemnifying Party shall require
the prior written consent of the Party seeking indemnification. If, however, the
Party seeking indemnification refuses its consent to a bona fide offer of
settlement which the Indemnifying Party wishes to accept, the Party seeking
indemnification may continue to pursue such matter, free of any participation by
the Indemnifying Party, at the sole expense of the Party seeking
indemnification. In such event, the obligation of the Indemnifying Party to the
Party seeking indemnification shall be equal to the lesser of (i) the amount of
the offer of settlement which the Party seeking indemnification refused to
accept plus the costs and expenses of such Party prior to the date the
Indemnifying Party notifies the Party seeking indemnification of the offer of
settlement and (ii) the actual out-of-pocket amount the Party seeking
indemnification is obligated to pay as a result of such Party's continuing to
pursue such an offer. An Indemnifying Party shall be entitled to recover from
the Party seeking indemnification any additional expenses incurred by such
Indemnifying Party as a result of the decision of the Party seeking
indemnification to pursue such matter.
8. MISCELLANEOUS.
8.1. Costs. Each party shall bear its own costs associated with this
Agreement, the closing of this Agreement, and all ancillary or related measures,
including without limitation, costs of attorneys fees, accountants fees, filing
fees, or other costs or expenses, without right or recourse from the other.
Page 8 of 13
<PAGE>
8.2. Additional Documentation. The parties acknowledge that further
agreements and documents, in addition to the Exhibits appended hereto, may be
required in order to effect the transactions contemplated hereunder. Each party
agrees to provide and execute such other and further agreements or documentation
as, in the opinions of respective counsel, are reasonably necessary to effect
the transactions contemplated hereunder and to maintain regulatory and legal
compliance.
8.3. Captions and Headings. The article and paragraph headings throughout
this Agreement are for convenience and reference only and shall not define,
limit or add to the meaning of any provision of this Agreement.
8.4. No Oral Change. This Agreement and any provision hereof may not be
waived, changed, modified or discharged orally, but only by an agreement in
writing signed by the party against whom enforcement of any such waiver, change,
modification or discharge is sought.
8.5. Non-Waiver. The failure of any party to insist in any one or more
cases upon the performance of any of the provisions, covenants or conditions of
this Agreement or to exercise any option herein contained shall not be construed
as a waiver or relinquishment for the future of any such provisions, covenants
or conditions. No waiver by any party of one breach by another party shall be
construed as a waiver with respect to any subsequent breach.
8.6. Time of Essence. Time is of the essence of this Agreement and of each
and every provision.
8.7. Choice of Law. This Agreement and its application shall be governed by
the laws of the State of Nevada.
8.8. Counterparts and/or Facsimile Signature. This Agreement may be
executed in any number of counterparts, including counterparts transmitted by
telecopier or FAX, any one of which shall constitute an original of this
Agreement. When counterparts of facsimile copies have been executed by all
parties, they shall have the same effect as if the signatures to each
counterpart or copy were upon the same document and copies of such documents
shall be deemed valid as originals. The parties agree that all such signatures
may be transferred to a single document upon the request of any party.
8.9. Notices. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
on the date of service if served personally on the party to whom notice is to be
given, or on the third day after mailing if mailed to the party to whom notice
is to be given, by first class mail, registered or certified, postage prepaid,
and properly addressed as follows:
If to ZiaSun, addressed to it at:
Mr. Bryant D. Cragun, President
ZiaSun Technologies, Inc.
205 S. Helix, #68
Solana Beach, California 92075
Page 9 of 13
<PAGE>
With copy to Counsel, addressed to:
George G. Chachas, Esq.
Wenthur & Chachas
4180 La Jolla Village Drive
Suite 500
La Jolla, California 92037
If to Momentum Internet and the Shareholders, to them at:
Anthony Tobin
3E, Block 17
South Horizons, Ap Lei Chau
Hong, Kong, China
With a copy to their Counsel, addressed to:
Mr. Alan Day
Compusec Services Limited
Suite C, 16th Floor, On Hing Building
1-9 On Hing Terrace, Central, Hong Kong
8.10. Binding Effect. This Agreement shall inure to and be binding upon the
heirs, executors, personal representatives, successors and assigns of each of
the parties to this Agreement.
8.11. Mutual Cooperation. The parties hereto shall cooperate with each
other to achieve the purpose of this Agreement and shall execute such other and
further documents and take such other and further actions as may be necessary or
convenient to effect the transaction described herein.
8.12. Brokers. The parties hereto represent that no other broker has
brought about this Agreement, and no other finder's fee has been paid or is
payable by either party, except for the broker whose name is set forth on
Exhibit 8.12, and whose fee shall be paid by the Shareholders. Each party hereto
shall indemnify and hold the other harmless against any and all claims, losses,
liabilities or expenses which may be asserted against it as a result of its
dealings, arrangements or agreements with any other broker.
8.13. Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the parties set forth in this Agreement
or in any instrument, certificate, opinion or other writing provided for herein
shall survive the Closing.
Page 10 of 13
<PAGE>
AGREED AND ACCEPTED as of the date first above written.
ZIASUN TECHNOLOGIES, INC.
A Nevada Corporation
Dated: October 5, 1998 /S/ Bryant D. Cragun
-----------------------------------
By: Bryant D. Cragun
Its: President
Dated: October 5, 1998 /S/ Jennifer C. McMinn
-----------------------------------
By: Jennifer C. McMinn
Its: Secretary
MOMENTUM INTERNET INCORPORATED
A British Virgin
Islands Corporation
Dated: October 5, 1998 /S/ Anthony Tobin
-----------------------------------
By: Anthony Tobin
Its: Director
SHAREHOLDERS OF MOMENTUM INTERNET INCORPORATED WHO WILL WARRANT
THE REPRESENTATIONS HEREIN:
/S/ Anthony Tobin
- -------------------------------- ----------------------------------
Vulcan Consultants Limited
By: Anthony Tobin
Its: Director
Page 11 of 13
<PAGE>
NON-WARRANTING MOMENTUM INTERNET INCORPORATED SHAREHOLDER SIGNATURE PAGE for
Acquisition Agreement and Plan of Reorganization between ZiaSun Technologies,
Inc., and the Shareholders of Momentum Internet, Inc.
The undersigned shareholders of Momentum Internet hereby execute this Agreement
solely for the purpose of affirming the following and for no other purpose.
Delivery of Momentum Internet Stock.
-----------------------------------
Each Momentum Internet Shareholder signing hereto hereby agrees to sell,
assign, transfer and deliver and does hereby sell, assign, transfer and deliver
to ZiaSun, and ZiaSun agrees to acquire and accept from each Momentum Internet
Shareholder, upon the terms and conditions set forth in this Agreement,
complete, absolute and unencumbered right, title and interest in and to the
Momentum Internet Shares held by each Momentum Internet Shareholder.
Consideration.
-------------
The entire consideration to be paid to Momentum Internet Shareholders in
exchange for the transfer, assignment and deliver of the Momentum Internet
Shares is the common shares of the authorized but unissued capital stock of
ZiaSun as allocated on Schedule A to each shareholder.
Exchange of Shares.
------------------
At the Closing Date as defined in this Agreement, ZiaSun shall deliver to
the Momentum Internet Shareholders, in accordance with Schedule A, 565,000
shares of the authorized but unissued Common Stock of ZiaSun (the "ZiaSun
Shares"). The exchange of shares contemplated by this Agreement is intended to
result in a tax-free reorganization within the meaning of Section 368(a)(1)(B)
of the Code. The Momentum Internet Shareholders agree to assist ZiaSun in
adopting and filing any documentation necessary to comply with the Code in order
to preserve the tax-free treatment of the within exchange of shares.
Investment Representation.
-------------------------
The Shares being acquired by the Momentum Internet Shareholders hereunder
are being acquired for investment purposes only and not with a view towards
resale or redistribution and no person or entity has any beneficial interest in
such shares except the Momentum Internet Shareholders. The Shares being acquired
have not been registered under the Securities Act of 1933 as amended (the
"Securities Act"), are restricted securities and the Momentum Internet
Shareholders acknowledge and agree that they may not sell, offer, transfer,
hypothecate or convey such shares except pursuant to a registration statement
pursuant to the Securities Act or an exemption therefrom. Such shares shall be
issued with the following legend and shall be subject to a stock transfer order
delivered by the Company to the transfer agent, such legend to be as follows:
Page 12 of 13
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION FOR THESE SHARES UNDER SUCH ACT
OR AN OPINION OF THE COMPANY'S COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER SAID ACT.
NOT APPLICABLE
Dated: _________________________ _____________________________
Signature of Non-Warranting
Momentum Internet Incorporated
Shareholder
Page 13 of 13
<PAGE>
SCHEDULE A
LIST OF MOMENTUM INTERNET SHAREHOLDERS
Shareholder Number of Number of
Name and Address Momentum Internet Shares ZiaSun Shares
- --------------------------------------------------------------------------------
Vulcan Consultants Limited. 1 565,000
P.O. Box 957
Offshore Incorporation Centre Road
Tortola, British Virgin Islands
- --------------------------------------------------------------------------------
Total 1 565,000
<PAGE>
EXHIBIT 1.2
INVESTMENT LETTER
- --------------------------------------------------------------------------------
Mr. Bryant D. Cragun
ZiaSun Technologies, Inc.
205 S. Helix, #68
Solana Beach, CA 92075
Re: INVESTMENT LETTER
-----------------
Gentlemen:
The undersigned having acquired by a stock-for-stock exchange a certain
amount of the total 565,000 restricted and unregistered shares of Common Stock,
$0.001 par value per share (the "Securities") of ZiaSun Technologies, Inc., a
Nevada Corporation, (the "Company"), hereby represents to the Company that:
1. The Securities which are being acquired by the undersigned are being
acquired for the undersigned's own account and for investment and not with a
view to the public resale or distribution thereof.
2. The undersigned will not sell, transfer or otherwise dispose of the
Securities unless, in the opinion of the Company's counsel, such disposition
conforms with applicable securities laws requirements.
3. The undersigned is aware that the Securities are "restricted securities"
as that term is defined in Rule 144 (the "Rule") promulgated under the
Securities Act of 1933, as amended (the "Act").
4. The undersigned acknowledges that the undersigned has had an opportunity
to ask questions of and receive answers from duly designated representatives of
the Company concerning the finances of the Company and the proposed business
plan of the Company.
5. The undersigned acknowledges and understands that the Securities are
unregistered and must be held indefinitely unless they are subsequently
registered under the Act or an exemption from such registration is available.
6. The undersigned further acknowledges that the undersigned is fully aware
of the applicable limitations on the resale of the Securities. These
restrictions for the most part are set forth in Rule 144 (the "Rule"). The Rule
permits sales of "restricted securities" upon compliance with the requirements
of such Rule. If and when the Rule is available to the undersigned, the
undersigned may make only sales of the Securities in accordance with the terms
and conditions of the rule (which may limit the amount of Securities that may be
sold).
<PAGE>
Investment Letter
Page 2 of 2
- --------------------------------------------------------------------------------
7. By reason of the undersigned's knowledge and experience in financial and
business matters in general, and investments in particular, the undersigned is
capable of evaluating the merits and risks of an investment by the undersigned
in the Securities.
8. The undersigned is capable of bearing the economic risks of an
investment in the Securities. The undersigned fully understands the speculative
nature of the Securities and the possibility of loss.
9. The undersigned's present financial condition is such that the
undersigned is under no present or contemplated future need to dispose of any
portion of the Securities to satisfy any existing or contemplated undertaking,
need, or indebtedness.
10. Any and all certificates representing the Securities, and any and all
securities issued in replacement thereof or in exchange therefor, shall bear the
following restrictive legend.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION FOR THESE SHARES UNDER SUCH ACT OR AN
OPINION OF THE COMPANY'S COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER SAID ACT.
11. The undersigned further agrees that the Company shall have the right to
issue stop-transfer instructions to its transfer agent until such time as sale
is permitted under Security Laws and acknowledges that the Company has informed
the undersigned of its intention to issue such instructions.
Very truly yours,
----------------------------------
Undersigned
Date: ____________________________
----------------------------------
Address
----------------------------------
Social Security Number
<PAGE>
EXHIBIT 2.4
SUBSIDIARIES OF MOMENTUM INTERNET
- -------------------------------------------------------------------------------
None
<PAGE>
EXHIBIT 2.5
PRESENT OFFICERS AND DIRECTORS MOMENTUM INTERNET
- --------------------------------------------------------------------------------
OFFICERS
Not Applicable
DIRECTORS
Anthony Tobin
Graham Daley
Alan Hubert Day
<PAGE>
EXHIBIT 2.6
AUDITED FINANCIAL STATEMENTS MOMENTUM INTERNET
- --------------------------------------------------------------------------------
TO BE PROVIDED WITHIN SIXTY (60) DAYS OF CLOSING
<PAGE>
EXHIBIT 2.8
LIABILITIES OF MOMENTUM INTERNET
- --------------------------------------------------------------------------------
NONE
<PAGE>
EXHIBIT 2.12
MOMENTUM INTERNET LITIGATION AND LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
NONE
<PAGE>
EXHIBIT 2.16
EXCEPTIONS TO GOOD TITLE TO ASSETS OF MOMENTUM INTERNET
- --------------------------------------------------------------------------------
NONE
<PAGE>
EXHIBIT 2.17
MATERIAL CONTRACTS OF MOMENTUM INTERNET
- --------------------------------------------------------------------------------
NONE
<PAGE>
EXHIBIT 3.5
SUBSIDIARIES OF ZIASUN
- --------------------------------------------------------------------------------
1. Best Way Beverages, Inc., a Nevada Corporation is a wholly
owned subsidiary of ZiaSun Technologies, Inc. Best Way
Beverages, Inc., holds a license from Fountain Fresh
International, Inc., under which Best Way will market , sell
and distribute the Beverage Center Equipment developed by
Fountain Fresh which is used to dispense Fountain Fresh
Beverages and purified water. The Beverage Center Equipment is
a patented in-store, self service, pressure fill, mini
bottling plant/beverage center.
2. Upon the completion of the pending acquisition of Momentum
Asia, Inc., a Corporation formed under the laws of the
Republic of the Philippines. Momentum Asia, Inc. will become a
wholly owned subsidiary of ZiaSun Technologies, Inc. Momentum
Asia, Inc., is, among other things, in printing and
publication design business.
<PAGE>
EXHIBIT 3.6
PRESENT OFFICES AND DIRECTORS OF ZIASUN
- --------------------------------------------------------------------------------
OFFICERS
- --------
CEO and President ....................................... Bryant D. Cragun
Vice President ......................................... Lynn Briggs
Vice President of Operations ........................... Allen D. Hardman
Chief Financial Officer ............................. Jennifer C. McMinn
Secretary ........................................... Jennifer C. McMinn
DIRECTORS
- ---------
Bryant D. Cragun
Lynn Briggs
Jennifer C. McMinn
<PAGE>
EXHIBIT 3.13
EXCEPTIONS TO GOOD TITLE TO ASSETS OF ZIASUN
- --------------------------------------------------------------------------------
NONE
<PAGE>
EXHIBIT 5.2.3
POST CLOSING OFFICERS AND DIRECTORS
- --------------------------------------------------------------------------------
OFFICERS
- --------
Not Applicable
DIRECTORS
- ---------
Anthony Tobin
Graham Daley
Alan Hubert Day
<PAGE>
EXHIBIT 8.12
BROKERS
- --------------------------------------------------------------------------------
With the exception of the shares issued to the Shareholders of Momentum Internet
as set forth herein, no brokerage of finders fees in the form of cash or
securities were paid to any party or person in connection with the acquisition.
ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
ZiaSun Technologies, Inc.
A Nevada Corporation
ACQUISITION OF SHARES OF
Momentum Asia, Inc.
A Corporation organized under the laws of
the Republic of the Philippines
Dated: October 5, 1998
<PAGE>
Table of Contents Page
- --------------------------------------------------------------------------------
1 EXCHANGE OF SECURITIES .................................... 1
1.1 Exchange of Shares ............................... 1
1.2 Exemption from Registration ...................... 1
1.3 Non-taxable Transaction .......................... 2
2. REPRESENTATION AND WARRANTIES OF THE SHAREHOLDERS ......... 2
2.1 Organization ..................................... 2
2.2 Capital Stock .................................... 2
2.3 Options, Warrants, Rights, etc. .................. 2
2.4 Subsidiaries ..................................... 2
2.5 Directors and Officers............................ 2
2.6 Financial Statements.............................. 2
2.7 Absence of Changes................................ 2
2.8 Absence of Undisclosed Liabilities................ 3
2.9 Tax Returns....................................... 3
2.10 Patents, Trade Names and Rights................... 3
2.11 Compliance with Laws.............................. 3
2.12 Litigation........................................ 3
2.13 Authority......................................... 3
2.14 Ability to Carry Out Obligations.................. 3
2.15 Full Disclosure................................... 3
2.16 Assets............................................ 4
2.17 Material Contracts................................ 4
3. REPRESENTATIONS AND WARRANTIES OF ZIASUN .................. 4
3.1 Organization...................................... 4
3.2 Capital Stock..................................... 4
3.3 Options, Warrants, Rights, etc. .................. 4
3.4 Non-Reporting Publicly Traded Status ............. 4
3.5 Subsidiaries ..................................... 4
3.6 Directors and Officers ........................... 5
3.7 Patents, Trade Names and Rights................... 5
3.8 Compliance with Laws.............................. 5
3.9 Litigation........................................ 5
3.10 Authority......................................... 5
3.11 Ability to Carry Out Obligations.................. 5
3.12 Full Disclosure................................... 5
3.13 Assets............................................ 6
4. COVENANTS.................................................. 6
4.1 Investigative Rights.............................. 6
4.2 Conduct of Business............................... 6
5. CLOSING .................................................. 6
5.1 Closing........................................... 6
5.2 Shareholders' Deliveries at Closing............... 6
5.3 ZiaSun's Deliveries at Closing.................... 7
i
<PAGE>
Table of Contents (continued) Page
- --------------------------------------------------------------------------------
6 CONDITIONS TO OBLIGATIONS TO CLOSE.......................... 7
6.1 Conditions to Obligations of Momentum Asia and
Shareholders to Close............................ 7
6.2 Conditions to Obligations of ZiaSun ............... 7
7. INDEMNIFICATION............................................. 7
7.1 Indemnification by Shareholders.................... 7
7.2 Indemnification by ZiaSun ......................... 7
7.3 Notice and Opportunity to Defend................... 8
8. MISCELLANEOUS............................................... 8
8.1 Costs.............................................. 8
8.2 Additional Documentation........................... 9
8.3 Captions and Headings.............................. 9
8.4 No Oral Change..................................... 9
8.5 Non-Waiver.......................................... 9
8.6 Time of Essence..................................... 9
8.7 Choice of Law....................................... 9
8.8 Counterparts and/or Facsimile Signature............. 9
8.9 Notices............................................. 9
8.10 Binding Effect...................................... 10
8.11 Mutual Cooperation.................................. 10
8.12 Brokers............................................. 10
8.13 Survival of Representations and Warranties.......... 10
Signature Pages .................................... 10
SCHEDULES A ...... List of Momentum Asia Shareholders
EXHIBIT 1.2....... Investment Letter
EXHIBIT 2.4....... Subsidiaries of Momentum Asia
EXHIBIT 2.5....... Present Officers and Directors of Momentum Asia
EXHIBIT 2.6....... Audited Financial Statements of Momentum Asia
EXHIBIT 2.8....... Liabilities of Momentum Asia
EXHIBIT 2.12...... Momentum Asia Legal Proceedings and Litigation
EXHIBIT 2.16...... Exceptions to Good Title to Assets of Momentum Asia
EXHIBIT 2.17...... Material Contracts of Momentum Asia
EXHIBIT 3.5....... Subsidiaries of ZiaSun
EXHIBIT 3.6....... Present Officers and Directors of ZiaSun
EXHIBIT 3.13...... Exceptions to Good Title to Assets of ZiaSun
EXHIBIT 5.2.3..... Post Closing Officers and Directors of
Momentum Asia
EXHIBIT 8.12...... Brokers
ii
<PAGE>
AGREEMENT
This Acquisition Agreement and Plan of Reorganization (the "Agreement" or
"Acquisition Agreement") made this 5th day of October, 1998, is by and among
ZiaSun Technologies, Inc., a Nevada Corporation ("ZiaSun") and the undersigned
shareholders (the "Shareholders") who are the owners of 100% of the capital
stock of Momentum Asia, Inc., a corporation organized and existing under the
laws of the Republic of the Philippines ("Momentum Asia").
A. Whereas, Shareholders hold all of the issued and outstanding common
stock of Momentum Asia; and
B. Whereas, ZiaSun, a non-reporting public company, desires to exchange
shares of its Common Stock, $0.001 par value (the "Common Stock") for all of the
issued and outstanding capital stock of Momentum Asia held by the Shareholders,
thereby making Momentum Asia a wholly owned subsidiary of ZiaSun; and
C. Whereas, Shareholders desire to exchange all of the issued and
outstanding capital stock of Momentum Asia for 2,000,000 shares of the Common
stock of ZiaSun, all as more fully set forth herein below; and
D. Whereas, the Board of Directors of ZiaSun has authorized its proper
corporate officers to effect the transactions contemplated herein.
AGREEMENT
---------
NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree to the following terms
and conditions:
1. EXCHANGE OF SECURITIES.
1.1. Exchange of Shares. Subject to all the terms and conditions of this
Agreement, ZiaSun will deliver to the Shareholders of Momentum Asia 2,000,000
shares of previously authorized but unissued unregistered and restricted shares
of the Common Stock, $0.001 par value per shares of ZiaSun (the "ZiaSun
Shares"), in exchange for all of the issued and outstanding capital stock of
Momentum Asia owned by the Momentum Asia Shareholders.
1.2. Exemption from Registration. The parties hereto intend that the ZiaSun
Shares to be exchanged shall be exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Act"), pursuant to Section 4(2) of the
Act and the rules and regulations promulgated thereunder and exempt from the
registration requirements of the applicable states. In furtherance thereof,
Shareholders will execute and deliver to ZiaSun on the closing date, investment
letters suitable to legal counsel for ZiaSun, in form substantially as set forth
in Exhibit 1.2 attached hereto.
Page 1 of 13
<PAGE>
1.3. Non-taxable Transaction. The parties intend to effect this transaction
as a non-taxable reorganization pursuant to Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended.
2. REPRESENTATIONS AND WARRANTIES OF MOMENTUM ASIA
AND THE SHAREHOLDERS.
The Officers and Directors of Momentum Asia and certain Shareholders (the
"Warranting Shareholders") hereby represent and warrant to ZiaSun that:
2.1. Organization. Momentum Asia is a corporation duly organized, validly
existing and in good standing under the laws of the Republic of the Philippines,
and has all necessary corporate powers to own its properties and to carry on its
business as now owned and operated by it, and is duly qualified to do business
and is in good standing in each of the states where its business requires
qualification.
2.2. Capital Stock. The authorized capital stock of Momentum Asia consists
of 4,000,000 shares of capital stock, one Peso (P1.00) par value per share,
(Philippine Currency) (the "Momentum Asia Shares") of which 1,000,000 shares are
issued and outstanding. Immediately prior to closing there shall be 1,000,000
Momentum Asia Shares issued and outstanding all of which are owned by the
Shareholders. All of the issued and outstanding shares of capital stock of
Momentum Asia are duly and validly issued, fully paid and nonassessable. There
are no other authorized class of capital stock.
2.3. Options, Warrants, Rights, etc. There are no outstanding
subscriptions, options, rights, warrants, debentures, instruments, convertible
securities or other agreements or commitments obligating Momentum Asia to issue
or to transfer from treasury any additional shares of its capital stock of any
class.
2.4. Subsidiaries. Momentum Asia has no subsidiaries and owns no interest
in other enterprises except as set forth on Exhibit 2.4 attached hereto.
2.5. Directors and Officers. Exhibit 2.5 hereto contains the names and
titles of all present officers and directors Momentum Asia as of the date of
this Agreement.
2.6. Financial Statements. Exhibit 2.6 hereto consists of the audited
financial statements of Momentum Asia as of December 31, 1997 and 1996. The
financial statements have been prepared in accordance with generally accepted
accounting principles on an accrual basis and practices consistently followed by
Momentum Asia throughout the periods indicated, and fairly present the financial
position of Momentum Asia as of the dates of the balance sheets included in the
financial statements and the results of operations for the periods indicated.
2.7. Absence of Changes. Since the date of Momentum Asia's financial
statements included in Exhibit 2.6, there has not been any change in the
financial condition or operations of Momentum Asia, except for changes in the
ordinary course of business, which changes have not, in the aggregate, been
materially adverse.
Page 2 of 13
<PAGE>
2.8. Absence of Undisclosed Liabilities. Except as set forth on Exhibit 2.8
attached hereto, Momentum Asia does not have any material debt, liability or
obligation of any nature, whether accrued, absolute, contingent or otherwise,
and whether due or to become due, that is not reflected in the balance sheet of
Momentum Asia included in Exhibit 2.6.
2.9. Tax Returns. Within the times and in the manner prescribed by law,
Momentum Asia has filed all federal, state and local tax returns required by law
and has paid all taxes, assessments and penalties due and payable. The
provisions for taxes, if any reflected in the Exhibits are adequate for the
periods indicated. There are no present disputes as to taxes of any nature
payable by Momentum Asia.
2.10. Patents, Trade Names and Rights. To the best of its knowledge
Momentum Asia and its subsidiaries (if any) own and hold all necessary patents,
franchise rights, trademarks, service marks, trade names, inventions, processes,
know-how, trade secrets, copyrights, licenses and other rights necessary to its
business, and the business of its subsidiaries as now conducted or proposed to
be conducted. Momentum Asia and its subsidiaries are not infringing upon or
otherwise acting adversely to the right or claimed right of any person with
respect to any of the foregoing.
2.11. Compliance with Laws. Momentum Asia and each of its subsidiaries have
complied with, and is not in violation of, applicable federal, state or local
statutes, laws and regulations (including, without limitation, any applicable
building, zoning or other law, ordinance or regulation) affecting its properties
or the operation of its business.
2.12. Litigation. Except as set forth in Exhibit 2.12 attached hereto,
neither Momentum Asia or any of its subsidiaries is a defendant to any suit,
action, arbitration or legal, administrative or other proceeding, or
governmental investigation which is pending or, to the best knowledge of the
Shareholders, threatened against or affecting Momentum Asia or its subsidiaries
or their business, assets or financial condition. Momentum Asia and its
subsidiaries are not in default with respect to any order, writ, injunction or
decree of any federal, state, local or foreign court, department, agency or
instrumentality applicable to it. Momentum Asia and its subsidiaries are not
engaged in any material lawsuits to recover moneys due it.
2.13. Authority. The Board of Directors of Momentum Asia has authorized the
execution of this Agreement and the consummation of the transactions
contemplated herein, and Momentum Asia has full power and authority to execute,
deliver and perform this Agreement, and this Agreement is a legal, valid and
binding obligation of the Shareholders and is enforceable in accordance with its
terms and conditions.
2.14. Ability to Carry Out Obligations. The execution and delivery of this
Agreement by the Shareholders and the performance by the Shareholders of their
obligations hereunder in the time and manner contemplated will not cause,
constitute or conflict with or result in (a) any breach or violation of any of
the provisions of or constitute a default under any license, indenture,
mortgage, instrument, article of incorporation, bylaw, or other agreement or
instrument to which Momentum Asia is a party, or by which it may be bound, nor
will any consents or authorizations of any party to the Shareholders'
performance of their obligations hereunder be required; (b) an event that would
permit any party to any agreement or instrument to terminate it or to accelerate
the maturity of any indebtedness or other obligation of Momentum Asia; or (c) an
event that would result in the creation or imposition of any lien, charge or
encumbrance on any asset of Momentum Asia.
Page 3 of 13
<PAGE>
2.15. Full Disclosure. None of the representations and warranties made by
Momentum Asia, its officers, directors of the Shareholder herein or in any
exhibit, certificate or memorandum furnished or to be furnished by the
Shareholders, or on their behalf, contain or will contain any untrue statement
of material fact or omit any material fact the omission of which would be
misleading.
2.16. Assets. Except as otherwise indicated in Exhibit 2.16 attached
hereto, Momentum Asia and each of its subsidiaries (if any) has good and
marketable title to all of its property, free and clear of all liens, claims and
encumbrances.
2.17. Material Contracts. Material contracts of Momentum Asia are set forth
in Exhibit 2.17, attached hereto an incorporated herein.
3. REPRESENTATIONS AND WARRANTIES OF ZIASUN.
ZiaSun represents and warrants to Momentum Asia and the Shareholders that:
3.1. Organization. ZiaSun is a corporation duly organized, validly existing
and in good standing under the laws of the State of Nevada, has all necessary
corporate powers to own its properties and to carry on its business as now owned
and operated by it, and is duly qualified to do business and is in good standing
in each of the states where its business requires qualification.
3.2. Capital Stock. The authorized capital stock of ZiaSun consists of
50,000,000 shares of common stock, $0.001 par value per share (the "Common
Stock") of which 7,900,009 shares are presently issued and outstanding.
Immediately prior to closing it is anticipated that there shall be 8,465,009
shares of Common Stock issued and outstanding which additional 565,000 issued
and outstanding shares will be the result of the closing of the acquisition of
Momentum Internet Incorporated. All of the issued and outstanding shares are
duly and validly issued, fully paid and nonassessable. There are no other
authorized class of capital stock.
3.3. Options, Warrants, Rights, etc. There are no outstanding
subscriptions, options, rights, debentures, instruments, convertible securities
or other agreements or commitments obligation ZiaSun to issue or to transfer
from treasury any additional shares of its Common Stock, or any other class of
securities.
3.4. Non-Reporting Publicly Traded Status. The Common Stock of ZiaSun is
currently listed on the OTC Bulletin Board under the symbol "ZTEC". ZiaSun is a
non-reporting public company. It is not subject to the filing and reporting
requirements of the Securities Exchange Act of 1934 and as such does not file
any period or annual reports with the Securities and Exchange Commission.
Page 4 of 13
<PAGE>
3.5. Subsidiaries. Except as set forth in Exhibit 3.5 attached hereto
ZiaSun does not have any other subsidiaries or own any interest in any other
enterprise.
3.6. Directors and Officers. The names and titles of all present officers
and directors of ZiaSun are as set forth on Exhibit 3.6 attached hereto.
3.7. Patents, Trade Names and Rights. To the best of its knowledge ZiaSun
and its subsidiaries own and hold all necessary patents, franchise rights,
trademarks, service marks, trade names, inventions, processes, know-how, trade
secrets, copyrights, licenses and other rights necessary to its business as now
conducted or proposed to be conducted. ZiaSun is not infringing upon or
otherwise acting adversely to the right or claimed right of any person with
respect to any of the foregoing.
3.8. Compliance with Laws. ZiaSun has complied with, and is not in
violation of, applicable federal, state or local statutes, laws and regulations
(including, without limitation, any applicable building, zoning or other law,
ordinance or regulation and all federal and state securities laws (including,
without limitation, the Securities Act of 1933 and the Securities Exchange Act
of 1934) and all material respects NASDAQ rules) affecting its properties or the
operation of its business. To the best of its knowledge all stock of ZiaSun
issued to date has been issued in compliance with all Federal and State
securities laws.
3.9. Litigation. ZiaSun is not a party to any suit, action, arbitration or
legal, administrative or other proceeding, or governmental investigation which
is pending or, to the best knowledge of ZiaSun threatened against or affecting
ZiaSun or its business, assets or financial condition except for suits as
described in its 1934 Act filings. ZiaSun is not in default with respect to any
order, writ, injunction or decree of any federal, state, local or foreign court,
department, agency or instrumentality applicable to it.
3.10. Authority. The Board of Directors of ZiaSun has authorized the
execution of this Agreement and the consummation of the transactions
contemplated herein, and ZiaSun has full power and authority to execute, deliver
and perform this Agreement, and this Agreement is a legal, valid and binding
obligation of ZiaSun enforceable in accordance with its terms.
3.11. Ability to Carry Out Obligations. The execution and delivery of this
Agreement by ZiaSun and the performance by the ZiaSun of the obligations
hereunder in the time and manner contemplated will not cause, constitute or
conflict with or result in (a) any breach or violation of any of the provisions
of or constitute a default under any license, indenture, mortgage, instrument,
article of incorporation, bylaw, or other agreement or instrument to which
ZiaSun is a party, or by which it may be bound, nor will any consents or
authorizations of any party to ZiaSun's performance of its obligation hereunder;
(b) an event that would permit any party to any agreement or instrument to
terminate it or to accelerate the maturity of any indebtedness or other
obligation of ZiaSun; or (c) an event that would result in the creation or
imposition of any lien, charge or encumbrance on any asset of ZiaSun.
3.12. Full Disclosure. None of the representations and warranties made by
ZiaSun herein or in any exhibit, certificate or memorandum furnished or to be
furnished by ZiaSun or on its behalf, contains or will contain any untrue
statement of material fact or omit any material fact the omission of which would
be misleading.
Page 5 of 13
<PAGE>
3.13. Assets. ZiaSun has good and marketable title to all of its property,
free and clear of all liens, claims and encumbrances, except as otherwise
indicated on Exhibit 3.13 attached hereto.
4. COVENANTS RELATING TO THE PERIOD PRIOR TO CLOSING.
4.1. Investigative Rights. From the date of this Agreement until the
Closing Date, each party shall provide to the other party, and such other
party's counsel, accountants, auditors and other authorized representatives,
full access during normal business hours and upon reasonable advance written
notice to all of each party's properties, books, contracts, commitments and
records for the purpose of examining the same. Each party shall furnish the
other party with all information concerning each party's affairs as the other
party may reasonably request.
4.2. Conduct of Business. Prior to Closing, the Shareholders represent that
Momentum Asia shall conduct its business in the normal course. Momentum Asia
shall not amend its Articles of Incorporation or Bylaws (except as may be
described in this Agreement), declare dividends, redeem securities, incur
additional or newly-funded liabilities outside the ordinary course of business,
acquire or dispose of fixed assets, change employment terms, enter into any
material or long-term contract, guarantee obligations of any third party, settle
or discharge any balance sheet receivable for less than its stated amount, pay
more on any liability than its stated amount, or enter into any other
transaction without the prior approval of ZiaSun, not to be unreasonably
withheld.
5. CLOSING.
5.1. Closing. The closing of this transaction shall be held at the offices
of ZiaSun on or prior to October 15, 1998, or at such other place and time as is
mutually agreeable to the parties, or by FAX and Federal Express.
5.2. Shareholders' Deliveries at Closing. At the Closing, the Shareholders
shall deliver the following items:
5.2.1 Certificates representing all of the shares of capital stock
Momentum Asia held by the Shareholders, along with a stock power or stock
powers with signatures guaranteed, duly executed by the Shareholders in
blank or to ZiaSun Technologies, Inc.;
5.2.2 An investment letter in the form of Exhibit 1.2 hereof, duly
executed by the Shareholders;
5.2.3 Resignations of the officers and directors of Momentum Asia and
a resolution concurrently therewith appointing ZiaSun's designated Officers
and Directors as set forth on Exhibit 5.2.3 attached hereto
Page 6 of 13
<PAGE>
5.3. ZiaSun's Deliveries at Closing. At the Closing, ZiaSun shall deliver
the following items:
5.3.1 Either (a) certificates representing the ZiaSun Shares, duly
issued with restrictive legend, to the Shareholders as listed on Schedule A
attached hereto, or (b) a copy of a letter from ZiaSun to its transfer
agent, Signature Stock Transfer, Inc., instructing such transfer agent to
issue the certificates representing the ZiaSun Shares to the Shareholders
as listed on Schedule A.
6. CONDITIONS TO OBLIGATIONS TO CLOSE AND MATERIAL TERMS OF AGREEMENT.
6.1. Conditions to Obligations of Momentum Asia and Shareholders to Close.
The obligations of the Shareholders to consummate the transactions contemplated
by this Agreement shall be subject to the satisfaction of the conditions that
the representations and warranties of ZiaSun shall be true in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing date, that ZiaSun shall have performed and
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date.
6.2. Conditions to Obligations of ZiaSun. The obligations of ZiaSun to
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction of the conditions that the representations and warranties of
Momentum Asia and the Shareholders shall be true in all material respects on and
as of the Closing Date with the same force and effect as though made on and as
of the Closing Date, that the Shareholders shall have performed and complied in
all material respects with all covenants and agreements required by this
Agreement and between ZiaSun, its shareholders and Momentum Asia and related
parties, be performed or complied with by it on or prior to the Closing Date.
7. INDEMNIFICATION.
7.1. Indemnification by Shareholders. The Warranting Shareholders agree to
indemnify, defend and hold the ZiaSun shareholders, ZiaSun, its officers and
directors, harmless against and in respect of any and all claims, demands,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties and reasonable attorney fees that it
shall incur or suffer, which arise out of, result or relate to any breach of, or
failure by Momentum Asia perform any of its material representations,
warranties, covenants or agreements in this Agreement or in any schedule,
certificate, exhibit or other instrument furnished or to be furnished by
Shareholders under this Agreement; provided however, that notice of any such
breach shall have been communicated with specificity within two (2) years of the
date hereof.
7.2. Indemnification by ZiaSun. ZiaSun agrees to indemnify, defend and hold
the Shareholders harmless against and in respect of any and all claims, demands,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties and reasonable attorney fees, that
it shall incur or suffer, which arise out of, result or relate to any breach of,
or failure by ZiaSun to perform any of its material representations, warranties,
covenants or agreements in this Agreement or in any schedule, certificate,
exhibit or other instrument furnished or to be furnished by ZiaSun under this
Agreement.
Page 7 of 13
<PAGE>
7.3. Notice and Opportunity to Defend. If there occurs an event which any
Party asserts is an indemnifiable event, the Party seeking indemnification shall
notify the Party obligated to provide indemnification (the "Indemnifying Party")
promptly. If such event involves (i) any claim or (ii) the commencement of any
action or proceeding by a third person, the Party seeking indemnification will
give such Indemnifying Party written notice of such claim or the commencement of
such action or proceeding. Such notice shall be a condition precedent to any
liability of the Indemnifying Party hereunder. Such Indemnifying Party shall
have a period of thirty (30) days within which to respond thereto. If such
Indemnifying Party does not respond within such thirty (30) days period, such
Indemnifying Party shall be obligated to compromise or defend, at its own
expense and by counsel chosen by the Indemnifying Party shall provide reasonably
satisfactory to the Party seeking indemnity, such matter and the Indemnifying
Party shall provide the Party seeking indemnification with such assurances as
may be reasonably required by the latter to assure that the Indemnifying Party
will assume, and be responsible for, the entire liability issue. If such
Indemnifying Party does not respond within such thirty (30) day period and
rejects responsibility for such matter in whole or in part, the Party seeking
indemnification shall be free to pursue, without prejudice to any of its rights
hereunder, such remedies as may be available to such Party under applicable law.
The Party seeking indemnification agrees to cooperate fully with the
Indemnifying Party and its counsel in the defense against any such asserted
liability. In any event, the Party seeking indemnification shall have the right
to participate at its own expense in the defense of such asserted liability. Any
compromise of such asserted liability by the Indemnifying Party shall require
the prior written consent of the Party seeking indemnification. If, however, the
Party seeking indemnification refuses its consent to a bona fide offer of
settlement which the Indemnifying Party wishes to accept, the Party seeking
indemnification may continue to pursue such matter, free of any participation by
the Indemnifying Party, at the sole expense of the Party seeking
indemnification. In such event, the obligation of the Indemnifying Party to the
Party seeking indemnification shall be equal to the lesser of (i) the amount of
the offer of settlement which the Party seeking indemnification refused to
accept plus the costs and expenses of such Party prior to the date the
Indemnifying Party notifies the Party seeking indemnification of the offer of
settlement and (ii) the actual out-of-pocket amount the Party seeking
indemnification is obligated to pay as a result of such Party's continuing to
pursue such an offer. An Indemnifying Party shall be entitled to recover from
the Party seeking indemnification any additional expenses incurred by such
Indemnifying Party as a result of the decision of the Party seeking
indemnification to pursue such matter.
8. MISCELLANEOUS.
8.1. Costs. Each party shall bear its own costs associated with this
Agreement, the closing of this Agreement, and all ancillary or related measures,
including without limitation, costs of attorneys fees, accountants fees, filing
fees, or other costs or expenses, without right or recourse from the other.
Page 8 of 13
<PAGE>
8.2. Additional Documentation. The parties acknowledge that further
agreements and documents, in addition to the Exhibits appended hereto, may be
required in order to effect the transactions contemplated hereunder. Each party
agrees to provide and execute such other and further agreements or documentation
as, in the opinions of respective counsel, are reasonably necessary to effect
the transactions contemplated hereunder and to maintain regulatory and legal
compliance.
8.3. Captions and Headings. The article and paragraph headings throughout
this Agreement are for convenience and reference only and shall not define,
limit or add to the meaning of any provision of this Agreement.
8.4. No Oral Change. This Agreement and any provision hereof may not be
waived, changed, modified or discharged orally, but only by an agreement in
writing signed by the party against whom enforcement of any such waiver, change,
modification or discharge is sought.
8.5. Non-Waiver. The failure of any party to insist in any one or more
cases upon the performance of any of the provisions, covenants or conditions of
this Agreement or to exercise any option herein contained shall not be construed
as a waiver or relinquishment for the future of any such provisions, covenants
or conditions. No waiver by any party of one breach by another party shall be
construed as a waiver with respect to any subsequent breach.
8.6. Time of Essence. Time is of the essence of this Agreement and of each
and every provision.
8.7. Choice of Law. This Agreement and its application shall be governed by
the laws of the State of Nevada.
8.8. Counterparts and/or Facsimile Signature. This Agreement may be
executed in any number of counterparts, including counterparts transmitted by
telecopier or FAX, any one of which shall constitute an original of this
Agreement. When counterparts of facsimile copies have been executed by all
parties, they shall have the same effect as if the signatures to each
counterpart or copy were upon the same document and copies of such documents
shall be deemed valid as originals. The parties agree that all such signatures
may be transferred to a single document upon the request of any party.
8.9. Notices. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
on the date of service if served personally on the party to whom notice is to be
given, or on the third day after mailing if mailed to the party to whom notice
is to be given, by first class mail, registered or certified, postage prepaid,
and properly addressed as follows:
If to ZiaSun, addressed to it at:
Mr. Bryant D. Cragun, President
ZiaSun Technologies, Inc.
205 S. Helix, #68
Solana Beach, California 92075
Page 9 of 13
<PAGE>
With copy to Counsel, addressed to:
George G. Chachas, Esq.
Wenthur & Chachas
4180 La Jolla Village Drive
Suite 500
La Jolla, California 92037
If to Momentum Asia and the Shareholders, to them at:
Eric Montandon
Unit 13 B, New West
Kalayaan, Subic Bay
Freeport Zone, Philippines
With a copy to their Counsel, addressed to:
Alfredo Alex S. Cruz III
19 Kalinga Street, La Vista Subd.
Quezon City
8.10. Binding Effect. This Agreement shall inure to and be binding upon the
heirs, executors, personal representatives, successors and assigns of each of
the parties to this Agreement.
8.11. Mutual Cooperation. The parties hereto shall cooperate with each
other to achieve the purpose of this Agreement and shall execute such other and
further documents and take such other and further actions as may be necessary or
convenient to effect the transaction described herein.
8.12. Brokers. The parties hereto represent that no other broker has
brought about this Agreement, and no other finder's fee has been paid or is
payable by either party, except for the broker whose name is set forth on
Exhibit 8.12, and whose fee shall be paid by the Shareholders. Each party hereto
shall indemnify and hold the other harmless against any and all claims, losses,
liabilities or expenses which may be asserted against it as a result of its
dealings, arrangements or agreements with any other broker.
8.13. Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the parties set forth in this Agreement
or in any instrument, certificate, opinion or other writing provided for herein
shall survive the Closing.
Page 10 of 13
<PAGE>
AGREED AND ACCEPTED as of the date first above written.
ZIASUN TECHNOLOGIES, INC.
A Nevada Corporation
Dated: October 5, 1998 /S/ Bryant D. Cragun
-----------------------------------
By: Bryant D. Cragun
Its: President
Dated: October 5, 1998 /S/ Jennifer C. McMinn
-----------------------------------
By: Jennifer C. McMinn
Its: Secretary
MOMENTUM ASIA, INC.
Republic of the
Philippines Corporation
Dated: October 5, 1998 /S/ Eric Montandon
-----------------------------------
By: Eric Montandon
Its: President
Dated: October 26, 1998 /S/ Mark R. Bocobo
-----------------------------------
By: Mark R. Bocobo
Its: Secretary
SHAREHOLDERS OF MOMENTUM ASIA, INC., WHO WILL WARRANT THE REPRESENTATIONS
HEREIN:
/S/ Eric Montandon /S/ Paula Jane Mayers
- ----------------------------------- ----------------------------------
Eric Montandon Paula Jane Mayers
/S/ Mark R. Bocobo Alfredo Alex S. Cruz III
- ----------------------------------- ----------------------------------
Mark R. Bocobo Alfredo Alex S. Cruz III
/S/ Loranzo G. Formoso /S/ Eric Montandon
- ----------------------------------- ----------------------------------
Lorenzo G. Formoso III Momentum Media Ltd.
By: Eric Montandon
Its: Authorized Agent
Page 11 of 13
<PAGE>
NON-WARRANTING MOMENTUM ASIA, INC. SHAREHOLDER SIGNATURE PAGE for Acquisition
Agreement and Plan of Reorganization between ZiaSun Technologies, Inc., and the
Shareholders of Momentum Asia, Inc.
The undersigned shareholders of Momentum Asia hereby execute this Agreement
solely for the purpose of affirming the following and for no other purpose.
Delivery of Momentum Asia Stock.
Each Momentum Asia Shareholder signing hereto hereby agrees to sell,
assign, transfer and deliver and does hereby sell, assign, transfer and deliver
to ZiaSun, and ZiaSun agrees to acquire and accept from each Momentum Asia
Shareholder, upon the terms and conditions set forth in this Agreement,
complete, absolute and unencumbered right, title and interest in and to the
Momentum Asia Shares held by each Momentum Asia Shareholder.
Consideration.
The entire consideration to be paid to Momentum Asia Shareholders in
exchange for the transfer, assignment and deliver of the Momentum Asia Shares is
the common shares of the authorized but unissued capital stock of ZiaSun as
allocated on Schedule A to each shareholder.
Exchange of Shares.
At the Closing Date as defined in this Agreement, ZiaSun shall deliver to
the Momentum Asia Shareholders, in accordance with Schedule A, 2,000,000 shares
of the authorized but unissued Common Stock of ZiaSun (the "ZiaSun Shares"). The
exchange of shares contemplated by this Agreement is intended to result in a
tax-free reorganization within the meaning of Section 368(a)(1)(B) of the Code.
The Momentum Asia Shareholders agree to assist ZiaSun in adopting and filing any
documentation necessary to comply with the Code in order to preserve the
tax-free treatment of the within exchange of shares.
Investment Representation.
The Shares being acquired by the Momentum Asia Shareholders hereunder are
being acquired for investment purposes only and not with a view towards resale
or redistribution and no person or entity has any beneficial interest in such
shares except the Momentum Asia Shareholders. The Shares being acquired have not
been registered under the Securities Act of 1933 as amended (the "Securities
Act"), are restricted securities and the Momentum Asia Shareholders acknowledge
and agree that they may not sell, offer, transfer, hypothecate or convey such
shares except pursuant to a registration statement pursuant to the Securities
Act or an exemption therefrom. Such shares shall be issued with the following
legend and shall be subject to a stock transfer order delivered by the Company
to the transfer agent, such legend to be as follows:
Page 12 of 13
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION FOR THESE SHARES UNDER SUCH ACT OR AN
OPINION OF THE COMPANY'S COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER SAID ACT.
Dated: ________________________ ___________________________
Signature of Non-Warranting
Momentum Asia, Inc.
Shareholder
Page 13 of 13
<PAGE>
SCHEDULE A
LIST OF MOMENTUM ASIA SHAREHOLDERS
Shareholder Number of Number of
Name and Address Momentum Asia Shares ZiaSun Shares
- --------------------------------------------------------------------------------
Eric Montandon 1 2
59-D Sword Fish, New West
Kalayaan, Subic Bay Freeport Zone
Philippines
Paula Jane Mayers 1 2
72-05 Timothy Street
Sunset Valley Mansions, Angeles City
Mark R. Bocobo 1 2
3 Libra Street, Bel-Air Village
Quezon City
Alfredo Alex S. Cruz III 1 2
19 Kalinga Street, La Vista Subd.
Quezon City
Lorenzo G. Formoso 1 2
35-B Scout, Fuentebella St.
Quezon, City
Momentum Media Ltd......... 999,995 1,999,990
Rm. 304, Dominion Centre
43 Queens Road East
Wanchai, Hong Kong
- --------------------------------------------------------------------------------
Total 1,000,000 2,000,000
<PAGE>
EXHIBIT 1.2
INVESTMENT LETTER
- --------------------------------------------------------------------------------
Mr. Bryant D. Cragun
ZiaSun Technologies, Inc.
205 S. Helix, #68
Solana Beach, CA 92075
Re: INVESTMENT LETTER
Gentlemen:
The undersigned having acquired by a stock-for-stock exchange a certain
amount of the total 2,000,000 restricted and unregistered shares of Common
Stock, $0.001 par value per share (the "Securities") of ZiaSun Technologies,
Inc., a Nevada Corporation, (the "Company"), hereby represents to the Company
that:
1. The Securities which are being acquired by the undersigned are being
acquired for the undersigned's own account and for investment and not with a
view to the public resale or distribution thereof.
2. The undersigned will not sell, transfer or otherwise dispose of the
Securities unless, in the opinion of the Company's counsel, such disposition
conforms with applicable securities laws requirements.
3. The undersigned is aware that the Securities are "restricted securities"
as that term is defined in Rule 144 (the "Rule") promulgated under the
Securities Act of 1933, as amended (the "Act").
4. The undersigned acknowledges that the undersigned has had an opportunity
to ask questions of and receive answers from duly designated representatives of
the Company concerning the finances of the Company and the proposed business
plan of the Company.
5. The undersigned acknowledges and understands that the Securities are
unregistered and must be held indefinitely unless they are subsequently
registered under the Act or an exemption from such registration is available.
6. The undersigned further acknowledges that the undersigned is fully aware
of the applicable limitations on the resale of the Securities. These
restrictions for the most part are set forth in Rule 144 (the "Rule"). The Rule
permits sales of "restricted securities" upon compliance with the requirements
of such Rule. If and when the Rule is available to the undersigned, the
undersigned may make only sales of the Securities in accordance with the terms
and conditions of the rule (which may limit the amount of Securities that may be
sold).
<PAGE>
Investment Letter
Page 2 of 2
- --------------------------------------------------------------------------------
7. By reason of the undersigned's knowledge and experience in financial and
business matters in general, and investments in particular, the undersigned is
capable of evaluating the merits and risks of an investment by the undersigned
in the Securities.
8. The undersigned is capable of bearing the economic risks of an
investment in the Securities. The undersigned fully understands the speculative
nature of the Securities and the possibility of loss.
9. The undersigned's present financial condition is such that the
undersigned is under no present or contemplated future need to dispose of any
portion of the Securities to satisfy any existing or contemplated undertaking,
need, or indebtedness.
10. Any and all certificates representing the Securities, and any and all
securities issued in replacement thereof or in exchange therefor, shall bear the
following restrictive legend.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION FOR THESE SHARES UNDER SUCH ACT OR AN
OPINION OF THE COMPANY'S COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER SAID ACT.
11. The undersigned further agrees that the Company shall have the right to
issue stop-transfer instructions to its transfer agent until such time as sale
is permitted under Security Laws and acknowledges that the Company has informed
the undersigned of its intention to issue such instructions.
Very truly yours,
----------------------------------
Undersigned
Date: ____________________________
----------------------------------
Address
----------------------------------
Social Security Number
<PAGE>
EXHIBIT 2.4
SUBSIDIARIES OF MOMENTUM ASIA
- -------------------------------------------------------------------------------
NONE
<PAGE>
EXHIBIT 2.5
PRESENT OFFICERS AND DIRECTORS MOMENTUM ASIA
- -------------------------------------------------------------------------------
OFFICERS
- --------
CEO and President .............................. Eric Montandon
Chief Financial Officer ........................ Mark R. Bocobo
Secretary ...................................... Mark R. Bocobo
Assistant Secretary............................. Alfredo Alex S. Cruz III
DIRECTORS
- ---------
Eric Montandon
Paula Jane Mayers
Mark R. Bocobo
Alfredo Alex S. Cruz III
Lorenzo G. Formoso III
<PAGE>
EXHIBIT 2.6
AUDITED FINANCIAL STATEMENTS MOMENTUM ASIA
As of December 31, 1997 and 1996
<PAGE>
MOMENTUM ASIA, INC.
(Formerly New Age Publications, Inc.)
FINANCIAL STATEMENTS
December 31, 1997 and 1996
C O N T E N T S
Independent Auditors' Report............................................ 3
Balance Sheet........................................................... 4
Statements of Operations................................................ 6
Statements of Stockholders' Equity...................................... 7
Statements of Cash Flows................................................ 8
Notes of the Financial Statements....................................... 9
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Momentum Asia, Inc.
(Formerly New Age Publications, Inc.)
Subic Bay, Phillippines
We have audited the accompanying balance sheet of Momentum Asia, Inc. (formerly
New Age Publications, Inc.) as of December 31, 1997 and the related statements
of operations, stockholders' equity, and cash flows for the years ended December
31, 1997 and 1996. 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 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 Momentum Asia, Inc. (formerly
New Age Publications, Inc.) as of December 31, 1997 and the results of its
operations and its cash flows for the years ended December 31, 1997 and 1996 in
conformity with generally accepted accounting principles.
Jones, Jensen & Company
Salt Lake City, Utah
August 19, 1998
<PAGE>
MOMENTUM ASIA, INC.
(Formerly New Age Publications, Inc.)
Balance Sheet
<TABLE>
<CAPTION>
ASSETS
December 31,
-------------
1997
-------------
<S> <C>
CURRENT ASSETS
Cash $ 22,011
Accounts receivable, net (Note 2) 28,831
Inventory (Note 2) 3,755
-------------
Total Current Assets 54,597
EQUIPMENT (Note 2)
Printing equipment 297,271
Machinery and equipment 17,890
Office equipment 54,324
Vehicles 22,005
Leasehold improvements 35,729
Less: accumulated depreciation (109,754)
-------------
Total Equipment 317,465
OTHER ASSETS
Other assets (Note 3) 546,123
-------------
Total Other Assets 546,123
TOTAL ASSETS $ 918,185
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
MOMENTUM ASIA, INC.
(Formerly New Age Publications, Inc.)
Balance Sheet (Continued)
LIABILITIES
<TABLE>
<CAPTION>
ASSETS
December 31,
-------------
1998
-------------
<S> <C>
CURRENT LIABILITIES
Accounts payable $ 69,198
Accrued expenses 41,031
-------------
Total Current Liabilities 110,229
TOTAL LIABILITIES 110,229
COMMITMENTS AND CONTINGENCIES (Note 4)
STOCKHOLDERS' EQUITY
Common stock, par value $0.038; 1,000,000
shares authorized; 25,000 shares issued
and outstanding 953
Additional paid-in capital 785,912
Currency translation adjustment 41,761
Accumulated deficit (20,670)
-------------
Total Stockholders' Equity 807,956
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 918,185
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
MOMENTUM ASIA, INC.
(Formerly New Age Publications, Inc.)
Statements of Operations
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------------
1997 1996
------------- -------------
<S> <C> <C>
SALES, NET $ 884,764 $ 565,097
COST OF GOODS SOLD 552,210 311,588
------------- -------------
Gross Profit 332,554 253,509
------------- -------------
OPERATING EXPENSES
Depreciation expense 49,200 40,518
General and administrative 202,035 331,278
------------- -------------
Total Operating Expenses 251,235 371,796
------------- -------------
Income (Loss) from Operations 81,319 (118,287)
------------- -------------
OTHER INCOME (EXPENSE)
Unrealized gain on trading securities 18,297 -
Rental income 70,688 -
Interest income 350 803
Bad debt expense (27,796) (14,466)
Loss on sale of assets (707) -
------------- -------------
Total Other Income (Expense) 60,832 (13,663)
------------- -------------
INCOME (LOSS) BEFORE INCOME TAXES 142,151 (131,950)
INCOME TAXES (Note 5) 605 -
------------- -------------
NET INCOME (LOSS) $ 141,546 $ (131,950)
============= =============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 25,000 25,000
============= =============
PRIMARY INCOME (LOSS) PER SHARE $ 5.66 $ (5.28)
============= =============
FULLY DILUTED INCOME (LOSS) PER SHARE $ 5.66 $ (5.28)
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
MOMENTUM ASIA, INC.
(Formerly New Age Publications, Inc.)
Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock Additional Currency
-------------------------------- Paid-In Transaction Accumulated
Shares Amount Capital adjustment Deficit
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 25,000 $ 953 $ 298,388 $ 11 $ (30,266)
Contribution of capital by shareholder - - 402,425 - -
Currency translation adjustment - - - 34,017 -
Net loss for the year ended
December 31, 1996 - - - - (131,950)
----------------------------------------------------------------------------------------
Balance, December 31, 1996 25,000 953 700,813 34,028 (162,216)
Contribution of capital by shareholder - - 85,099 - -
Currency translation adjustment - - - 7,733 -
Net income for the year ended
December 31, 1997 - - - - 141,546
----------------------------------------------------------------------------------------
Balance, December 31, 1997 25,000 $ 953 $ 785,912 $ 41,761 $ (20,670)
========================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
MOMENTUM ASIA, INC.
(Formerly New Age Publications, Inc.)
Statements of Cash Flows
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------------
1997 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (income) loss $ 141,546 $ (131,950)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation 49,200 40,518
Allowance for bad debts 27,796 14,466
Gain on securities held for sale (18,297) -
Loss on sale of assets 707 -
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 5,970 (58,748)
(Increase) decrease in inventory - 2,315
(Increase) decrease in other assets (332,694) -
Increase (decrease) in accounts payable 46,875 11,901
Increase (decrease) in accrued expenses 41,031 -
------------- -------------
Net Cash Used in Operating Activities (37,866) (121,498)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (47,943) (22,771)
------------- -------------
Net Cash Used in Investing Activities (47,943) (22,771)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contribution of capital by shareholder - 200,000
------------- -------------
Net Cash Provided by Financing Activities - 200,000
------------- -------------
NET INCREASE (DECREASE) IN CASH (85,809) 55,731
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 107,820 52,089
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 22,011 $ 107,820
============= =============
Cash Paid For:
Interest $ - $ -
Income taxes $ 605 $ -
Schedule of Non-Cash Financing Activities:
Contribution of capital $ 85,099 $ 202,425
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
MOMENTUM ASIA, INC.
(Formerly New Age Publications, Inc.)
Notes to the Financial Statements
December 31, 1997 and 1996
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
The financial statements presented are those of Momentum Asia, Inc.
(formerly New Age Publications, Inc.) (the Company). The Company was
incorporated in Manila, Phillippines on September 6, 1994 to carry on any
lawful activity under the laws of the Phillippines. On June 17, 1998, New
Age Publications, Inc. changed its name to Momentum Asia, Inc.
The Company is in the business of providing design printing and marketing
support services.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected a December 31 year end.
b. Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less to be cash equivalents.
c. Inventory
Inventories of raw materials are stated at the lower of cost or market. The
cost of the inventory includes the purchase price and direct costs such as
freight-in.
d. Accounts Receivable
Accounts receivable are shown net of the allowance for doubtful accounts.
The allowance was $24,141 and $8,697 at December 31, 1997 and 1996,
respectively.
e. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financials statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
The accompanying notes are an integral part of these consolidated financial
statements.
9
<PAGE>
MOMENTUM ASIA, INC.
(Formerly New Age Publications, Inc.)
Notes to the Financial Statements
December 31, 1997 and 1996
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTANT POLICIES (Continued)
f. Equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful life or lease term of
the related asset. Estimated useful lives are as follows:
Printing equipment 7 years
Machinery and equipment 5 years
Office equipment 5 years
Vehicles 10 years
Leasehold improvements 5 years
g. Marketable Securities
The Company has classified its marketable equity securities as "trading"
securities. Trading securities are stated at fair value. Realized and
unrealized gains and losses are included in other income.
Trading securities at December 31, 1997 and 1996 were $33,260 and -0-
respectively, and have been included in other assets.
h. Foreign Operations
The Company currently conducts printing and telemarketing activities in the
Philippines, a country with a developing economy. The Philippines have
experienced recently, or are experiencing currently, economic or political
instability. Hyperinflation, volatile exchange rates and rapid political
and legal change, often accompanied by military insurrection, have been
common in this and certain other emerging markets in which the Company may
conduct operations. The Company may be materially adversely affected by
possible political or economic instability in any one or more of those
countries. The risks include, but are not limited to terrorism, military
repression, expropriation, changing fiscal regimes, extreme fluctuations in
currency exchange rates, high rates of inflation and the absence of
industrial and economic infrastructure. Changes in investment policies or
shifts in the prevailing political climate in any of the countries in which
the Company conducts exploration and development activities could adversely
affect the Company's business. Operations may be affected in varying
degrees by government regulations with respect to production restrictions,
price controls, export controls, income and other taxes, expropriation of
property, maintenance of claims, environmental legislation, labor, welfare
benefit policies, land use, land claims of local residents, water use and
mine safety. The effect of these factors cannot be accurately predicted.
10
<PAGE>
MOMENTUM ASIA, INC.
(Formerly New Age Publications, Inc.)
Notes to the Financial Statements
December 31, 1997 and 1996
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTANT POLICIES (Continued)
i. Foreign Currency Translation
Monetary assets and liabilities denominated in foreign currencies are
translated into United States dollars at the period and exchange rate.
Non-monetary assets are translated at the historical exchange rate and all
income and expenses are translated at the exchange rates prevailing during
the period. Foreign exchange currency translation adjustments are included
in the stockholders' equity section.
j. Fair Value of Financial Instruments
As at December 31, 1997, the fair value of cash, accounts receivable and
accounts and advances payable including amounts due to and from related
parties, approximate carrying values because of the short-term maturity of
these instruments.
k. Advertising
Advertising costs are expensed as incurred.
NOTE 3 - OTHER ASSETS
Other assets consisted of the following at December 31, 1997:
Membership in the Subic Bay Yacht Club $ 43,956
Prepaid rental deposits 24,978
Land held for resale 250,000
Membership in the Mimosa Golf Club 98,901
Motorcycles held for sale 95,028
Common stock held for sale 33,260
-------------
$ 546,123
NOTE 4 - COMMITMENTS AND CONTINGENCIES
The Company currently leases its office space on a month-to-month basis.
Rent expense for the years ended December 31, 1997 and 1996 was $58,338 and
$39,319, respectively.
11
<PAGE>
MOMENTUM ASIA, INC.
(Formerly New Age Publications, Inc.)
Notes to the Financial Statements
December 31, 1997 and 1996
NOTE 5 - INCOME TAXES
For the years ended December 31, 1997 and 1996, income taxes were as
follows:
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------------
1997 1996
------------- -------------
<S> <C> <C>
Net income earned in the Phillippines -
subject to tax $ 12,100 $ 39,491
Net income (loss) not subject to taxation
jurisdictions 129,446 (171,441)
------------- -------------
Total Net Income (Loss) $ 141,546 $ (131,950)
============= =============
Income tax due $ 605 $ 1,975
Income tax paid at 5% (605) -
Carryforward credits applied - (1,975)
------------- -------------
Net Tax Due $ - $ -
============= =============
</TABLE>
12
<PAGE>
EXHIBIT 2.8
LIABILITIES OF MOMENTUM ASIA
- -------------------------------------------------------------------------------
See Financial Statements set forth in Exhibit 2.6
<PAGE>
EXHIBIT 2.12
MOMENTUM ASIA LITIGATION AND LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
NONE
<PAGE>
EXHIBIT 2.16
EXCEPTIONS TO GOOD TITLE TO ASSETS OF MOMENTUM ASIA
- --------------------------------------------------------------------------------
NONE
<PAGE>
EXHIBIT 2.17
MATERIAL CONTRACTS OF MOMENTUM ASIA
- --------------------------------------------------------------------------------
(1) See copy of Loan Agreement between Momentum Asia, Inc., (formerly
New Age Publications, Inc.) and Touchstone Transport Services, Inc.,
attached hereto.
(2) See copy of Real Estate Mortgage between Momentum Asia, Inc.,
(formerly New Age Publications, Inc.) and Touchstone Transport
Services, Inc., attached hereto.
(3) See copy of the Appraisal of Property for Property of Momentum Asia
located at various locations in the Philippines.
(4) See copy of Appraisal of Property relating to Property of Touchstone
Transport Services, Inc.
(5) Loan Agreement evidencing $100,000 loan by Momentum Asia, Inc. to
Vulcan Consultants Limited (Not attached).
<PAGE>
EXHIBIT 3.5
SUBSIDIARIES OF ZIASUN
- -------------------------------------------------------------------------------
1. Best Way Beverages, Inc., a Nevada Corporation is a wholly
owned subsidiary of ZiaSun Technologies, Inc. Best Way
Beverages, Inc., holds a license from Fountain Fresh
International, Inc., under which Best Way will market , sell
and distribute the Beverage Center Equipment developed by
Fountain Fresh which is used to dispense Fountain Fresh
Beverages and purified water. The Beverage Center Equipment is
a patented in-store, self service, pressure fill, mini
bottling plant/beverage center.
2. Upon the completion of the pending acquisition of Momentum
Internet Incorporation, a Corporation formed under the laws of
the Bristish Virgin Islands, Momentum Internet Incorporation
will become a wholly owned subsidiary of ZiaSun Technologies,
Inc. Momentum Internet Incorporated is, among other things, in
the Financial Internet Website publication business wherein
subscribers can received financial news, stock quotes and
market information about various companies.
<PAGE>
EXHIBIT 3.6
PRESENT OFFICES AND DIRECTORS OF ZIASUN
- --------------------------------------------------------------------------------
OFFICERS
- --------
CEO and President .................................. Bryant D. Cragun
Vice President .................................... Lynn Briggs
Vice President of Operations ...................... Allen D. Hardman
Chief Financial Officer ........................... Jennifer C. McMinn
Secretary ......................................... Jennifer C. McMinn
DIRECTORS
- ---------
Bryant D. Cragun
Lynn Briggs
Jennifer C. McMinn
<PAGE>
EXHIBIT 3.13
EXCEPTIONS TO GOOD TITLE TO ASSETS OF ZIASUN
- --------------------------------------------------------------------------------
NONE
<PAGE>
EXHIBIT 5.2.3
POST CLOSING OFFICERS AND DIRECTORS
- --------------------------------------------------------------------------------
OFFICERS
- --------
CEO and President .................................. Eric Montandon
Chief Financial Officer ............................ Mark R. Bocobo
Secretary .......................................... Mark R. Bocobo
Assistant Secretary................................. Alfredo Alex S. Cruz III
DIRECTORS
- ---------
Eric Montandon
Paula Jane Mayers
Mark R. Bocobo
Alfredo Alex S. Cruz III
Lorenzo G. Formoso III
<PAGE>
EXHIBIT 8.12
BROKERS
- --------------------------------------------------------------------------------
With the exception of the shares issued to the Shareholders of Momentum Internet
as set forth herein, no brokerage of finders fees in the form of cash or
securities were paid to any party or person in connection with the acquisition.
ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
ZiaSun Technologies, Inc.
A Nevada Corporation
ACQUISITION OF SHARES OF
Asia4sale.com, Ltd.
A Hong Kong Registered Company
Dated: March 25, 1999
<PAGE>
Table of Contents Page
- --------------------------------------------------------------------------------
1 EXCHANGE OF SECURITIES .......................................... 1
1.1 Exchange of Shares ..................................... 1
1.2 Acquisition Consideration .............................. 1
1.3 Payment of Acquisition Consideration ................... 2
1.4 Calculation of Actual Asia4sale.com Earnings.......... 2
1.5 Adjustment Based on Actual Asia4sale.com Earnings..... 2
1.6 Exemption from Registration............................. 3
1.7 Non-taxable Transaction................................. 3
2. REPRESENTATION AND WARRANTIES OF Asia4sale.COM AND THE
SHAREHOLDERS .................................................... 3
2.1 Organization ........................................... 3
2.2 Capital Stock .......................................... 3
2.3 Options, Warrants, Rights, etc. ........................ 3
2.4 Subsidiaries ........................................... 3
2.5 Directors and Officers.................................. 3
2.6 Financial Statements.................................... 3
2.7 Absence of Changes...................................... 4
2.8 Absence of Undisclosed Liabilities...................... 4
2.9 Tax Returns............................................. 4
2.10 Patents, Trade Names and Rights......................... 4
2.11 Compliance with Laws.................................... 4
2.12 Litigation.............................................. 4
2.13 Authority............................................... 5
2.14 Ability to Carry Out Obligations........................ 5
2.15 Full Disclosure......................................... 5
2.16 Assets................................................... 5
2.17 Material Contracts...................................... 5
3. REPRESENTATIONS AND WARRANTIES OF ZIASUN ........................ 5
3.1 Organization............................................ 5
3.2 Capital Stock........................................... 5
3.3 Options, Warrants, Rights, etc. ........................ 6
3.4 Non-Reporting Publicly Traded Status ................... 6
3.5 Subsidiaries ........................................... 6
3.6 Directors and Officers ................................. 6
3.7 Patents, Trade Names and Rights......................... 6
3.8 Compliance with Laws.................................... 6
3.9 Litigation.............................................. 6
3.10 Authority............................................... 6
3.11 Ability to Carry Out Obligations........................ 7
3.12 Full Disclosure......................................... 7
3.13 Assets.................................................. 7
4. COVENANTS........................................................ 7
4.1 Investigative Rights.................................... 7
4.2 Conduct of Business..................................... 7
<PAGE>
Table of Contents(continued) Page
- --------------------------------------------------------------------------------
5. CLOSING ..................................................... 7
5.1 Closing............................................... 7
5.2 Shareholders' Deliveries at Closing................... 7
5.3 ZiaSun's Deliveries at Closing........................ 8
6 CONDITIONS TO OBLIGATIONS TO CLOSE............................ 8
6.1 Conditions to Obligations of Asia4sale.com
Shareholders to Close................................. 8
6.2 Conditions to Obligations of ZiaSun .................. 8
7. INDEMNIFICATION................................................. 8
7.1 Indemnification by Shareholders....................... 8
7.2 Indemnification by ZiaSun ............................ 9
7.3 Notice and Opportunity to Defend...................... 9
8. MISCELLANEOUS.................................................. 10
8.1 Costs................................................. 10
8.2 Additional Documentation.............................. 10
8.3 Captions and Headings................................. 10
8.4 No Oral Change........................................ 10
8.5 Non-Waiver............................................ 10
8.6 Time of Essence....................................... 10
8.7 Choice of Law......................................... 10
8.8 Counterparts and/or Facsimile Signature............... 10
8.9 Notices............................................... 10
8.10 Binding Effect........................................ 11
8.11 Mutual Cooperation.................................... 11
8.12 Brokers............................................... 11
8.13 Survival of Representations and Warranties............ 11
Signature Pages ...................................... 12
EXHIBIT 1.2(a)....CASH DISTRIBUTED TO THE Asia4sale.COM
SHAREHOLDERS AT CLOSING
EXHIBIT 1.3.1.....SHARES TO BE ISSUED TO Asia4sale.COM
SHAREHOLDERS AT CLOSING
EXHIBIT 1.6.......INVESTMENT LETTER
EXHIBIT 2.4.......SUBSIDIARIES OF Asia4sale.COM
EXHIBIT 2.5.......PRESENT OFFICERS AND DIRECTORS OF Asia4sale.COM
EXHIBIT 2.6.......AUDITED FINANCIAL STATEMENTS OF Asia4sale.COM
EXHIBIT 2.8.......LIABILITIES OF Asia4sale.COM
EXHIBIT 2.12......Asia4sale.COM LITIGATION AND LEGAL PROCEEDINGS
ii
<PAGE>
Table of Contents (continued) Page
- --------------------------------------------------------------------------------
EXHIBIT 2.16......EXCEPTIONS TO GOOD TITLE TO ASSETS
OF Asia4sale.COM
EXHIBIT 2.17......MATERIAL CONTRACTS OF Asia4sale.COM
EXHIBIT 3.5...... SUBSIDIARIES OF ZIASUN
EXHIBIT 3.6...... PRESENT OFFICERS AND DIRECTORS OF ZIASUN
EXHIBIT 3.13......EXCEPTIONS TO GOOD TITLE TO ASSETS OF ZIASUN
EXHIBIT 5.2.3.....POST CLOSING OFFICERS AND DIRECTORS OF
Asia4sale.COM
EXHIBIT 8.12......BROKERS
iii
<PAGE>
AGREEMENT
This Acquisition Agreement and Plan of Reorganization (the "Agreement" or
"Acquisition Agreement") made this 25th day of March, 1999, is by and among
ZiaSun Technologies, Inc., a Nevada Corporation ("ZiaSun") and the undersigned
shareholders (the "Shareholders") who are the owners of 100% of the capital
stock of Asia4sale.com, Ltd., a corporation organized and existing under the
laws of Hong Kong ("Asia4sale.com").
A. Whereas, Shareholders hold all of the issued and outstanding common
stock of Asia4sale.com; and
B. Whereas, ZiaSun, a non-reporting public company, desires to exchange
shares of its Common Stock, $0.001 par value (the "Common Stock") for all of the
issued and outstanding capital stock of Asia4sale.com held by the
Shareholders, thereby making Asia4sale.com a wholly owned subsidiary of
ZiaSun; and
C. Whereas, Shareholders desire to exchange all of the issued and
outstanding capital stock of Asia4sale.com for acquisition consideration
consisting of $15,000.00 and 50,000 shares of the common stock of ZiaSun, as
adjusted and determined pursuant to the terms of this agreement, all as more
fully set forth herein below; and
D. Whereas, the Board of Directors of ZiaSun has authorized its proper
corporate officers to effect the transactions contemplated herein.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree to the following terms
and conditions:
1. EXCHANGE OF SECURITIES.
1.1. Exchange of Shares. Subject to all the terms and conditions set forth
in this Agreement, in exchange for the acquisition consideration (the
"Acquisition Consideration"), as set forth in paragraph 1.2 hereof, paid by
ZiaSun to the Shareholders of Asia4sale.com, ZiaSun shall acquire all of the
issued and outstanding capital stock of Asia4sale.com (the "Asia4sale.com
Shareholders") owned by the Shareholders of Asia4sale.com.
1.2. Acquisition Consideration. The total Acquisition Consideration to be
paid by ZiaSun for the Asia4sale.com Shares shall be equal to: (a) Cash in the
amount of $15,000 distributed prorata to the Asia4sale.com Shareholders as set
forth in Exhibit 1.2(a) attached hereto, (b) 50,000 shares of the previously
authorized but unissued unregistered and restricted shares of the Common Stock,
$0.001 par value per shares of ZiaSun (the "ZiaSun Shares"), and (c) one (1)
additional ZiaSun Share for each Two dollars ($2.00) of actual earnings of
Asia4sale.com ("Actual Asia4sale.com Earnings") for the period from April 1,
1999 through September 31, 2000 (the "Earnings Period"). The Acquisition
Consideration shall be adjusted as determined pursuant to paragraph 1.6 of this
Agreement. In addition, concurrently with the Closing, ZiaSun agrees to make a
loan to Asidforale.com in the principal amount of $50,000. Said loan shall bear
interest at the rate of 6.0% per annum the principal and unpaid accrued interest
due and payable in one year.
Page 1
<PAGE>
1.3 Payment of Acquisition Consideration. The Acquisition Consideration
shall be paid and delivered as follows:
1.3.1 Upon the Closing as set forth in paragraph 5.1, 50,000 ZiaSun
Shares shall be issued and delivered to the Asia4sale.com Shareholders as
set forth in Exhibit 1.3.1; and
1.3.2 $15,000 payable prorata to the Asia4sale.com Shareholders as
set forth in Exhibit 1.3.2.
1.4 Calculation of Actual Asia4sale.com Earnings. For the purpose of this
Agreement, Actual Asia4sale.com Earnings for the Earnings Period shall be
calculated based on EBITDA determine in accordance with general accepted
accounting principals. Actual Asia4sale.com Earnings shall mean the total
gross sales of Asia4sale.com less the costs of sales, less general
administrative expenses before interest, taxes, depreciation and amortization.
As soon as practicable, but in no event later than ninety (90) days following
the end of the Earnings Period, the independent auditors of ZiaSun shall
calculate the Actual Asia4sale.com Earnings for the Earnings Period. In the
event that the parties disagree on the determination of the Actual
Asia4sale.com Earnings, then ZiaSun, on the one hand, shall designate one (1)
independent auditor, at its expense and the Asia4sale.com Shareholders
collectively as a group, on the second hand, shall designate one (1) independent
auditor, at its expense. The two designated independent auditors, shall choose a
third independent auditor, at the joint expense of the parties. In no event
shall there be more than three (3) independent auditors. Each independent
auditor shall make a determination of the Actual Asia4sale.com Earnings during
the Earnings Period. If a majority of the independent auditors concur on the
Actual Asia4sale.com Earnings during the Earnings Period that value shall be
binding and conclusive. If a majority of the independent auditors do not concur,
then the determination of the independent auditor whose appraisal is neither the
highest nor lowest shall be binding and conclusive.
1.5 Adjustment Based on Actual Asia4sale.com Earnings. Adjustments based
on the Actual Asia4sale.com Earnings shall be made as follows:
(a) Increase Adjustment. For each $2.00 of Actual lAsia4sale Earnings
during the Earnings Period, ZiaSun shall issue an aggregate of one (1)
additional share of restricted common stock to be distributed prorata to the
Asia4sale.com Shareholders as set forth on Exhibit 1.3.1.
(b) Fractional Shares. No fractional shares shall be issued and all
fractions shall be rounded down to the next whole share.
Page 2
<PAGE>
1.6 Exemption from Registration. The parties hereto intend that the ZiaSun
Shares to be exchanged shall be exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Act"), pursuant to Section 4(2) of the
Act and the rules and regulations promulgated thereunder and exempt from the
registration requirements of the applicable states. In furtherance thereof,
Shareholders will execute and deliver to ZiaSun on the closing date, investment
letters suitable to legal counsel for ZiaSun, in form substantially as set forth
in Exhibit 1.6 attached hereto.
1.7 Non-taxable Transaction. The parties intend to effect this transaction
as a non-taxable reorganization pursuant to Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended.
2. REPRESENTATIONS AND WARRANTIES OF Asia4sale.COM AND THE SHAREHOLDERS.
The Officers and Directors of Asia4sale.com and certain Shareholders (the
"Warranting Shareholders") hereby represent and warrant to ZiaSun that:
2.1 Organization. Asia4sale.com is a corporation duly organized, validly
existing and in good standing under the laws of Hong Kong, and has all necessary
corporate powers to own its properties and to carry on its business as now owned
and operated by it, and is duly qualified to do business and is in good standing
in each of the countries where its business requires qualification.
2.2 Capital Stock. The authorized capital stock of Asia4sale.com consists
of 10,000 ordinary shares, HK$1.00 par value per share, of which 100 shares are
issued and outstanding. Immediately prior to closing there shall be 100
Asia4sale.com Shares issued and outstanding all of which are owned by the
Shareholders. All of the issued and outstanding shares of capital stock of
Asia4sale.com are duly and validly issued, fully paid and nonassessable. There
are no other authorized class of capital stock.
2.3 Options, Warrants, Rights, etc. There are no outstanding subscriptions,
options, rights, warrants, debentures, instruments, convertible securities or
other agreements or commitments obligating Asia4sale.com to issue or to
transfer from treasury any additional shares of its capital stock of any class.
2.4 Subsidiaries. Asia4sale.com has no subsidiaries and owns no interest
in other enterprises except as set forth on Exhibit 2.4 attached hereto.
2.5 Directors and Officers. Exhibit 2.5 hereto contains the names and
titles of all present officers and directors Asia4sale.com as of the date of
this Agreement.
2.6 Financial Statements. Within sixty (60) days of the Close of the
acquisition contemplated by this agreement, Asia4sale.com will provide audited
financial statements to ZiaSun, which financial statements will be prepared in
accordance with generally accepted accounting principles and practices
consistently followed by Asia4sale.com throughout the periods indicated, and
will fairly present the financial position of Asia4sale.com as of the dates of
the balance sheets included in the financial statements and the results of
operations for the periods indicated.
Page 3
<PAGE>
2.7 Absence of Changes. The financial statements which will be provided
pursuant to paragraph 2.6, will reflect that since the date of said financial
statements, there has not been any change in the financial condition or
operations of Asia4sale.com, except for changes in the ordinary course of
business, which changes have not, in the aggregate, been materially adverse.
2.8 Absence of Undisclosed Liabilities. Except as set forth on Exhibit 2.8
attached hereto, Asia4sale.com does not have any material debt, liability or
obligation of any nature, whether accrued, absolute, contingent or otherwise,
and whether due or to become due, that will not be reflected in the balance
sheet of Asia4sale.com included in the financial statements to be provided
pursuant to paragraph 2.6.
2.9 Tax Returns. Within the times and in the manner prescribed by law,
Asia4sale.com has filed all tax returns in all countries where it is bound by
law to pay taxes, including, but not limited to any U.S. federal, state and
local tax returns as required by U.S. law. Asia4sale.com has paid all taxes,
assessments and penalties due and payable. The provisions for taxes, if any
reflected in the Exhibits are adequate for the periods indicated. There are no
present disputes as to taxes of any nature payable by Asia4sale.com.
2.10 Patents, Trade Names and Rights. To the best of its knowledge
Asia4sale.com and its subsidiaries (if any) own and hold all necessary
patents, franchise rights, trademarks, service marks, trade names, inventions,
processes, know-how, trade secrets, copyrights, licenses and other rights
necessary to its business, and the business of its subsidiaries as now conducted
or proposed to be conducted. Asia4sale.com and its subsidiaries are not
infringing upon or otherwise acting adversely to the right or claimed right of
any person with respect to any of the foregoing.
2.11 Compliance with Laws. Asia4sale.com and each of its subsidiaries
have complied with, and are not in violation of any laws or regulations in any
of the countries in which they do business. This includes, but is not limited
to, any applicable U.S. federal, state or local statutes, laws and regulations
(including, without limitation, any applicable building, zoning or other law,
ordinance or regulation) affecting its properties or the operation of its
business.
2.12 Litigation. Except as set forth in Exhibit 2.12 attached hereto,
neither Asia4sale.com or any of its subsidiaries is a defendant to any suit,
action, arbitration or legal, administrative or other proceeding, or
governmental investigation which is pending or, to the best knowledge of the
Shareholders, threatened against or affecting Asia4sale.com or its
subsidiaries or their business, assets or financial condition. Asia4sale.com
and its subsidiaries are not in default with respect to any order, writ,
injunction or decree of any federal, state, local or foreign court, department,
agency or instrumentality applicable to it. Asia4sale.com and its subsidiaries
are not engaged in any material lawsuits to recover moneys due it.
Page 4
<PAGE>
2.13 Authority. The Board of Directors of Asia4sale.com has authorized
the execution of this Agreement and the consummation of the transactions
contemplated herein, and Asia4sale.com has full power and authority to
execute, deliver and perform this Agreement, and this Agreement is a legal,
valid and binding obligation of the Shareholders and is enforceable in
accordance with its terms and conditions.
2.14 Ability to Carry Out Obligations. The execution and delivery of this
Agreement by the Shareholders and the performance by the Shareholders of their
obligations hereunder in the time and manner contemplated will not cause,
constitute or conflict with or result in (a) any breach or violation of any of
the provisions of or constitute a default under any license, indenture,
mortgage, instrument, article of incorporation, bylaw, or other agreement or
instrument to which Asia4sale.com is a party, or by which it may be bound, nor
will any consents or authorizations of any party to the Shareholders'
performance of their obligations hereunder be required; (b) an event that would
permit any party to any agreement or instrument to terminate it or to accelerate
the maturity of any indebtedness or other obligation of Asia4sale.com; or (c)
an event that would result in the creation or imposition of any lien, charge or
encumbrance on any asset of Asia4sale.com.
2.15 Full Disclosure. None of the representations and warranties made by
Asia4sale.com, its officers, directors of the Shareholder herein or in any
exhibit, certificate or memorandum furnished or to be furnished by the
Shareholders, or on their behalf, contain or will contain any untrue statement
of material fact or omit any material fact the omission of which would be
misleading.
2.16 Assets. Except as otherwise indicated in Exhibit 2.16 attached hereto,
Asia4sale.com and each of its subsidiaries (if any) has good and marketable
title to all of its property, free and clear of all liens, claims and
encumbrances.
2.17 Material Contracts. Material contracts of Asia4sale.com are set
forth in Exhibit 2.17, attached hereto an incorporated herein.
3. REPRESENTATIONS AND WARRANTIES OF ZIASUN.
ZiaSun represents and warrants to Asia4sale.com and the Shareholders
that:
3.1 Organization. ZiaSun is a corporation duly organized, validly existing
and in good standing under the laws of the State of Nevada, has all necessary
corporate powers to own its properties and to carry on its business as now owned
and operated by it, and is duly qualified to do business and is in good standing
in each of the states where its business requires qualification.
3.2 Capital Stock. The authorized capital stock of ZiaSun consists of
50,000,000 shares of common stock, $0.001 par value per share (the "Common
Stock") of which 10,465,009 shares are presently issued and outstanding, which.
Immediately prior to Closing there shall not be more the 12,000,000 shares of
Common Stock issued and outstanding. All of the issued and outstanding shares
are duly and validly issued, fully paid and nonassessable. There are no other
authorized class of capital stock.
Page 5
<PAGE>
3.3 Options, Warrants, Rights, etc. There are outstanding rights granted to
various shareholders of ZiaSun's subsidiary's under which additional shares may
be issued based on the performance of these subsidiaries. The exact number of
shares which may be issued cannot be calculated with any certainty. There are no
other outstanding subscriptions, options, rights, debentures, instruments,
convertible securities or other agreements or commitments obligation ZiaSun to
issue or to transfer from treasury any additional shares of its Common Stock, or
any other class of securities.
3.4 Non-Reporting Publicly Traded Status. The Common Stock of ZiaSun is
currently listed on the OTC Bulletin Board under the symbol "ZSUN". ZiaSun is a
non-reporting public company. It is not subject to the filing and reporting
requirements of the Securities Exchange Act of 1934 and as such does not file
any period or annual reports with the Securities and Exchange Commission.
3.5 Subsidiaries. Except as set forth in Exhibit 3.5 attached hereto ZiaSun
does not have any other subsidiaries or own any interest in any other
enterprise.
3.6 Directors and Officers. The names and titles of all present officers
and directors of ZiaSun are as set forth on Exhibit 3.6 attached hereto.
3.7 Patents, Trade Names and Rights. To the best of its knowledge ZiaSun
and its subsidiaries own and hold all necessary patents, franchise rights,
trademarks, service marks, trade names, inventions, processes, know-how, trade
secrets, copyrights, licenses and other rights necessary to its business as now
conducted or proposed to be conducted. ZiaSun is not infringing upon or
otherwise acting adversely to the right or claimed right of any person with
respect to any of the foregoing.
3.8 Compliance with Laws. ZiaSun has complied with, and is not in violation
of, applicable federal, state or local statutes, laws and regulations
(including, without limitation, any applicable building, zoning or other law,
ordinance or regulation and all federal and state securities laws (including,
without limitation, the Securities Act of 1933 and the Securities Exchange Act
of 1934) and all material respects NASDAQ rules) affecting its properties or the
operation of its business. To the best of its knowledge all stock of ZiaSun
issued to date has been issued in compliance with all Federal and State
securities laws.
3.9 Litigation. ZiaSun is not a party to any suit, action, arbitration or
legal, administrative or other proceeding, or governmental investigation which
is pending or, to the best knowledge of ZiaSun threatened against or affecting
ZiaSun or its business, assets or financial condition except for suits as
described in its 1934 Act filings. ZiaSun is not in default with respect to any
order, writ, injunction or decree of any federal, state, local or foreign court,
department, agency or instrumentality applicable to it.
3.10 Authority. The Board of Directors of ZiaSun has authorized the
execution of this Agreement and the consummation of the transactions
contemplated herein, and ZiaSun has full power and authority to execute, deliver
and perform this Agreement, and this Agreement is a legal, valid and binding
obligation of ZiaSun enforceable in accordance with its terms.
Page 6
<PAGE>
3.11 Ability to Carry Out Obligations. The execution and delivery of this
Agreement by ZiaSun and the performance by the ZiaSun of the obligations
hereunder in the time and manner contemplated will not cause, constitute or
conflict with or result in (a) any breach or violation of any of the provisions
of or constitute a default under any license, indenture, mortgage, instrument,
article of incorporation, bylaw, or other agreement or instrument to which
ZiaSun is a party, or by which it may be bound, nor will any consents or
authorizations of any party to ZiaSun's performance of its obligation hereunder;
(b) an event that would permit any party to any agreement or instrument to
terminate it or to accelerate the maturity of any indebtedness or other
obligation of ZiaSun; or (c) an event that would result in the creation or
imposition of any lien, charge or encumbrance on any asset of ZiaSun.
3.12 Full Disclosure. None of the representations and warranties made by
ZiaSun herein or in any exhibit, certificate or memorandum furnished or to be
furnished by ZiaSun or on its behalf, contains or will contain any untrue
statement of material fact or omit any material fact the omission of which would
be misleading.
3.13 Assets. ZiaSun has good and marketable title to all of its property,
free and clear of all liens, claims and encumbrances, except as otherwise
indicated on Exhibit 3.13 attached hereto.
4. COVENANTS RELATING TO THE PERIOD PRIOR TO CLOSING.
4.1 Investigative Rights. From the date of this Agreement until the Closing
Date, each party shall provide to the other party, and such other party's
counsel, accountants, auditors and other authorized representatives, full access
during normal business hours and upon reasonable advance written notice to all
of each party's properties, books, contracts, commitments and records for the
purpose of examining the same. Each party shall furnish the other party with all
information concerning each party's affairs as the other party may reasonably
request.
4.2 Conduct of Business. Prior to Closing, the Shareholders represent that
Asia4sale.com shall conduct its business in the normal course. Asia4sale.com
shall not amend its Articles of Incorporation or Bylaws (except as may be
described in this Agreement), declare dividends, redeem securities, incur
additional or newly-funded liabilities outside the ordinary course of business,
acquire or dispose of fixed assets, change employment terms, enter into any
material or long-term contract, guarantee obligations of any third party, settle
or discharge any balance sheet receivable for less than its stated amount, pay
more on any liability than its stated amount, or enter into any other
transaction without the prior approval of ZiaSun, not to be unreasonably
withheld.
5. CLOSING.
5.1 Closing. The closing of this transaction shall be held at the offices
of ZiaSun on or before April 10, 1999, or at such other place and time as is
mutually agreeable to the parties, or by FAX and Federal Express.
5.2 Shareholders' Deliveries at Closing. At the Closing, the Shareholders
shall deliver the following items:
Page 7
<PAGE>
5.2.1 Certificates representing all of the shares of capital
stock Asia4sale.com held by the Shareholders, along with a stock
power or stock powers with signatures guaranteed, duly executed by the
Shareholders in blank or to ZiaSun Technologies, Inc.;
5.2.2 An investment letter in the form of Exhibit 1.2 hereof,
duly executed by the Shareholders;
5.3 ZiaSun's Deliveries at Closing. At the Closing, ZiaSun shall deliver
the following items:
5.3.1 Either (a) certificates representing the ZiaSun Shares,
duly issued with restrictive legend, to the Shareholders as listed on
Schedule A attached hereto, or (b) a copy of a letter from ZiaSun to
its transfer agent, Signature Stock Transfer, Inc., instructing such
transfer agent to issue the certificates representing the ZiaSun
Shares to the Shareholders as listed on Schedule A.
6. CONDITIONS TO OBLIGATIONS TO CLOSE AND MATERIAL TERMS OF AGREEMENT.
6.1 Conditions to Obligations of Asia4sale.com Shareholders to Close. The
obligations of the Shareholders to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction of the conditions that the
representations and warranties of ZiaSun shall be true in all material respects
on and as of the Closing Date with the same force and effect as though made on
and as of the Closing date, that ZiaSun shall have performed and complied in all
material respects with all covenants and agreements required by this Agreement
to be performed or complied with by it on or prior to the Closing Date.
6.2 Conditions to Obligations of ZiaSun. The obligations of ZiaSun to
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction of the conditions that the representations and warranties of
Asia4sale.com and the Shareholders shall be true in all material respects on
and as of the Closing Date with the same force and effect as though made on and
as of the Closing Date, that the Shareholders shall have performed and complied
in all material respects with all covenants and agreements required by this
Agreement and between ZiaSun, its shareholders and Asia4sale.com and related
parties, be performed or complied with by it on or prior to the Closing Date.
7. INDEMNIFICATION.
7.1 Indemnification by Shareholders. The Warranting Shareholders agree to
indemnify, defend and hold the ZiaSun shareholders, ZiaSun, its officers and
directors, harmless against and in respect of any and all claims, demands,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties and reasonable attorney fees that it
shall incur or suffer, which arise out of, result or relate to any breach of, or
failure by Asia4sale.com perform any of its material representations,
warranties, covenants or agreements in this Agreement or in any schedule,
certificate, exhibit or other instrument furnished or to be furnished by
Shareholders under this Agreement; provided however, that notice of any such
breach shall have been communicated with specificity within two (2) years of the
date hereof.
Page 8
<PAGE>
7.2 Indemnification by ZiaSun. ZiaSun agrees to indemnify, defend and hold
the Shareholders harmless against and in respect of any and all claims, demands,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties and reasonable attorney fees, that
it shall incur or suffer, which arise out of, result or relate to any breach of,
or failure by ZiaSun to perform any of its material representations, warranties,
covenants or agreements in this Agreement or in any schedule, certificate,
exhibit or other instrument furnished or to be furnished by ZiaSun under this
Agreement.
7.3 Notice and Opportunity to Defend. If there occurs an event which any
Party asserts is an indemnifiable event, the Party seeking indemnification shall
notify the Party obligated to provide indemnification (the "Indemnifying Party")
promptly. If such event involves (i) any claim or (ii) the commencement of any
action or proceeding by a third person, the Party seeking indemnification will
give such Indemnifying Party written notice of such claim or the commencement of
such action or proceeding. Such notice shall be a condition precedent to any
liability of the Indemnifying Party hereunder. Such Indemnifying Party shall
have a period of thirty (30) days within which to respond thereto. If such
Indemnifying Party does not respond within such thirty (30) days period, such
Indemnifying Party shall be obligated to compromise or defend, at its own
expense and by counsel chosen by the Indemnifying Party shall provide reasonably
satisfactory to the Party seeking indemnity, such matter and the Indemnifying
Party shall provide the Party seeking indemnification with such assurances as
may be reasonably required by the latter to assure that the Indemnifying Party
will assume, and be responsible for, the entire liability issue. If such
Indemnifying Party does not respond within such thirty (30) day period and
rejects responsibility for such matter in whole or in part, the Party seeking
indemnification shall be free to pursue, without prejudice to any of its rights
hereunder, such remedies as may be available to such Party under applicable law.
The Party seeking indemnification agrees to cooperate fully with the
Indemnifying Party and its counsel in the defense against any such asserted
liability. In any event, the Party seeking indemnification shall have the right
to participate at its own expense in the defense of such asserted liability. Any
compromise of such asserted liability by the Indemnifying Party shall require
the prior written consent of the Party seeking indemnification. If, however, the
Party seeking indemnification refuses its consent to a bona fide offer of
settlement which the Indemnifying Party wishes to accept, the Party seeking
indemnification may continue to pursue such matter, free of any participation by
the Indemnifying Party, at the sole expense of the Party seeking
indemnification. In such event, the obligation of the Indemnifying Party to the
Party seeking indemnification shall be equal to the lesser of (i) the amount of
the offer of settlement which the Party seeking indemnification refused to
accept plus the costs and expenses of such Party prior to the date the
Indemnifying Party notifies the Party seeking indemnification of the offer of
settlement and (ii) the actual out-of-pocket amount the Party seeking
indemnification is obligated to pay as a result of such Party's continuing to
pursue such an offer. An Indemnifying Party shall be entitled to recover from
the Party seeking indemnification any additional expenses incurred by such
Indemnifying Party as a result of the decision of the Party seeking
indemnification to pursue such matter.
Page 9
<PAGE>
8. MISCELLANEOUS.
8.1 Costs. Each party shall bear its own costs associated with this
Agreement, the closing of this Agreement, and all ancillary or related measures,
including without limitation, costs of attorneys fees, accountants fees, filing
fees, or other costs or expenses, without right or recourse from the other.
8.2 Additional Documentation. The parties acknowledge that further
agreements and documents, in addition to the Exhibits appended hereto, may be
required in order to effect the transactions contemplated hereunder. Each party
agrees to provide and execute such other and further agreements or documentation
as, in the opinions of respective counsel, are reasonably necessary to effect
the transactions contemplated hereunder and to maintain regulatory and legal
compliance.
8.3 Captions and Headings. The article and paragraph headings throughout
this Agreement are for convenience and reference only and shall not define,
limit or add to the meaning of any provision of this Agreement.
8.4 No Oral Change. This Agreement and any provision hereof may not be
waived, changed, modified or discharged orally, but only by an agreement in
writing signed by the party against whom enforcement of any such waiver, change,
modification or discharge is sought.
8.5 Non-Waiver. The failure of any party to insist in any one or more cases
upon the performance of any of the provisions, covenants or conditions of this
Agreement or to exercise any option herein contained shall not be construed as a
waiver or relinquishment for the future of any such provisions, covenants or
conditions. No waiver by any party of one breach by another party shall be
construed as a waiver with respect to any subsequent breach.
8.6 Time of Essence. Time is of the essence of this Agreement and of each
and every provision.
8.7 Choice of Law. This Agreement and its application shall be governed by
the laws of the State of Nevada.
8.8 Counterparts and/or Facsimile Signature. This Agreement may be executed
in any number of counterparts, including counterparts transmitted by telecopier
or FAX, any one of which shall constitute an original of this Agreement. When
counterparts of facsimile copies have been executed by all parties, they shall
have the same effect as if the signatures to each counterpart or copy were upon
the same document and copies of such documents shall be deemed valid as
originals. The parties agree that all such signatures may be transferred to a
single document upon the request of any party.
8.9 Notices. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
on the date of service if served personally on the party to whom notice is to be
given, or on the third day after mailing if mailed to the party to whom notice
is to be given, by first class mail, registered or certified, postage prepaid,
and properly addressed as follows:
Page 10
<PAGE>
If to ZiaSun, addressed to it at:
Mr. Anthony Tobin, President
ZiaSun Technologies, Inc.
205 S. Helix, #68
Solana Beach, California 92075
With copy to Counsel, addressed to:
George G. Chachas, Esq.
Wenthur & Chachas
4180 La Jolla Village Drive
Suite 500
La Jolla, California 92037
If to Asia4sale.com and the Shareholders, to them at:
Asia4sale.com
12A, First Pacific Centre
56 Gloucester Road
Wanchai, Hong Kong
With a copy to their Counsel, addressed to:
Alan Day
Horvath & Giles
Suite D, 16th Floor, On Hing Building
1-9 Onhing Terrace
Central, Hong Kong
8.10 Binding Effect. This Agreement shall inure to and be binding upon the
heirs, executors, personal representatives, successors and assigns of each of
the parties to this Agreement.
8.11 Mutual Cooperation. The parties hereto shall cooperate with each other
to achieve the purpose of this Agreement and shall execute such other and
further documents and take such other and further actions as may be necessary or
convenient to effect the transaction described herein.
8.12 Brokers. The parties hereto represent that no other broker has brought
about this Agreement, and no other finder's fee has been paid or is payable by
either party, except for the broker whose name is set forth on Exhibit 8.12, and
whose fee shall be paid by the Shareholders. Each party hereto shall indemnify
and hold the other harmless against any and all claims, losses, liabilities or
expenses which may be asserted against it as a result of its dealings,
arrangements or agreements with any other broker.
8.13 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the parties set forth in this Agreement
or in any instrument, certificate, opinion or other writing provided for herein
shall survive the Closing.
Page 11
<PAGE>
AGREED AND ACCEPTED as of the date first above written.
ZIASUN TECHNOLOGIES, INC.
A Nevada Corporation
Dated: March 25, 1999 /S/ Bryant D. Cragun
-----------------------------------
By: Bryant D. Cragun
Its: President
Dated: March 25, 1999 /S/ Jennifer C. McMinn
-----------------------------------
By: Jennifer C. McMinn
Its: Secretary
ASIA4SALE.COM, LTD.
A Hong Kong Registered Company
Dated: March 25, 1999 /S/ Brian Hodgson
-----------------------------------
By: Brian Hodgson
Its: President and Secretary
SHAREHOLDERS OF ASIA4SALE.COM INC. WHO WILL WARRANT THE REPRESENTATIONS HEREIN:
/S/ Brian Hodgson
- -----------------------------------
Brian Hodgson
Page 12
<PAGE>
EXHIBIT 1.2(a)
CASH DISTRIBUTED TO THE Asia4sale.COM SHAREHOLDERS AT CLOSING
Shareholder
Name Cash
- --------------------------------------------------------------------------------
Brian Hodgson $15,000.00
- --------------------------------------------------------------------------------
Total $15,000.00
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 1.3.1
SHARES TO BE ISSUED TO Asia4sale.COM SHAREHOLDERS AT CLOSING
Shareholder Number of Number of
Name and Addressd Address Asia4sale Shares ZiaSun Shares
- --------------------------------------------------------------------------------
Brian Hodgson 99 50,000
1st Floor, 67 Pak Wai
Sai Kung
New Territories
Hong Kong
Tempest Company Limited 1 0
- --------------------------------------------------------------------------------
Total 100 50,000
<PAGE>
EXHIBIT 1.62
INVESTMENT LETTER
- --------------------------------------------------------------------------------
Mr. Anthony Tobin, President
ZiaSun Technologies, Inc.
12707 High Bluff Drive
2nd Floor
San Diego, CA 92103
Re: INVESTMENT LETTER
Gentlemen:
The undersigned having acquired by a stock-for-stock exchange a minimum
of 50,000 restricted and unregistered shares of Common Stock, $0.001 par value
per share (the "Securities") of ZiaSun Technologies, Inc., a Nevada Corporation,
(the "Company"), and such other shares of Common Stock which represent the
Acquisition Consideration as adjusted and determined pursuant to the terms of
that certain Acquisition Agreement and Plan of Reorganization between the
undersigned and the Company, hereby represents to the Company that:
1. The Securities which are being acquired by the undersigned are being
acquired for the undersigned's own account and for investment and not with a
view to the public resale or distribution thereof.
2. The undersigned will not sell, transfer or otherwise dispose of the
Securities unless, in the opinion of the Company's counsel, such disposition
conforms with applicable securities laws requirements.
3. The undersigned is aware that the Securities are "restricted
securities" as that term is defined in Rule 144 (the "Rule") promulgated under
the Securities Act of 1933, as amended (the "Act").
4. The undersigned acknowledges that the undersigned has had an
opportunity to ask questions of and receive answers from duly designated
representatives of the Company concerning the finances of the Company and the
proposed business plan of the Company.
5. The undersigned acknowledges and understands that the Securities are
unregistered and must be held indefinitely unless they are subsequently
registered under the Act or an exemption from such registration is available.
6. The undersigned further acknowledges that the undersigned is fully aware
of the applicable limitations on the resale of the Securities. These
restrictions for the most part are set forth in Rule 144 (the "Rule"). The Rule
permits sales of "restricted securities" upon compliance with the requirements
of such Rule. If and when the Rule is available to the undersigned, the
undersigned may make only sales of the Securities in accordance with the terms
and conditions of the rule (which may limit the amount of Securities that may be
sold).
<PAGE>
Investment Letter
Page 2 of 2
- --------------------------------------------------------------------------------
7. By reason of the undersigned's knowledge and experience in financial
and business matters in general, and investments in particular, the undersigned
is capable of evaluating the merits and risks of an investment by the
undersigned in the Securities.
8. The undersigned is capable of bearing the economic risks of an
investment in the Securities. The undersigned fully understands the speculative
nature of the Securities and the possibility of loss.
9. The undersigned's present financial condition is such that the
undersigned is under no present or contemplated future need to dispose of any
portion of the Securities to satisfy any existing or contemplated undertaking,
need, or indebtedness.
10. Any and all certificates representing the Securities, and any and
all securities issued in replacement thereof or in exchange therefor, shall bear
the following restrictive legend.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION FOR THESE SHARES UNDER SUCH ACT OR AN
OPINION OF THE COMPANY'S COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER SAID ACT.
11. The undersigned further agrees that the Company shall have the
right to issue stop-transfer instructions to its transfer agent until such time
as sale is permitted under Security Laws and acknowledges that the Company has
informed the undersigned of its intention to issue such instructions.
Very truly yours,
Date: ____________________. __________________________________
Undersigned
----------------------------------
Address
----------------------------------
Social Security Number
<PAGE>
EXHIBIT 2.4
SUBSIDIARIES OF Asia4sale.COM
- --------------------------------------------------------------------------------
NONE
<PAGE>
EXHIBIT 2.5
PRESENT OFFICERS AND DIRECTORS Asia4sale.COM
- --------------------------------------------------------------------------------
OFFICERS
President ......................... Brian Hodgson
Chief Financial Officer ........... Brian Hodgson
Treasurer ......................... Brian Hodgson
Secretary ......................... Larville Ltd.
DIRECTORS
Brian Hodgson
Larville Ltd.
<PAGE>
EXHIBIT 2.6
AUDITED FINANCIAL STATEMENTS Asia4sale.COM
- -------------------------------------------------------------------------------
TO BE PROVIDED WITHIN SIXTY (60) DAYS OF CLOSING
<PAGE>
EXHIBIT 2.8
LIABILITIES OF Asia4sale.COM
- -------------------------------------------------------------------------------
NONE
<PAGE>
EXHIBIT 2.12
ASIA4SALE.COM LITIGATION AND LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
NONE
<PAGE>
EXHIBIT 2.16
EXCEPTIONS TO GOOD TITLE TO ASSETS OF Asia4sale.COM
- --------------------------------------------------------------------------------
NONE
<PAGE>
EXHIBIT 2.17
MATERIAL CONTRACTS OF Asia4sale.COM
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 3.5
SUBSIDIARIES OF ZIASUN
- --------------------------------------------------------------------------------
1. BestWay Beverages, Inc., a Nevada Corporation is a wholly
owned subsidiary of ZiaSun Technologies, Inc. BestWay
Beverages, Inc., holds a license from Fountain Fresh
International, Inc., under which BestWay will market , sell
and distribute the Beverage Center Equipment developed by
Fountain Fresh which is used to dispense Fountain Fresh
Beverages and purified water. The Beverage Center Equipment is
a patented in-store, self service, pressure fill, mini
bottling plant/beverage center.
2. Momentum Asia, Inc., a Corporation formed under the laws of
the Republic of the Philippines is a wholly owned subsidiary
of ZiaSun Technologies, Inc. Momentum Asia, Inc., is, among
other things, in printing and publication design business.
3. Momentum Internet Incorporation, a Corporation formed under
the laws of the British Virgin Islands, Momentum Internet
Incorporation is a wholly owned subsidiary of ZiaSun
Technologies, Inc. Momentum Internet Incorporated is, among
other things, in the Financial Internet Website publication
business wherein subscribers can received financial news,
stock quotes and market information about various companies.
4. Internet Holdings, Inc., a Utah Corporation is a wholly owned
subsidiary of ZiaSun Technologies, Inc.
<PAGE>
EXHIBIT 3.6
PRESENT OFFICES AND DIRECTORS OF ZIASUN
- --------------------------------------------------------------------------------
OFFICERS
- --------
CEO and President ...................... Anthony Tobin
Vice President ......................... Allen D. Hardman
Vice President of Investor Relations ... Rick Farias
Chief Financial Officer ................ Allen D. Hardman
Treasurer ............................... Allen D. Hardman
Secretary ............................... Jennifer C. McMinn
DIRECTORS
- ---------
Allen D. Hardman
Anthony Tobin
<PAGE>
EXHIBIT 3.13
EXCEPTIONS TO GOOD TITLE TO ASSETS OF ZIASUN
- --------------------------------------------------------------------------------
NONE
<PAGE>
EXHIBIT 5.2.3
POST CLOSING OFFICERS AND DIRECTORS OF Asia4sale.COM
- --------------------------------------------------------------------------------
CEO and President ............................ Brian Hodgson
Vice President ............................... Brian Hodgson
Treasurer .................................... Brian Hodgson
Secretary .................................... Brian Hodgson
DIRECTORS
- ---------
Brian Hodgson
Anthony Tobin
<PAGE>
EXHIBIT 8.12
BROKERS
- --------------------------------------------------------------------------------
With the exception of the shares issued to the Shareholders of Asia4sale.com
as set forth herein, no brokerage of finders fees in the form of cash or
securities were paid to any party or person in connection with the acquisition.
ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
ZiaSun Technologies, Inc.
A Nevada Corporation
ACQUISITION OF SHARES OF
Online Investors Advantage Incorporated
A Utah Corporation
Dated: March 31, 1999
<PAGE>
Table of Contents Page
- --------------------------------------------------------------------------------
1 EXCHANGE OF SECURITIES ....................................... 1
1.1 Exchange of Shares .................................. 1
1.2 Acquisition Consideration ........................... 1
1.3 Payment of Acquisition Consideration ................ 2
1.4 Deposit of Escrow Shares............................. 2
1.5 Calculation of Actual Online Earnings ............... 3
1.6 Offset of Escrow Shares Based on Actual Online Earnings 3
1.7 Appointment by Online of a Member of the Board
of Directors ...................................... 3
1.8 Exemption from Registration ......................... 3
1.3 Non-taxable Transaction ............................. 4
2. REPRESENTATION AND WARRANTIES OF THE SHAREHOLDERS ............ 3
2.1 Organization ........................................ 4
2.2 Capital Stock ....................................... 4
2.3 Options, Warrants, Rights, etc. ..................... 4
2.4 Subsidiaries ........................................ 4
2.5 Directors and Officers............................... 4
2.6 Financial Statements................................. 4
2.7 Absence of Changes................................... 4
2.8 Absence of Undisclosed Liabilities................... 5
2.9 Tax Returns.......................................... 5
2.10 Patents, Trade Names and Rights...................... 5
2.11 Compliance with Laws................................. 5
2.12 Litigation........................................... 5
2.13 Authority............................................ 5
2.14 Ability to Carry Out Obligations..................... 5
2.15 Full Disclosure...................................... 6
2.16 Assets............................................... 6
2.17 Material Contracts................................... 6
3. REPRESENTATIONS AND WARRANTIES OF ZIASUN ..................... 6
3.1 Organization......................................... 6
3.2 Capital Stock........................................ 6
3.3 Options, Warrants, Rights, etc. ..................... 6
3.4 Non-Reporting Publicly Traded Status ................ 6
3.5 Subsidiaries ........................................ 6
3.6 Directors and Officers .............................. 7
3.7 Patents, Trade Names and Rights...................... 7
3.8 Compliance with Laws................................. 7
3.9 Litigation........................................... 7
3.10 Authority............................................ 7
3.11 Ability to Carry Out Obligations..................... 7
3.12 Full Disclosure...................................... 7
3.13 Assets............................................... 8
(i)
<PAGE>
Table of Contents(continued) Page
- -------------------------------------------------------------------------------
4. COVENANTS..................................................... 8
4.1 Investigative Rights................................. 8
4.2 Conduct of Business.................................. 8
5. CLOSING .................................................... 8
5.1 Closing.............................................. 8
5.2 Shareholders' Deliveries at Closing.................. 8
5.3 ZiaSun's Deliveries at Closing....................... 8
6 CONDITIONS TO OBLIGATIONS TO CLOSE............................ 9
6.1 Conditions to Obligations of Online
Shareholders to Close.............................. 9
6.2 Conditions to Obligations of ZiaSun ................. 9
7. INDEMNIFICATION............................................... 9
7.1 Indemnification by Shareholders...................... 9
7.2 Indemnification by ZiaSun ........................... 10
7.3 Notice and Opportunity to Defend..................... 10
8. MISCELLANEOUS................................................. 10
8.1 Costs................................................ 11
8.2 Additional Documentation............................. 11
8.3 Captions and Headings................................ 11
8.4 No Oral Change....................................... 11
8.5 Non-Waiver........................................... 11
8.6 Time of Essence...................................... 11
8.7 Choice of Law........................................ 11
8.8 Counterparts and/or Facsimile Signature.............. 11
8.9 Notices.............................................. 11
8.10 Binding Effect....................................... 12
8.11 Mutual Cooperation................................... 12
8.12 Brokers.............................................. 12
8.13 Survival of Representations and Warrantie............ 12
Signature Pages ..................................... 13
EXHIBIT 1.2(a)....Distribution of Cash Consideration
EXHIBIT 1.3.1.....Shares issued and delivered to Online
Shareholders at Closing
EXHIBIT 1.3.2..... Shares issued and held in Escrow
EXHIBIT 1.3.2(b).. Stock Power
EXHIBIT 1.4....... Escrow Agreement
EXHIBIT 1.8....... Investment Letter
EXHIBIT 2.4....... Subsidiaries of Online
EXHIBIT 2.5....... Present Officers and Directors of Online
EXHIBIT 2.6....... Audited Financial Statements of Online
EXHIBIT 2.8....... Liabilities of Online
EXHIBIT 2.12...... Online Legal Proceedings and Litigation
EXHIBIT 2.16...... Exceptions to Good Title to
Assets of Online
<PAGE>
EXHIBIT 2.17...... Material Contracts of Online
EXHIBIT 3.5....... Subsidiaries of ZiaSun
EXHIBIT 3.6....... Present Officers and Directors of ZiaSun
EXHIBIT 3.13...... Exceptions to Good Title to
Assets of ZiaSun
EXHIBIT 5.2.3..... Post Closing Officers and Directors of Online
EXHIBIT 8.12...... Brokers
(iii)
<PAGE>
AGREEMENT
---------
This Acquisition Agreement and Plan of Reorganization (the "Agreement" or
"Acquisition Agreement") made as of March 31, 1999, is by and among ZiaSun
Technologies, Inc., a Nevada Corporation ("ZiaSun") and the undersigned
shareholders (the "Shareholders") who are the owners of 100% of the capital
stock of Online Investors Advantage Incorporated, a corporation organized and
existing under the laws of the State of Utah ("Online").
A. Whereas, Shareholders hold all of the issued and outstanding common
stock of Online; and
B. Whereas, ZiaSun, a non-reporting public company, desires to exchange
shares of its Common Stock, $0.001 par value (the "Common Stock") for all of the
issued and outstanding capital stock of Online held by the Shareholders, thereby
making Online a wholly owned subsidiary of ZiaSun; and
C. Whereas, Shareholders desire to exchange all of the issued and
outstanding capital stock of Online for 3,000,000 shares of the Common stock of
ZiaSun, based on anticipated earning of Online for the period from April 1, 1999
through March 31, 2000, of $2,500,000. 2,500,000 of said shares shall be held in
escrow pursuant to the terms of this Agreement, in the event of adjustment based
on the actual earnings of Online for fiscal year 1999.
D. Whereas, the Board of Directors of ZiaSun has authorized its proper
corporate officers to effect the transactions contemplated herein.
AGREEMENT
---------
NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree to the following terms
and conditions:
1. EXCHANGE OF SECURITIES.
1.1. Exchange of Shares. Subject to all the terms and conditions set forth
in this Agreement, in exchange for the acquisition consideration (the
"Acquisition Consideration"), as set forth in paragraph 1.2 hereof, paid by
ZiaSun to the Shareholders of Online, ZiaSun shall acquire all of the issued and
outstanding capital stock of Online (the "Online Shares") owned by the
Shareholders of Online.
1.2. Acquisition Consideration. The total Acquisition Consideration to be
paid by ZiaSun for the Online Shares shall be equal to: (a) Cash in the amount
of $400,000 distributed prorata to the Online Shareholders as set forth in
Exhibit 1.2(a) attached hereto, and (b) 3,000,000 shares of the previously
authorized but unissued unregistered and restricted shares of the Common Stock,
$0.001 par value per shares of ZiaSun (the "ZiaSun Shares"), based on
anticipated earnings of $2,500,000 (the "Anticipated Online Earnings") for
Online for the period from April 1, 1999 through March 31, 2000 (the "Earnings
Period"). The Acquisition Consideration shall be adjusted as determined pursuant
to paragraph 1.6 of this Agreement.
Page 1
<PAGE>
The parties hereto agree that the balance of the cash in Onlines' accounts
less such sums as are necessary to continue the operations of Online in the
normal course of business, as determined by the mutual agreement of the parties,
shall be distributed on or before Closing to the officers, directors, employee
and shareholders of Online according the deferred compensation and other
agreements of Online presently in effect as of March 31, 1999.
1.3. Payment of Acquisition Consideration. The Acquisition Consideration
shall be paid and delivered as follows:
1.3.1 Upon the Closing as set forth in paragraph 5.1, 500,000
ZiaSun Shares shall be issued and delivered to the Online Shareholders
as set forth in Exhibit 1.3.1; and
1.3.2 2,500,000 ZiaSun Shares (the "Escrow Shares") to be issued
to the Online Shareholders as set forth in Exhibit 1.3.2, attached
hereto, along with a duly executed and effective stock power in the
form attached hereto in Exhibit 1.3.2(B), and delivered pursuant to
paragraph 1.4, to Wenthur & Chachas, as Escrow Holder, or such other
Escrow Holder as may be appointed by the mutual agreement of the
parties.
1.4. Deposit of Escrow Shares. ZiaSun and the Online Shareholders hereby
agree that the Escrow Holder, pursuant to the terms of an Escrow Agreement with
terms mutually acceptable to the parties and attached hereto as Exhibit 1.4,
shall hold in escrow the four (4) stock certificates issued to the Online
Shareholders representing 2,500,000 ZiaSun Shares, as set forth in Exhibit
1.3.2, along with duly executed irrevocable stock powers issued in blank (the
"Stock Powers").
(a) In the event that an offset reduction adjustment to the total
number of Escrow Shares is required pursuant to paragraph 1.6, such
adjustment shall be made prorata according the each Online
Shareholders percentage as set forth on Exhibit 1.3.2, and Escrow
Holder shall deliver the stock certificates and accompanying Stock
Powers to the then acting registrar and transfer agent for Adjustment.
(b) In the event that an increase adjustment to the total number of
Escrow Shares is required pursuant to paragraph 1.6, then Escrow
Holder shall deliver the four (4) stock certificates issued to the
Online Shareholders being held by Escrow Holder, as set forth in
Exhibit 1.3.2, and ZiaSun shall cause such number of additional shares
to be issued as a result of the adjustment and such additional shares
shall be made issued prorata according the each Online Shareholders
percentage as set forth on Exhibit 1.3.2.
No fractional shares shall be issued and all fractions shall be rounded
down to the next whole share.
Page 2
<PAGE>
1.5 Calculation of Actual Online Earnings. For the purpose of this
Agreement, Actual Online Earnings for the Earnings Period shall be calculated
based on EBITDA determine in accordance with general accepted accounting
principals. Actual Online Earnings shall mean the total gross sales of Online
less the costs of sales, less general administrative expenses before interest,
taxes, depreciation and amortization. As soon as practicable, but in no event
later than ninety (90) days following the end of the Earnings Period, the
independent auditors of ZiaSun shall calculate the Actual Online Earnings for
the Earnings Period. In the event that the parties disagree on the determination
of the Actual Online Earnings, then ZiaSun, on the one hand, shall designate one
(1) independent auditor, at its expense and the Online Shareholders collectively
as a group, on the second hand, shall designate one (1) independent auditor, at
its expense. The two designated independent auditors, shall choose a third
independent auditor, at the joint expense of the parties. In no event shall
there be more than three (3) independent auditors. Each independent auditor
shall make a determination of the Actual Online Earnings during the Earnings
Period. If a majority of the independent auditors concur on the Actual Online
Earnings during the Earnings Period that value shall be binding and conclusive.
If a majority of the independent auditors do not concur, then the determination
of the independent auditor whose appraisal is neither the highest nor lowest
shall be binding and conclusive.
1.6. Adjustment Based on Actual Online Earnings. Adjustments based on the
Actual Online Earnings shall be made as follows:
(a) Reduction Adjustment. In the event that the Actual Online Earnings
are less than $2,500,000, then the total number of Escrow Shares shall
be reduced on a one share basis for each $1.00 of Actual Online
Earning less than $2,500,000. In the event that an offset and
adjustment to the total number of Escrow Shares is required pursuant
to this paragraph 1.6, such adjustment shall be made prorata according
the each Online Shareholders percentage as set forth on Exhibit 1.3.2.
(b) Increase Adjustment. In the event that the Actual Online Earnings
are greater than $2,500,000, then ZiaSun shall issue a such additional
shares on the basis of one additional shares for each $1.00 of Actual
Online Earning greater than $2,500,000. Such additional shares shall
be issued prorata according the each Online Shareholders percentage as
set forth on Exhibit 1.3.2.
1.7. Appointment by Online of a Member to the Board of Directors.
Concurrently with the Closing as set forth herein, Ross Jardine shall be
appointed as member of ZiaSun's Board of Directors, and will serve until the
next annual meeting of shareholders or until his successor its duly elected and
qualified.
1.8. Exemption from Registration. The parties hereto intend that the ZiaSun
Shares to be exchanged shall be exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Act"), pursuant to Section 4(2) of the
Act and the rules and regulations promulgated thereunder and exempt from the
registration requirements of the applicable states. In furtherance thereof,
Shareholders will execute and deliver to ZiaSun on the closing date, investment
letters suitable to legal counsel for ZiaSun, in form substantially as set forth
in Exhibit 1.8 attached hereto.
Page 3
<PAGE>
1.9. Non-taxable Transaction. The parties intend to effect this transaction
as a non-taxable reorganization pursuant to Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended.
2. REPRESENTATIONS AND WARRANTIES OF ONLINE AND THE SHAREHOLDERS.
The Officers and Directors of Online and certain Shareholders (the
"Warranting Shareholders") hereby represent and warrant to ZiaSun that:
2.1. Organization. Online is a corporation duly organized, validly existing
and in good standing under the laws of the State of Utah, and has all necessary
corporate powers to own its properties and to carry on its business as now owned
and operated by it, and is duly qualified to do business and is in good standing
in each of the states where its business requires qualification.
2.2. Capital Stock. On or before the Closing, the Online Articles of
Incorporation shall have been amended to reflect that the authorized capital
stock of Online consists of 2,500,000 shares of Common Stock, $2.00 Par Value
per share (the "Online Shares"). Immediately prior to closing there shall be
2,500,000 Online Shares issued and outstanding all of which are owned by the
Shareholders. All of the issued and outstanding shares of capital stock of
Online are duly and validly issued, fully paid and nonassessable. There are no
other authorized class of capital stock.
2.3. Options, Warrants, Rights, etc. There are no outstanding
subscriptions, options, rights, warrants, debentures, instruments, convertible
securities or other agreements or commitments obligating Online to issue or to
transfer from treasury any additional shares of its capital stock of any class.
2.4. Subsidiaries. Online has no subsidiaries and owns no interest in other
enterprises except as set forth on Exhibit 2.4 attached hereto.
2.5. Directors and Officers. Exhibit 2.5 hereto contains the names and
titles of all present officers and directors Online as of the date of this
Agreement.
2.6. Financial Statements. Within sixty (60) days of the Close of the
acquisition contemplated by this agreement, Online will provide audited
financial statements to ZiaSun, which financial statements will be prepared in
accordance with generally accepted accounting principles and practices
consistently followed by Online throughout the periods indicated, and will
fairly present the financial position of Online as of the dates of the balance
sheets included in the financial statements and the results of operations for
the periods indicated.
2.7. Absence of Changes. The financial statements which will be provided
pursuant to paragraph 2.6, will reflect that since the date of said financial
statements, there has not been any change in the financial condition or
operations of Online, except for changes in the ordinary course of business,
which changes have not, in the aggregate, been materially adverse.
2.8. Absence of Undisclosed Liabilities. Except as set forth on Exhibit 2.8
attached hereto, Online does not have any material debt, liability or obligation
of any nature, whether accrued, absolute, contingent or otherwise, and whether
due or to become due, that will not be reflected in the balance sheet of Online
included in the financial statements to be provided pursuant to paragraph 2.6.
Page 4
<PAGE>
2.9. Tax Returns. Within the times and in the manner prescribed by law,
Online has filed all federal, state and local tax returns required by law and
has paid all taxes, assessments and penalties due and payable. The provisions
for taxes, if any reflected in the Exhibits are adequate for the periods
indicated. There are no present disputes as to taxes of any nature payable by
Online.
2.10. Patents, Trade Names and Rights. To the best of its knowledge Online
and its subsidiaries (if any) own and hold all necessary patents, franchise
rights, trademarks, service marks, trade names, inventions, processes, know-how,
trade secrets, copyrights, licenses and other rights necessary to its business,
and the business of its subsidiaries as now conducted or proposed to be
conducted. Online and its subsidiaries are not infringing upon or otherwise
acting adversely to the right or claimed right of any person with respect to any
of the foregoing.
2.11. Compliance with Laws. Online and each of its subsidiaries have
complied with, and is not in violation of, applicable federal, state or local
statutes, laws and regulations (including, without limitation, any applicable
building, zoning or other law, ordinance or regulation) affecting its properties
or the operation of its business.
2.12. Litigation. Except as set forth in Exhibit 2.12 attached hereto,
neither Online or any of its subsidiaries is a defendant to any suit, action,
arbitration or legal, administrative or other proceeding, or governmental
investigation which is pending or, to the best knowledge of the Shareholders,
threatened against or affecting Online or its subsidiaries or their business,
assets or financial condition. Online and its subsidiaries are not in default
with respect to any order, writ, injunction or decree of any federal, state,
local or foreign court, department, agency or instrumentality applicable to it.
Online and its subsidiaries are not engaged in any material lawsuits to recover
moneys due it.
2.13. Authority. The Board of Directors of Online has authorized the
execution of this Agreement and the consummation of the transactions
contemplated herein, and Online has full power and authority to execute, deliver
and perform this Agreement, and this Agreement is a legal, valid and binding
obligation of the Shareholders and is enforceable in accordance with its terms
and conditions.
2.14. Ability to Carry Out Obligations. The execution and delivery of this
Agreement by the Shareholders and the performance by the Shareholders of their
obligations hereunder in the time and manner contemplated will not cause,
constitute or conflict with or result in (a) any breach or violation of any of
the provisions of or constitute a default under any license, indenture,
mortgage, instrument, article of incorporation, bylaw, or other agreement or
instrument to which Online is a party, or by which it may be bound, nor will any
consents or authorizations of any party to the Shareholders' performance of
their obligations hereunder be required; (b) an event that would permit any
party to any agreement or instrument to terminate it or to accelerate the
maturity of any indebtedness or other obligation of Online; or (c) an event that
would result in the creation or imposition of any lien, charge or encumbrance on
any asset of Online.
Page 5
<PAGE>
2.15. Full Disclosure. None of the representations and warranties made by
Online, its officers, directors of the Shareholder herein or in any exhibit,
certificate or memorandum furnished or to be furnished by the Shareholders, or
on their behalf, contain or will contain any untrue statement of material fact
or omit any material fact the omission of which would be misleading.
2.16. Assets. Except as otherwise indicated in Exhibit 2.16 attached
hereto, Online and each of its subsidiaries (if any) has good and marketable
title to all of its property, free and clear of all liens, claims and
encumbrances.
2.17. Material Contracts. Material contracts of Online are set forth in
Exhibit 2.17, attached hereto an incorporated herein.
3. REPRESENTATIONS AND WARRANTIES OF ZIASUN.
ZiaSun represents and warrants to Online and the Shareholders that:
3.1. Organization. ZiaSun is a corporation duly organized, validly existing
and in good standing under the laws of the State of Nevada, has all necessary
corporate powers to own its properties and to carry on its business as now owned
and operated by it, and is duly qualified to do business and is in good standing
in each of the states where its business requires qualification.
3.2. Capital Stock. The authorized capital stock of ZiaSun consists of
50,000,000 shares of common stock, $0.001 par value per share (the "Common
Stock") of which 10,465,009 shares are presently issued and outstanding, which.
Immediately prior to Closing there shall not be more the 12,000,000 shares of
Common Stock issued and outstanding. All of the issued and outstanding shares
are duly and validly issued, fully paid and nonassessable. There are no other
authorized class of capital stock.
3.3. Options, Warrants, Rights, etc. There are outstanding rights granted
to various shareholders of ZiaSun's subsidiary's under which additional shares
may be issued based on the performance of these subsidiaries. The exact number
of shares which may be issued cannot be calculated with any certainty. There are
no other outstanding subscriptions, options, rights, debentures, instruments,
convertible securities or other agreements or commitments obligation ZiaSun to
issue or to transfer from treasury any additional shares of its Common Stock, or
any other class of securities.
3.4. Non-Reporting Publicly Traded Status. The Common Stock of ZiaSun is
currently listed on the OTC Bulletin Board under the symbol "ZSUN". ZiaSun is a
non-reporting public company. It is not subject to the filing and reporting
requirements of the Securities Exchange Act of 1934 and as such does not file
any period or annual reports with the Securities and Exchange Commission.
3.5. Subsidiaries. Except as set forth in Exhibit 3.5 attached hereto
ZiaSun does not have any other subsidiaries or own any interest in any other
enterprise.
Page 6
<PAGE>
3.6. Directors and Officers. The names and titles of all present officers
and directors of ZiaSun are as set forth on Exhibit 3.6 attached hereto.
3.7. Patents, Trade Names and Rights. To the best of its knowledge ZiaSun
and its subsidiaries own and hold all necessary patents, franchise rights,
trademarks, service marks, trade names, inventions, processes, know-how, trade
secrets, copyrights, licenses and other rights necessary to its business as now
conducted or proposed to be conducted. ZiaSun is not infringing upon or
otherwise acting adversely to the right or claimed right of any person with
respect to any of the foregoing.
3.8. Compliance with Laws. ZiaSun has complied with, and is not in
violation of, applicable federal, state or local statutes, laws and regulations
(including, without limitation, any applicable building, zoning or other law,
ordinance or regulation and all federal and state securities laws (including,
without limitation, the Securities Act of 1933 and the Securities Exchange Act
of 1934) and all material respects NASDAQ rules) affecting its properties or the
operation of its business. To the best of its knowledge all stock of ZiaSun
issued to date has been issued in compliance with all Federal and State
securities laws.
3.9. Litigation. ZiaSun is not a party to any suit, action, arbitration or
legal, administrative or other proceeding, or governmental investigation which
is pending or, to the best knowledge of ZiaSun threatened against or affecting
ZiaSun or its business, assets or financial condition except for suits as
described in its 1934 Act filings. ZiaSun is not in default with respect to any
order, writ, injunction or decree of any federal, state, local or foreign court,
department, agency or instrumentality applicable to it.
3.10. Authority. The Board of Directors of ZiaSun has authorized the
execution of this Agreement and the consummation of the transactions
contemplated herein, and ZiaSun has full power and authority to execute, deliver
and perform this Agreement, and this Agreement is a legal, valid and binding
obligation of ZiaSun enforceable in accordance with its terms.
3.11. Ability to Carry Out Obligations. The execution and delivery of this
Agreement by ZiaSun and the performance by the ZiaSun of the obligations
hereunder in the time and manner contemplated will not cause, constitute or
conflict with or result in (a) any breach or violation of any of the provisions
of or constitute a default under any license, indenture, mortgage, instrument,
article of incorporation, bylaw, or other agreement or instrument to which
ZiaSun is a party, or by which it may be bound, nor will any consents or
authorizations of any party to ZiaSun's performance of its obligation hereunder;
(b) an event that would permit any party to any agreement or instrument to
terminate it or to accelerate the maturity of any indebtedness or other
obligation of ZiaSun; or (c) an event that would result in the creation or
imposition of any lien, charge or encumbrance on any asset of ZiaSun.
3.12. Full Disclosure. None of the representations and warranties made by
ZiaSun herein or in any exhibit, certificate or memorandum furnished or to be
furnished by ZiaSun or on its behalf, contains or will contain any untrue
statement of material fact or omit any material fact the omission of which would
be misleading.
Page 7
<PAGE>
3.13. Assets. ZiaSun has good and marketable title to all of its property,
free and clear of all liens, claims and encumbrances, except as otherwise
indicated on Exhibit 3.13 attached hereto.
4. COVENANTS RELATING TO THE PERIOD PRIOR TO CLOSING.
4.1. Investigative Rights. From the date of this Agreement until the
Closing Date, each party shall provide to the other party, and such other
party's counsel, accountants, auditors and other authorized representatives,
full access during normal business hours and upon reasonable advance written
notice to all of each party's properties, books, contracts, commitments and
records for the purpose of examining the same. Each party shall furnish the
other party with all information concerning each party's affairs as the other
party may reasonably request.
4.2. Conduct of Business. Prior to Closing, the Shareholders represent that
Online shall conduct its business in the normal course. Online shall not amend
its Articles of Incorporation or Bylaws (except as may be described in this
Agreement), declare dividends, redeem securities, incur additional or
newly-funded liabilities outside the ordinary course of business, acquire or
dispose of fixed assets, change employment terms, enter into any material or
long-term contract, guarantee obligations of any third party, settle or
discharge any balance sheet receivable for less than its stated amount, pay more
on any liability than its stated amount, or enter into any other transaction
without the prior approval of ZiaSun, not to be unreasonably withheld.
5. CLOSING.
5.1. Closing. The closing of this transaction shall be held at the offices
of ZiaSun on or before April 10, 1999, or at such other place and time as is
mutually agreeable to the parties, or by FAX and Federal Express, with an
effective date of March 31, 1999.
5.2. Shareholders' Deliveries at Closing. At the Closing, the Shareholders
shall deliver the following items:
5.2.1 Certificates representing all of the shares of capital
stock Online held by the Shareholders, along with a stock power or
stock powers with signatures guaranteed, duly executed by the
Shareholders in blank or to ZiaSun Technologies, Inc.;
5.2.2 An investment letter in the form of Exhibit 1.8 hereof,
duly executed by the Shareholders;
5.2.3 To the Escrow Holder, duly executed Stock Powers pursuant
to paragraph 1.4.
5.3. ZiaSun's Deliveries at Closing. At the Closing, ZiaSun shall deliver
the following items:
Page 8
<PAGE>
5.3.1 Pursuant to paragraph 1.3.1, to the Online Shareholders,
either (a) certificates representing the ZiaSun Shares, duly issued
with restrictive legend, to the Shareholders as listed on Exhibit
1.3.1 attached hereto, or (b) a copy of a letter from ZiaSun to its
transfer agent, Atlas Stock Transfer, instructing such transfer agent
to issue the certificates representing the ZiaSun Shares to the
Shareholders as listed on Exhibit 1.3.1;
5.3.2 Pursuant to paragraph 1.3.2, to the Escrow Holder, either
(a) certificates representing the ZiaSun Shares, duly issued with
restrictive legend, to the Shareholders as listed on Exhibit 1.3.2
attached hereto, or (b) a copy of a letter from ZiaSun to its transfer
agent, Atlas Stock Transfer, instructing such transfer agent to issue
the certificates representing the ZiaSun Shares to the Shareholders as
listed on Exhibit 1.3.2;
6. CONDITIONS TO OBLIGATIONS TO CLOSE AND MATERIAL TERMS OF AGREEMENT.
6.1. Conditions to Obligations of Online and Shareholders to Close. The
obligations of the Shareholders to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction of the conditions that the
representations and warranties of ZiaSun shall be true in all material respects
on and as of the Closing Date with the same force and effect as though made on
and as of the Closing date, that ZiaSun shall have performed and complied in all
material respects with all covenants and agreements required by this Agreement
to be performed or complied with by it on or prior to the Closing Date.
6.2. Conditions to Obligations of ZiaSun. The obligations of ZiaSun to
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction of the conditions that the representations and warranties of
Online and the Shareholders shall be true in all material respects on and as of
the Closing Date with the same force and effect as though made on and as of the
Closing Date, that the Shareholders shall have performed and complied in all
material respects with all covenants and agreements required by this Agreement
and between ZiaSun, its shareholders and Online and related parties, be
performed or complied with by it on or prior to the Closing Date.
7. INDEMNIFICATION.
7.1. Indemnification by Shareholders. The Warranting Shareholders agree to
indemnify, defend and hold the ZiaSun shareholders, ZiaSun, its officers and
directors, harmless against and in respect of any and all claims, demands,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties and reasonable attorney fees that it
shall incur or suffer, which arise out of, result or relate to any breach of, or
failure by Online perform any of its material representations, warranties,
covenants or agreements in this Agreement or in any schedule, certificate,
exhibit or other instrument furnished or to be furnished by Shareholders under
this Agreement; provided however, that notice of any such breach shall have been
communicated with specificity within two (2) years of the date hereof.
Page 9
<PAGE>
7.2. Indemnification by ZiaSun. ZiaSun agrees to indemnify, defend and hold
the Shareholders harmless against and in respect of any and all claims, demands,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties and reasonable attorney fees, that
it shall incur or suffer, which arise out of, result or relate to any breach of,
or failure by ZiaSun to perform any of its material representations, warranties,
covenants or agreements in this Agreement or in any schedule, certificate,
exhibit or other instrument furnished or to be furnished by ZiaSun under this
Agreement.
7.3. Notice and Opportunity to Defend. If there occurs an event which any
Party asserts is an indemnifiable event, the Party seeking indemnification shall
notify the Party obligated to provide indemnification (the "Indemnifying Party")
promptly. If such event involves (i) any claim or (ii) the commencement of any
action or proceeding by a third person, the Party seeking indemnification will
give such Indemnifying Party written notice of such claim or the commencement of
such action or proceeding. Such notice shall be a condition precedent to any
liability of the Indemnifying Party hereunder. Such Indemnifying Party shall
have a period of thirty (30) days within which to respond thereto. If such
Indemnifying Party does not respond within such thirty (30) days period, such
Indemnifying Party shall be obligated to compromise or defend, at its own
expense and by counsel chosen by the Indemnifying Party shall provide reasonably
satisfactory to the Party seeking indemnity, such matter and the Indemnifying
Party shall provide the Party seeking indemnification with such assurances as
may be reasonably required by the latter to assure that the Indemnifying Party
will assume, and be responsible for, the entire liability issue. If such
Indemnifying Party does not respond within such thirty (30) day period and
rejects responsibility for such matter in whole or in part, the Party seeking
indemnification shall be free to pursue, without prejudice to any of its rights
hereunder, such remedies as may be available to such Party under applicable law.
The Party seeking indemnification agrees to cooperate fully with the
Indemnifying Party and its counsel in the defense against any such asserted
liability. In any event, the Party seeking indemnification shall have the right
to participate at its own expense in the defense of such asserted liability. Any
compromise of such asserted liability by the Indemnifying Party shall require
the prior written consent of the Party seeking indemnification. If, however, the
Party seeking indemnification refuses its consent to a bona fide offer of
settlement which the Indemnifying Party wishes to accept, the Party seeking
indemnification may continue to pursue such matter, free of any participation by
the Indemnifying Party, at the sole expense of the Party seeking
indemnification. In such event, the obligation of the Indemnifying Party to the
Party seeking indemnification shall be equal to the lesser of (i) the amount of
the offer of settlement which the Party seeking indemnification refused to
accept plus the costs and expenses of such Party prior to the date the
Indemnifying Party notifies the Party seeking indemnification of the offer of
settlement and (ii) the actual out-of-pocket amount the Party seeking
indemnification is obligated to pay as a result of such Party's continuing to
pursue such an offer. An Indemnifying Party shall be entitled to recover from
the Party seeking indemnification any additional expenses incurred by such
Indemnifying Party as a result of the decision of the Party seeking
indemnification to pursue such matter.
8. MISCELLANEOUS.
8.1. Costs. Each party shall bear its own costs associated with this
Agreement, the closing of this Agreement, and all ancillary or related measures,
including without limitation, costs of attorneys fees, accountants fees, filing
fees, or other costs or expenses, without right or recourse from the other.
Page 10
<PAGE>
8.2. Additional Documentation. The parties acknowledge that further
agreements and documents, in addition to the Exhibits appended hereto, may be
required in order to effect the transactions contemplated hereunder. Each party
agrees to provide and execute such other and further agreements or documentation
as, in the opinions of respective counsel, are reasonably necessary to effect
the transactions contemplated hereunder and to maintain regulatory and legal
compliance.
8.3. Captions and Headings. The article and paragraph headings throughout
this Agreement are for convenience and reference only and shall not define,
limit or add to the meaning of any provision of this Agreement.
8.4. No Oral Change. This Agreement and any provision hereof may not be
waived, changed, modified or discharged orally, but only by an agreement in
writing signed by the party against whom enforcement of any such waiver, change,
modification or discharge is sought.
8.5. Non-Waiver. The failure of any party to insist in any one or more
cases upon the performance of any of the provisions, covenants or conditions of
this Agreement or to exercise any option herein contained shall not be construed
as a waiver or relinquishment for the future of any such provisions, covenants
or conditions. No waiver by any party of one breach by another party shall be
construed as a waiver with respect to any subsequent breach.
8.6. Time of Essence. Time is of the essence of this Agreement and of each
and every provision.
8.7. Choice of Law. This Agreement and its application shall be governed by
the laws of the State of Nevada.
8.8. Counterparts and/or Facsimile Signature. This Agreement may be
executed in any number of counterparts, including counterparts transmitted by
telecopier or FAX, any one of which shall constitute an original of this
Agreement. When counterparts of facsimile copies have been executed by all
parties, they shall have the same effect as if the signatures to each
counterpart or copy were upon the same document and copies of such documents
shall be deemed valid as originals. The parties agree that all such signatures
may be transferred to a single document upon the request of any party.
8.9. Notices. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
on the date of service if served personally on the party to whom notice is to be
given, or on the third day after mailing if mailed to the party to whom notice
is to be given, by first class mail, registered or certified, postage prepaid,
and properly addressed as follows:
Page 11
<PAGE>
If to ZiaSun, addressed to it at:
Mr. Anthony Tobin, President
ZiaSun Technologies, Inc.
12707 High Bluff Drive
2nd Floor
San Diego, CA 92130
With copy to Counsel, addressed to:
George G. Chachas, Esq.
Wenthur & Chachas
4180 La Jolla Village Drive
Suite 500
La Jolla, California 92037
If to Online and the Shareholders, to them at:
----------------------------------------------
Mr. D. Scott Elder
Online Investors Advantage, Inc.
825 North 1430 West
Orem, Utah 84057
With a copy to their Counsel, addressed to:
Mr. Nathan W. Drage, P.C.
Attorney at Law
6975 South Union Park Center
Suite 600
Salt Lake City, Utah 84047
8.10. Binding Effect. This Agreement shall inure to and be binding upon the
heirs, executors, personal representatives, successors and assigns of each of
the parties to this Agreement.
8.11. Mutual Cooperation. The parties hereto shall cooperate with each
other to achieve the purpose of this Agreement and shall execute such other and
further documents and take such other and further actions as may be necessary or
convenient to effect the transaction described herein.
8.12. Brokers. The parties hereto represent that no other broker has
brought about this Agreement, and no other finder's fee has been paid or is
payable by either party, except for the broker whose name is set forth on
Exhibit 8.12, and whose fee shall be paid by the Shareholders. Each party hereto
shall indemnify and hold the other harmless against any and all claims, losses,
liabilities or expenses which may be asserted against it as a result of its
dealings, arrangements or agreements with any other broker.
8.13. Survival of Representations/Warranties. The representations,
warranties, covenants and agreements of the parties set forth in this Agreement
or in any instrument, certificate, opinion or other writing provided for herein
shall survive the Closing.
Page 12
<PAGE>
AGREED AND ACCEPTED as of the date first above written.
ZIASUN TECHNOLOGIES, INC.
A Nevada Corporation
Dated: March 31, 1999 /S/ Anthony Tobin
-----------------------------------
By: Anthony Tobin
Its: President
Dated: March 31, 1999 /S/ Jennifer C. McMinn
-----------------------------------
By: Jennifer C. McMinn
Its: Secretary
ONLINE INVESTORS ADVANTAGE, INC.
A Utah Corporation
Dated: March 31, 1999 /S/ D. Scott Elder
----------------------------------
By: D. Scott Elder
Its: President
Dated: March 31, 1999 /S/ David McCoy
----------------------------------
By: David McCoy
Its: Secretary
SHAREHOLDERS OF ONLINE INVESTORS ADVANTAGE INCORPORATED WHO WILL WARRANT THE
REPRESENTATIONS HEREIN:
/S/ D. Scott Edler /S/ David McCoy
- ----------------------------------- -----------------------------------
D. Scott Elder David McCoy
/S/ Ross Jardine /S/ Scott Harris
- ----------------------------------- -----------------------------------
Ross Jardine Scott Harris
Page 13
<PAGE>
EXHIBIT 1.2(a)
DISTRIBUTION OF CASH CONSIDERATION AT CLOSING
Shareholder
Name and Address $Amount
- --------------------------------------------------------------------------------
Ross Jardine $140,000
D. Scott Elder $140,000
David McCoy $ 60,000
Scott Harris $ 60,000
- --------------------------------------------------------------------------------
Total $400,000
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 1.3.1
SHARES TO BE ISSUED TO ONLINE SHAREHOLDERS AT CLOSING
Shareholder Number of Number of
Name and Address Online Shares ZiaSun Shares
- --------------------------------------------------------------------------------
Ross Jardine 875,000 175,000
D. Scott Elder 875,000 175,000
David McCoy 375,000 75,000
Scott Harris 375,000 75,000
- --------------------------------------------------------------------------------
Total 2,500,000 500,000
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 1.3.2
SHARES TO BE ISSUED TO ONLINE SHAREHOLDERS AT CLOSING
AND HELD IN ESCROW PURSUANT TO PARAGRAPH 1.3.2
Shareholder Number of
Name and Address ZiaSun Shares
- --------------------------------------------------------------------------------
Ross Jardine 875,000
D. Scott Elder 875,000
David McCoy 375,000
Scott Harris 375,000
- --------------------------------------------------------------------------------
Total 2,500,000
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 1.3.2(b)
FORM OF IRREVOCABLE STOCK POWER
- --------------------------------------------------------------------------------
IRREVOCABLE STOCK OR BOND ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell, assign, transfer unto:
- --------------------------------------------------------------------------------
- ------------------------------- -------------------------------------
TAXPAYER IDENTIFICATION NUMBER
_______________ shares of the _______________ stock of _________________
STOCK ________________________________________________________________________
represented by certificate(s) No(s). ___________________________________
inclusive, standing in the name of the undersigned on the books of
said Company.
_______________ bonds of _______________________________________________
BOND ________________________________________________________________________
in the principal amount of $_______________ No(s). ____________________
inclusive, standing in the name of the undersigned on the books of
said Company.
The undersigned hereby irrevocably constitute and appoint ____________________
________________________________________________________ attorney to transfer
the said stock(s) or bond(s), as the case may be, on the books of said Company,
with full power of substitution in the premises.
------------------------------------------
SIGNATURE(S)
- ---------------------- ------------------------------------------
DATED
------------------------------------------
IMPORTANT Signature(s) Guaranteed
The signature(s) to this assignment must correspond with The name(s) as written
upon the face of the certificate(s) or bond(s) in every particular without
alteration.
--------------------------------------
--------------------------------------
AUTHORIZED SIGNATURE
<PAGE>
EXHIBIT 1.4
ESCROW AGREEMENT
- --------------------------------------------------------------------------------
This Escrow Agreement (the "Escrow Agreement") is made as of March 31, 1999
by and among ZiaSun Technologies, Inc., a Nevada Corporation ("ZiaSun"), Ross
Jardine, D. Scott Elder, David McCoy and Scott Harris, hereinafter collectively,
referred to as (the "Online Shareholders"), and Wenthur & Chachas as Escrow
Holder (the "Escrow Holder"). The Escrow Holder, ZiaSun and the Online
Shareholders are sometimes referred to herein collectively as the "Parties."
Capitalized terms used but not defined herein have the meanings ascribed such
terms in the Acquisition Agreement.
Recitals
A. Whereas, ZiaSun and the Online Shareholders are parties to that certain
Acquisition Agreement and Plan of Reorganization (the "Acquisition Agreement")
dated as of the date hereof, a copy of which is attached hereto as Exhibit 1.
B. Whereas, pursuant to the terms of the Acquisition Agreement, ZiaSun is
acquiring all of the issued and outstanding capital stock of Online Investor's
Advantage Incorporated, a Utah Corporation, from the Online Shareholders, in a
stock for stock exchange in exchange for Acquisition Consideration as set forth
in paragraph 1.2 of the Acquisition Agreement.
C. Whereas, paragraph 1.3.2 of the Acquisition Agreement provides that the
2,500,000 restricted shares of ZiaSun's common stock to be issued to the Online
Shareholders shall be delivered at the closing to the Escrow Holder pending a
determination of the Actual Online Earnings pursuant to paragraph 1.6 of the
Acquisition Agreement.
D. Whereas, ZiaSun and the Online Shareholders desire to enter into this
Agreement pursuant to the terms of the Acquisition Agreement and desire to
appoint Wenthur & Chachas, as Escrow Holder hereunder.
Agreement
NOW THEREFORE, the Parties hereby agree as follows:
1. Escrow Holder. ZiaSun and the Online Shareholders hereby designate and
appoint Wenthur & Chachas whose address is 4180 La Jolla Village Drive, Suite
500, La Jolla, California 92037, as the Escrow Holder to serve in accordance
with the terms, conditions and provisions of this Escrow Agreement, and the
Escrow Holder hereby agrees to act as such upon the terms, conditions and
provisions of this Escrow Agreement.
2. Establishment of the Escrow. On or before April 10, 1999, the ZiaSun and
the Online Shareholders shall deliver to the Escrow Holder (i) four (4) stock
certificates representing 2,500,000 restricted ZiaSun Shares issued to the
Online Shareholders pursuant to Exhibit 1.3.2 to the Acquisition Agreement and
(ii) an irrevocable stock power in the form attached to the Acquisition
Agreement as Exhibit 1.3.2(B), duly executed by each Online Shareholder and duly
effective, for deposit with and to be held by Escrow Agent pursuant to the terms
of this Agreement.
Page 1 of 7
<PAGE>
3. Change in Value of Escrow Shares. None of the Parties shall be liable or
responsible in any manner for any loss or depreciation resulting from activities
in the stock market or for any costs in connection therewith.
4. Release and Disbursement of Escrow Shares. The Escrow Holder shall hold
the Escrow Shares pursuant to the terms of this Agreement until a determination
of the Actual Online Earnings has been made pursuant to paragraphs 1.5 and 1.6
of the Acquisition Agreement and both ZiaSun and the Online Shareholders have
delivered written confirmation of their agreement to the determination of the
Actual Online Earnings and instructions with regard to the disbursement and
delivery of the Escrow Shares (the "Confirmation and Distribution
Instructions").
The Confirmation and Distribution Instructions shall be signed by both
ZiaSun and each of the Online Shareholders, or their authorized representative,
and shall include and provide:
(a) The Actual Online Earnings as agreed by ZiaSun and the Online
Shareholders;
(b) If a reduction adjustment to the Escrow Shares is required pursuant to
the terms of the Acquisition Agreement, the Confirmation and Distribution
Instructions shall include the following:
(i) The total number of shares to be reduced and the breakdown as to
how such adjustment is to be made with respect to the Online
Shareholders;
(ii) Separate written instructions to the transfer agent (the
"Transfer Agent Instructions") executed by both ZiaSun and each of the
Online Shareholders instructing the transfer agent as to the reduction
and re-issuance of share certificates to complete the reduction
adjustment; and
(iii) Written instructions to Escrow Holder to deliver the Escrow
Shares along with the Stock Powers and the Transfer Agent Instructions
to the transfer agent of ZiaSun to complete the adjustment.
(c) If an increased adjustment to the Escrow Shares is required pursuant to
the terms of the Acquisition Agreement, the Confirmation and Distribution
Instructions shall include the following:
(i) The total number of shares to issued pursuant to the increase
adjustment and the breakdown as to how such additional shares are to
be issued to the Online Shareholders;
Page 2 of 7
<PAGE>
(ii) Separate written instructions to the transfer agent (the
"Transfer Agent Instructions") executed by ZiaSun, along with a duly
executed resolution of the board of directors of ZiaSun (the "Board
Resolution") authorizing the issuance of the additional shares to the
Online Shareholders with instructions for the transfer agent to
deliver said shares upon issuance directly to the Online Shareholders;
(iii) Written instructions to Escrow Holder to deliver the Transfer
Agent Instructions and Board Resolution, to the transfer agent of
ZiaSun to complete the increase adjustment; and
(iv) Written instructions to Escrow Holder to deliver the Escrow
Shares along with the Stock Powers to the Online Shareholders.
(d) If no adjustment to the Escrow Shares is required pursuant to the terms
of the Acquisition Agreement, the Confirmation and Distribution
Instructions shall state this fact and provide written instructions to the
Escrow Holder to deliver the Escrow Shares along with the Stock Powers to
the Online Shareholders.
(f) Notwithstanding any provision herein to the contrary, if at any time
ZiaSun and each of the Online Shareholders, shall jointly execute a written
notice to the Escrow Holder providing the Escrow Holder with disbursement
instructions for all or a portion of the Escrow Amount, the Escrow Holder
shall disburse the Escrow Amount in accordance with the instructions
contained in such notice.
5. Responsibilities of the Escrow Holder, Indemnification. The Escrow
Holder shall have no duties or responsibilities except those expressly set forth
herein. The Escrow Holder shall have no responsibility for the validity of any
agreements referred to in this Escrow Agreement, or for the performance of any
such agreements by any party thereto or for interpretation of any of the
provisions of any of such agreements. The liability of the Escrow Holder
hereunder shall be limited solely to bad faith, willful misconduct or gross
negligence on its part. The Escrow Holder shall be protected in acting upon any
certificate, notice or other instrument whatsoever received by the Escrow Holder
under this Agreement, not only as to its due execution and the validity and
effectiveness of its provisions, but also as to the truth and accuracy of any
information therein contained, which the Escrow Holder in good faith believes to
be genuine and to have been signed or presented by a proper person or persons.
The Escrow Holder shall have no responsibility as to the validity,
collectibility or value of any property held by it in escrow pursuant to this
Escrow Agreement, and the Escrow Holder may rely on any notice, instruction,
certificate, statement, request, consent, confirmation, agreement or other
instrument which it believes to be genuine and to have been signed or presented
by a proper person or persons. In the event that the Escrow Holder shall be
uncertain as to its duties or rights hereunder or shall receive instructions
from any of the undersigned with respect to any property held by it in escrow
pursuant to this Escrow Agreement which, in the opinion of the Escrow Holder,
are in conflict with any of the provisions of this Escrow Agreement, the Escrow
Holder shall be entitled to refrain from taking any action until it shall be
directed otherwise in writing by ZiaSun and each of the Online Shareholders, or
by an order of a court of competent jurisdiction. The Escrow Holder shall be
deemed to have no notice of, or duties with respect to, any agreement or
Page 3 of 7
<PAGE>
agreements with respect to any property held by it in escrow pursuant to this
Escrow Agreement other than this Escrow Agreement or except as otherwise
provided herein. This Escrow Agreement sets forth the entire agreement between
the Parties and the Escrow Holder. Notwithstanding any provision to the contrary
contained in any other agreement (excluding any amendment or document
incorporated by reference to this Escrow Agreement) between any of the Parties,
the Escrow Holder shall have no interest in the property held by it in escrow
pursuant to this Escrow Agreement except as provided in this Escrow Agreement
and shall not be deemed to be a joint venturer of any Party. In the event that
any of the terms and provisions of any other agreement (excluding any amendment
to this Escrow Agreement) between the Parties conflict or are inconsistent with
any of the terms and provisions of this Escrow Agreement, the terms and
provisions of this Escrow Agreement shall govern and control in all respects.
6. Amendment and Cancellation. The Escrow Holder shall not be bound by any
cancellation, waiver, modification or amendment of this Escrow Agreement,
including the transfer of any interest hereunder, unless such modification is in
writing and signed by ZiaSun and the Online Shareholders, and, if the duties of
the Escrow Holder hereunder are affected in any way, unless the Escrow Holder
also shall have given its written consent thereto.
7. Legal Counsel. The Escrow Holder may consult with, and obtain advice
from, legal counsel in the event of any question as to any of the provisions
hereof or its duties hereunder, and it shall incur no liability and shall be
fully protected in acting in good faith in accordance with the opinion and
instructions of such counsel. The reasonable cost of such services shall be
added to and be a part of the Escrow Holder's fee hereunder.
8. Resignation. The Escrow Holder shall have the right at its discretion,
to resign as agent at any time, by giving at least 30 days prior written notice
of such resignation to ZiaSun and each of the Online Shareholders. In such event
ZiaSun and the Online Shareholders jointly shall promptly select a substitute
Escrow Holder, and ZiaSun and each of the Online Shareholders shall enter into
an agreement with substitute Escrow Holder in substantially the form of this
Escrow Agreement. Resignation by the Escrow Holder shall relieve the Escrow
Holder of any responsibility or duty thereafter arising hereunder, but shall not
relieve the Escrow Holder of responsibility to account to ZiaSun and each of the
Online Shareholders for the Escrow Shares and Stock Powers being held hereunder,
prior to the effective date of such resignation. If a substitute for the Escrow
Holder hereunder shall not have been selected, as aforesaid, the Escrow Holder
shall be entitled to petition any court for the appointment of a substitute for
it hereunder or, in the alternative, it may (i) file an action for interpleader
and transfer and deliver the Escrow Shares deposited with the Escrow Holder,
with the court in which such action is filed, or (ii) keep safely all Escrow
Shares until it receives joint notice from ZiaSun and each of the Online
Shareholders of a substitute appointment. The Escrow Holder shall be discharged
from all further duties hereunder upon acceptance by the substitute of its
duties hereunder or upon transfer and delivery of the Escrow Shares and Stock
Powers, to or upon the order of any court.
Page 4 of 7
<PAGE>
9. Representations and Warranties of the Parties and the Escrow Holder.
Each of the Parties hereby represents and warrants to each other Party that this
Agreement is the valid and binding obligation of such Party, enforceable in
accordance with its terms and the Escrow Holder hereby represents and warrants
to each Party that this Agreement is the valid and binding obligation of the
Escrow Holder enforceable in accordance with its terms, except as enforceability
of this Escrow Agreement may be limited by bankruptcy, insolvency,
reorganization or other similar laws relating to or effecting the enforcement of
creditors' rights generally and by general equitable principles regardless of
whether such enforceability is considered in a proceeding in equity or at law.
10. Fees. An acceptance fee of $500 shall be paid to the Escrow Holder for
its services hereunder, upon delivery or the Escrow Shares and Stock Powers.
11. Payment. At any time the Escrow Holder is required to distribute any
Escrow Share held by or received by it under any of the provisions of this
Agreement to ZiaSun or the Online Shareholders, such distribution shall be
effected (i) by delivering the stock certificates representing the Escrow Shares
and accompanying Stock Powers to the then acting registrar and transfer agent
for adjustment, as applicable, along with the letter confirming the Parties
agreement as to any adjustment that is required, or (ii) in the event that no
adjustment is required, by delivering the stock certificates representing the
Escrow Shares and accompanying Stock Powers to the respective Online
Shareholder.
12. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given (i) when delivered,
if personally delivered, (ii) when receipt is electronically confirmed, if faxed
(with hard copy to follow via first class mail, postage prepaid), or (iii) one
day after deposit with a reputable overnight courier, in each case addressed to
the intended recipient as set forth below or (iv) when actually delivered:
If to the Escrow Holder:
George G. Chachas, Esq.
Wenthur & Chachas
4180 La Jolla Village Drive
Suite 500
La Jolla, California 92037
If to the Online Shareholders respectively as follows:
Ross W. Jardine
275 North 1090 East
Lindon, Utah 84042
D . Scott Elder
1156 E. 100 North
Orem, Utah 84097
Scott Harris
876 North 500 East
Springville, Utah 84663
David W. McCoy
981 West 600 South
Orem, Utah 84057
Page 5 of 7
<PAGE>
If to the ZiaSun:
Mr. Anthony Tobin, President
ZiaSun Technologies, Inc.
12707 High Bluff Drive
2nd Floor
San Diego, California 92130
Any Party may change the address and/or facsimile number to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving written notice to the Escrow Holder and other Party.
13. Captions. The Section captions used herein are for reference purposes
only, and shall not in any way affect the meaning or interpretation of this
Escrow Agreement.
14. Execution by Escrow Holder. The execution of this Escrow Agreement by
the Escrow Holder shall constitute a receipt for the Escrow Amounts.
15. Indemnification of Escrow Holder. Any loss, liability, claim, demand or
expense (including attorney's fees and expenses) arising out of or in connection
with the performance of the Escrow Holder's obligations in accordance with the
provisions of this Escrow Agreement, except for the bad faith, gross negligence
or willful misconduct of the Escrow Holder will be paid by ZiaSun and the Online
Shareholders, jointly and severally, and said parties further, hold the Escrow
Holder harmless and to indemnify the Escrow Holder against any such payment. The
foregoing indemnities in this Section 15 shall survive termination of this
Escrow Agreement.
16. Escrow Agreement as Security Only. The escrow arrangement under this
Escrow Agreement serves only as security for ZiaSun or the Online Shareholders
obligations pursuant to all terms and conditions of paragraphs 1.1 through 1.6
of the Acquisition Agreement and in no way shall limit the amount of liability
which may be incurred by ZiaSun or the Online Shareholders pursuant to such
other obligations.
17. Disagreements. If any disagreement or dispute arises between the
Parties concerning the meaning or validity of any provision under this Escrow
Agreement or concerning any other matter relating to this Escrow Agreement, the
Escrow Holder (a) shall be under no obligation to act, except under process or
order of court, or until it has been adequately indemnified to its full
satisfaction, and shall sustain no liability for its failure to act pending such
process or court order or indemnification, and (b) may deposit, in its sole and
absolute discretion, the Escrow Amounts or that portion of the Escrow Amounts it
then holds with any court of competent jurisdiction and interplead the Parties.
Upon such deposit and filing of interpleader, the Escrow Holder shall be
relieved of all liability as to the Escrow Amounts and shall be entitled to
recover from the Parties its reasonable attorneys' fees and other costs incurred
in commencing and maintaining such action.
Page 6 of 7
<PAGE>
18. Governing Law. This Escrow Agreement shall be governed by and construed
in accordance with the domestic laws of the State of California without giving
effect to any choice of law or conflict of law provision or rule (whether of the
state of California or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of California. Venue for
any action hereunder shall be in the Superior Court of the State of California,
County of San Diego.
19. Counterparts. This Escrow Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
IN WITNESS WHEREOF, the Parties hereunto have duly caused this Escrow
Agreement to be executed as of the first day above written.
ZiaSun Technologies, Inc.
Date: __________________ _____________________________
By: Allen Hardman
Its: Vice President
The Online Shareholders
Date: __________________ _____________________________
Ross Jardine
Date: __________________ _____________________________
D. Scott Elder
Date: __________________ _____________________________
David McCoy
Date: __________________ _____________________________
Scott Harris
Escrow Holder
Wenthur & Chachas
Date: __________________ _____________________________
By: George G. Chachas
Title: Partner
Page 7 of 7
<PAGE>
EXHIBIT 1.8
INVESTMENT LETTER
- --------------------------------------------------------------------------------
Mr. Anthony Tobin
ZiaSun Technologies, Inc.
12707 High Bluff Drive
2nd Floor
San Diego, CA 92130
Re: INVESTMENT LETTER
Gentlemen:
The undersigned having acquired by a stock-for-stock exchange a certain
amount of the total 3,000,000 restricted and unregistered shares of Common
Stock, $0.001 par value per share (the "Securities") of ZiaSun Technologies,
Inc., a Nevada Corporation, (the "Company"), pursuant to the terms of that
certain Acquisition Agreement and Plan of Reorganization between the undersigned
and the Company, hereby represents to the Company that:
1. The Securities which are being acquired by the undersigned are being
acquired for the undersigned's own account and for investment and not with a
view to the public resale or distribution thereof.
2. The undersigned will not sell, transfer or otherwise dispose of the
Securities unless, in the opinion of the Company's counsel, such disposition
conforms with applicable securities laws requirements.
3. The undersigned is aware that the Securities are "restricted securities"
as that term is defined in Rule 144 (the "Rule") promulgated under the
Securities Act of 1933, as amended (the "Act").
4. The undersigned acknowledges that the undersigned has had an opportunity
to ask questions of and receive answers from duly designated representatives of
the Company concerning the finances of the Company and the proposed business
plan of the Company.
5. The undersigned acknowledges and understands that the Securities are
unregistered and must be held indefinitely unless they are subsequently
registered under the Act or an exemption from such registration is available.
6. The undersigned further acknowledges that the undersigned is fully aware
of the applicable limitations on the resale of the Securities. These
restrictions for the most part are set forth in Rule 144 (the "Rule"). The Rule
permits sales of "restricted securities" upon compliance with the requirements
of such Rule. If and when the Rule is available to the undersigned, the
undersigned may make only sales of the Securities in accordance with
<PAGE>
Investment Letter
Page 2 of 2
- --------------------------------------------------------------------------------
the terms and conditions of the rule (which may limit the amount of
Securities that may be sold).
7. By reason of the undersigned's knowledge and experience in financial and
business matters in general, and investments in particular, the undersigned is
capable of evaluating the merits and risks of an investment by the undersigned
in the Securities.
8. The undersigned is capable of bearing the economic risks of an
investment in the Securities. The undersigned fully understands the speculative
nature of the Securities and the possibility of loss.
9. The undersigned's present financial condition is such that the
undersigned is under no present or contemplated future need to dispose of any
portion of the Securities to satisfy any existing or contemplated undertaking,
need, or indebtedness.
10. Any and all certificates representing the Securities, and any and all
securities issued in replacement thereof or in exchange therefor, shall bear the
following restrictive legend.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION FOR THESE SHARES UNDER SUCH ACT OR AN
OPINION OF THE COMPANY'S COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER SAID ACT.
11. The undersigned further agrees that the Company shall have the right to
issue stop-transfer instructions to its transfer agent until such time as sale
is permitted under Security Laws and acknowledges that the Company has informed
the undersigned of its intention to issue such instructions.
Very truly yours,
Date: ___________________ __________________________________
Undersigned
----------------------------------
Address
----------------------------------
Social Security Number
<PAGE>
EXHIBIT 2.4
SUBSIDIARIES OF ONLINE
- --------------------------------------------------------------------------------
NONE
<PAGE>
EXHIBIT 2.5
PRESENT OFFICERS AND DIRECTORS ONLINE
- --------------------------------------------------------------------------------
OFFICERS
- --------
President ........................... D. Scott Elder
Chief Financial Officer ............. D. Scott Elder
Treasurer ........................... David McCoy
Secretary ........................... David McCoy
DIRECTORS
- ---------
Ross W. Jardine
D. Scott Elder
David McCoy
Scott Harris
<PAGE>
EXHIBIT 2.6
AUDITED FINANCIAL STATEMENTS ONLINE
- --------------------------------------------------------------------------------
TO BE PROVIDED WITHIN SIXTY (60) DAYS OF CLOSING
<PAGE>
EXHIBIT 2.8
LIABILITIES OF ONLINE
- -------------------------------------------------------------------------------
NONE
<PAGE>
EXHIBIT 2.12
ONLINE LITIGATION AND LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
NONE
<PAGE>
EXHIBIT 2.16
EXCEPTIONS TO GOOD TITLE TO ASSETS OF ONLINE
- --------------------------------------------------------------------------------
NONE
<PAGE>
EXHIBIT 2.17
MATERIAL CONTRACTS OF ONLINE
- --------------------------------------------------------------------------------
NONE
<PAGE>
EXHIBIT 3.5
SUBSIDIARIES OF ZIASUN
- --------------------------------------------------------------------------------
1. BestWay Beverages, Inc., a Nevada Corporation is a wholly
owned subsidiary of ZiaSun Technologies, Inc. BestWay
Beverages, Inc., holds a license from Fountain Fresh
International, Inc., under which BestWay will market , sell
and distribute the Beverage Center Equipment developed by
Fountain Fresh which is used to dispense Fountain Fresh
Beverages and purified water. The Beverage Center Equipment is
a patented in-store, self service, pressure fill, mini
bottling plant/beverage center.
2. Momentum Asia, Inc., a Corporation formed under the laws of
the Republic of the Philippines is a wholly owned subsidiary
of ZiaSun Technologies, Inc. Momentum Asia, Inc., is, among
other things, in printing and publication design business.
3. Momentum Internet Incorporation, a Corporation formed under
the laws of the British Virgin Islands, Momentum Internet
Incorporation is a wholly owned subsidiary of ZiaSun
Technologies, Inc. Momentum Internet Incorporated is, among
other things, in the Financial Internet Website publication
business wherein subscribers can received financial news,
stock quotes and market information about various companies.
4. Internet Holdings, Inc., a Utah Corporation is a wholly owned
subsidiary of ZiaSun Technologies, Inc.
5. Asia4sale.com, Ltd., a Hong Kong registered, is a wholly
owned subsidiary of ZiaSun Technologies, Inc. Asia4sale is
the business of Internet related e-commerce.
<PAGE>
EXHIBIT 3.6
PRESENT OFFICES AND DIRECTORS OF ZIASUN
- --------------------------------------------------------------------------------
OFFICERS
- --------
CEO and President ............................................Anthony Tobin
Vice President ...............................................Allen D. Hardman
Vice President of Inve........................................Rick Farias
Chief Financial Office........................................Allen D. Hardman
Treasurer ....................................................Allen D. Hardman
Secretary ....................................................Jennifer C. McMinn
DIRECTORS
- ---------
Allen D. Hardman
Anthony Tobin
<PAGE>
EXHIBIT 3.13
EXCEPTIONS TO GOOD TITLE TO ASSETS OF ZIASUN
- --------------------------------------------------------------------------------
NONE
<PAGE>
EXHIBIT 5.2.3
POST CLOSING OFFICERS AND DIRECTORS OF ONLINE
- --------------------------------------------------------------------------------
OFFICERS
President...................................... D. Scott Elder
Chief Financial Officer ....................... D. Scott Elder
Treasurer ..................................... David McCoy
Secretary ..................................... David McCoy
DIRECTORS
- ---------
Ross W. Jardine
D. Scott Elder
David McCoy
Scott Harris
Such additional person as appointed by ZiaSun
<PAGE>
EXHIBIT 8.12
BROKERS
- --------------------------------------------------------------------------------
With the exception of the shares issued to the Shareholders of Online as set
forth herein, no brokerage of finders fees in the form of cash or securities
were paid to any party or person in connection with the acquisition.
ARTICLES OF INCORPORATION
OF
CARLISLE ENTERPRISES, INC.
THE UNDERSIGNED person, acting as sole incorporator under applicable
provisions of the Nevada Business Corporation Act, does hereby adopt the
following Articles of Incorporation for said corporation.
ARTICLE I
NAME
The name of the corporation is CARLISLE ENTERPRISES. INC.
ARTICLE II
DURATION
The duration of the corporation is perpetual.
ARTICLE III
PURPOSES
The specific purpose for which the corporation is organized is to
manufacture, assemble, modify, customize, sell, distribute and promote the use
of motorcycles and ocher recreational motor vehicles. The corporation shall also
have power:
(a) To engage in any and all activities as may be reasonably related
to the foregoing and following purposes.
(b) To purchase, own and develop real and personal property. to enter
leases, contracts and agreements, to open bank accounts and to conduct:
financial transactions.
(c) To engage in any all other lawful purposes, activities and
pursuits, which are substantially similar to the foregoing. or which would
contribute to accomplishment of the expressed purposes of the expressed
purposes of the corporation.
<PAGE>
(d) To change its primary business purpose from time to as may to the
Board of Directors seem appropriate.
(e) To engage in any other lawful business authorized by the laws of
Nevada or any other state or other jurisdiction in which the corporation
may be authorized to do business.
ARTICLE IV
CAPITAL
The corporation shall have authority to issue Fifty Million (50,000,000)
common shares, one mil (.001) par value. There shall be only one class of
authorized shares, to wit:: common voting stock. The common stock shall have
unlimited voting rights provided in the Nevada Business Corporation Act.
None of the shares of the corporation shall carry with them the pre-emptive
right to acquire additional or other shares of the corporation. There shall be
no cumulative voting of shares.
ARTICLE V
INDEMNIFICATION OF DIRECTORS
No shareholders or directors of the corporation shall be individually
liable for the debts of the corporation or for monetary damages arising from the
conduct of the corporation.
ARTICLE VI
BY-LAWS
Provisions for the regulation of the internal affairs of the corporation
not provided for in these Articles Of Incorporation shall be set forth in the
By-Laws.
<PAGE>
ARTICLE VII
REGISTERED OFFICE AND AGENT
The address of the corporation's initial registered office shall be 3230
East Flamingo Road, Suite 156. Las Vegas, NV 89121. The corporation's initial
registered agent at such address shall be Gateway Enterprises Inc.
I hereby acknowledge and accept appointment as corporation registered
agent:
Gateway Enterprises, Inc.
----------------------------------
By:
ARTICLE VIII
INCORPORATORS
The identity and address of the incorporator are:
Lynn Briggs (President)
4897 South Kings Row Circle
Salt Lake City, UT 84117
Jennifer McMinn (Secretary)
10 River Road
Apt. #7L
New York, N.Y. 100
The aforesaid incorporators shall be the initial Directors of the
corporation and shall act as such until the corporation shall have conducted its
organizational meeting or until one or more successors shall have been elected
and accepted their election as directors of the corporation.
/s/ Jennifer McMinn
----------------------------------
Jennifer McMinn
/s/ Lynn Briggs, Incorporator
----------------------------------
Lynn Briggs
3
<PAGE>
IN WITNESS WHEREOF, I, Lynn Briggs, have executed these Articles of
Incorporation in duplicate this ____ day of February, 1996 and say:
That I am the incorporator herein: that I have read the above and foregoing
Articles of Incorporation: that I know the contents therof and that the same is
true to the best of my knowledge and belief, excepting as to matters herein
alleged on information and belief, and as to those matters I believe them to be
true.
/s/ Lynn Briggs, Incorporator
----------------------------------
Lynn Briggs
State of Utah
ss [NOTARY SEAL]
County of Salt Lake
Subscribed and sworn before me this 23rd day of February, 1996 by Lynn
Briggs.
----------------------------------
Notary Public
IN WITNESS WHEREOF, I, Jennifer McMinn, have executed these Articles of
Incorporation in duplicate this 22 day of February, 1996, and say:
That I am the incorporator herein; that I have read the above and foregoing
Articles of Incorporation; that I know the contents thereof and that the same is
true to the best of my knowledge and belief, excepting as to matters herein
alleged on information and belief, as to those matters I believe them to be
true.
/s/ Jennifer McMinn
----------------------------------
Jennifer McMinn
State of Arizona
ss [NOTARY SEAL]
County of Maucape
Subscribed and sworn before me this 22 day of February, 1996 by Jennifer
McMinn.
----------------------------------
Notary Public
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
CARLISLE ENTERPRISES, INC.
Pursuant to the provisions of Nevada Revised Statues, title 7. Chapter 78.
the undersigned officers do hereby certify:
FIRST The name of the Corporation is CARLISLE ENTERPRISES. INC.
SECOND: The Board of Directors of the Corporation duly adopted the following
resolutions on. April 15. 1997:
RESOLVED, that it is advisable in the judgment of the Board of Directors of
the Corporation that the name of the Corporation be changed, and that. in
order to accomplish the same. Article I of the -Articles of Incorporation
be amended to read as follows:
"The name of the corporation is "Best Way. USA"
FURTHER RESOLVED, that stockholder having voting power shall take action
upon the proposed amendment by a consent in writing signed by them; and
FURTHER RESOLVED. that in the event that the said stockholders shall adept
the aforesaid proposed amendment by a written consent in favor thereof
signed by all of them without a meeting, the Corporation is hereby
authorized to make by the hands of its President or a Vice President and by
its Secretary or an Assistant Secretary a certificate setting forth the
said amendment and to cause the same to be riled pursuant to the provisions
of Nevada Revised Statues. Title 7. Chapter 78.
THIRD: The total number of outstanding shares having voting power of the
corporation is 800.000 and the total number of votes entitled to be cast by the
holders of all of said outstanding shares is 800.000.
<PAGE>
FOURTH: The holders of all of the aforesaid total number of outstanding shares
having voting power, to wit, 800.000 shares. dispensed with the holding of a
meeting of stockholders and adopted the amendments herein certified by a consent
in writing signed by all of them in accordance with the provisions of Nevada
Revised Statues, Tide 7, Section 78.320
Signed on April 17, 1997
CARLISLE ENTERPRISES, INC.
/s/ Lynn Briggs
- ----------------------------------
By: Lynn Briggs, President
/s/ Jennifer McMinn
- ----------------------------------
By: Jennifer McMinn, Secretary
STATE OF CALIFORNIA )
) SS:
COUNTY OF LOS ANGELES )
On April 17, 1997. personally appeared before me, a Notary Public, for the
State and County aforesaid. Lynn Briggs as President of Carlisle Enterprises,
Inc. and Jennifer McMinn as Secretary of Carlisle Enterprises. Inc. who
acknowledged at they executed the above instrument.
[NOTARY SEAL]
- ----------------------------------
Notary Public
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
Bryant Cragun and Jennifer C. McMinn, hereby certify that:
1. They are the President and Secretary of Best Way, USA, a Nevada
Corporation.
2. Article I., of the Articles of Incorporation of this Corporation is
amended to read as follows:
Article I. The name of the corporation is ZiaSun Technologies, Inc.
3. That Article IV., of the Articles of Incorporation of this Corporation
is hereby amended to read as follows:
Article IV. The Corporation is authorized to issue one (1) class
of shares to be designated as Common Stock ("Common Stock"). The
total number of shares of Common Stock this Corporation shall
have the authority to issue is Fifty Million Shares (50,000,000)
with a par value of $0.001 per share.
Upon the amendment of this Article VI., as hereinabove set forth,
each share of the Common Stock, $0.001 Par Value, outstanding as
of the date of filing, shall become and represent 0.50 shares of
the Common Stock, $0.001 Par Value, effectuating a I for 2
reverse split of the outstanding Common Stock of the
Corporation..
4. There will be no fractional shares issued as a result of the above
referenced reverse stock split, with any fractional shares being rounded up to
the next whole share.
5. The current number of authorized shares before the amendment to Article
IV., as set forth above is 50,000,000 shares of Common Stock, $0.001 Par Value.
6. The number of authorized shares after the amendment to Article IV., as
set forth above is 50,000,000 shares of Common Stock, $0.001 Par Value.
7. The foregoing amendment of Articles of Incorporation, including the
above 1 for 2 Reverse Stock split of the outstanding shares of Common Stock, has
been duly approved by the Board of Directors in accordance with Section 78.207
of the Nevada Revised Statutes.
8. The foregoing amendments of Articles of Incorporation, have been duly
approved by the required written Consent of Shareholders in accordance with
Section 78.390 of the Nevada Revised Statutes. The total number of outstanding
Page 1 of 2
<PAGE>
shares of the Corporation is 15,800,000. The number of shares voting in favor of
the Amendments was 11,278,486 shares representing 71.38%. The percentage of vote
required was more than 50%.
The undersigned declare under the penalty of perjury that the matters set
forth in the foregoing certificate are true of their own knowledge.
Executed at San Diego, California on September 9, 1998
/s/ Bryant Cragun /s/ Jennifer C. McMinn
- --------------------------------- ----------------------------------
By: Bryant Cragun, President By: Jennifer C. McMinn, Secretary
STATE OF CALIFORNIA )
)
COUNTY OF SAN DIEGO )
On September 9, 1998, before me, personally appeared Bryant Cragun, 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, 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.
WITNESS my hand and official seal
/s/ George G. Chachas
- -------------------------------
Notary Public
STATE OF CALIFORNIA
COUNTY OF SAN DIEGO
On September 9, 1998, before me, personally appeared Jennifer C. McMinn,
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, 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.
WITNESS my hand and official seal
/s/ George G. Chachas
- --------------------------------
Notary Public
CERTIFICATE FILED PURSUANT TO NRS SS. 78.207
- --------------------------------------------------------------------------------
Anthony Tobin and Alfredo Alex S. Cruz III, hereby certify that:
1. They are the President and Secretary, respectively, of ZiaSun
Technologies, Inc., a Nevada Corporation.
2. That effective May 21, 1999, all the issued and outstanding shares of
Common Stock, $0.01 par value per share, for shareholders of record on the close
of business on the Record Date of May 14, 1999, shall be increased on a
two-for-one basis effective a 2 for 1 forward stock split. That on or after May
21, 1999, each one of the Corporation's issued and outstanding shares of Common
Stock as of May 14, 1999, shall be deemed to represent two shares of the Common
Stock.
3. The foregoing 2 for 1 forward stock split of the outstanding shares of
Common Stock, has been duly approved by the Board of Directors in accordance
with Section 78.207 of the Nevada Revised Statutes.
4. The current number of authorized shares before the change is 50,000,000
shares of Common Stock, $.001 Par Value.
5. The number of authorized shares after the change is 50,000,000 shares of
Common Stock, $.001 Par Value.
The undersigned declare under the penalty of perjury that the matters set
forth in the foregoing certificate are true of their own knowledge.
Executed at QUEZON CITY on April 13, 1999
/s/ Anthony Tobin /s/ Alfredo Alex S. Cruz III.
- -------------------------------- ---------------------------------------
By: Anthony Tobin - President By: Alfred Alex S. Cruz III - Secretary
Page 1
<PAGE>
STATE OF ___________________ )
QUEZON CITY )
On April 13, 1999, before me, personally appeared Anthony Tobin, 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, 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.
WITNESS my hand and official seal
/S/ Eladio B. Abquina Jr.
- ----------------------------
Notary Public
Page 2
RESTATED
ARTICLES OF INCORPORATION
OF
ZIASUN TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
Allen D. Hardman and Alfredo Alex S. Cruz III, hereby certify that:
1. They are the Vice President and Secretary, respectively, of ZiaSun
Technologies, Inc., a Nevada Corporation.
The Articles of Incorporation of this Corporation are amended and restated
in their entirety to read as follows and supersede and take the place of the
existing Articles of Incorporation and all prior amendments thereto and
restatements thereof:
ARTICLE 1.
----------
Company Name
------------
1.1 The name of this corporation is ZiaSun Technologies, Inc.
ARTICLE 2.
----------
Duration
----------
2.1 The corporation shall continue in existence perpetually unless sooner
dissolved according to law.
ARTICLE 3.
----------
Purpose
-------
3.1 The purpose for which the corporation is organized is to engage in any
lawful activity within or without the State of Nevada.
ARTICLE 4.
Board of Directors
------------------
4.1. Number. The board of directors of the Corporation shall consist of
such number of persons, not less than three, as shall be determined in
accordance with the bylaws from time to time.
Page 1 of 4
<PAGE>
ARTICLE 5.
Capitalization
--------------
5.1 The amount of the total authorized capital stock of the corporation is
50,000,000 shares with a par value of $0.001 per share. All of said shares shall
be of one class, without series or other distinction, and shall be designated as
"Common Stock".
ARTICLE 6.
No Further Assessments
----------------------
6.1 The capital stock, after the amount of the subscription price has been
paid in money, property, or services, as the Directors shall determine, shall be
subject to no further assessment to pay the debts of the corporation, and no
stock issued as fully paid up shall ever be assessable or assessed, and these
Articles of Incorporation shall not and cannot be amended, regardless of the
vote therefor, so as to amend, modify or rescind this Article 6., or any of the
provisions hereof.
ARTICLE 7.
No Preemptive Rights
--------------------
7.1 None of the shares of the Corporation shall carry with them any
preemptive right to acquire additional or other shares of the corporation and no
holder of any stock of the Corporation shall be entitled, as of right, to
purchase or subscribe for any part of any unissued shares of stock of the
Corporation or for any additional shares of stock, of any class or series, which
may at any time be issued, whether now or hereafter authorized, or for any
rights, options, or warrants to purchase or receive shares of stock or for any
bonds, certificates of indebtedness, debentures, or other securities.
ARTICLE 8.
No Cumulative Voting
--------------------
8.1 There shall be no cumulative voting of shares.
ARTICLE 9.
Indemnification of Officers and Directors
-----------------------------------------
9.1 The Corporation shall indemnify its directors, officers, employee,
fiduciaries and agents to the fullest extent permitted under the Nevada Revised
Statutes.
9.2 Every person who was or is a party or is threatened to be made a party
to or is involved in any action, suit or proceedings, whether civil, criminal,
administrative or investigative, by reason of the fact that he or a person for
whom he is the legal representative is or was a director or officer of the
corporation or is or was serving at the request of the corporation as a director
or officer of another corporation, or as its
Page 2 of 4
<PAGE>
representative in a partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless to the fullest extent legally permissible under
the law of the State of Nevada from time to time against all expenses, liability
and loss (including attorney's fees, judgments, fines and amounts paid or to be
paid in settlement) reasonably incurred or suffered by him in connection
therewith. Such right of indemnification shall be a contract right which may be
enforced in any manner desired by such person. Such right of indemnification
shall not be exclusive of any other right which such directors, officers or
representatives may have or hereafter acquire and, without limiting the
generality of such statement, they shall be entitled to their respective rights
of indemnification under any By-Law, agreement, vote of stockholders, provision
of law or otherwise, as well as their rights under this Article.
9.3 Without limiting the application of the foregoing, the Board of
Directors may adopt By-Laws from time to time with respect to indemnification to
provide at all times the fullest indemnification permitted by the law of the
State of Nevada and may cause the corporation to purchase and maintain insurance
on behalf of any person who is or was a director or officer of the corporation
as a director of officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred in any such capacity or arising out of
such status, whether or not the corporation would have the power to indemnify
such person.
9.4 The private property of the Stockholders, Directors and Officers shall
not be subject to the payment of corporate debts to any extent whatsoever.
9.5 No director, officer or shareholder shall have any personal liability
to the corporation or its stockholders for damages for breach of fiduciary duty
as a director or officer, except that this provision does not eliminate nor
limit in any way the liability of a director or officer for:
(a) Acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law; or
(b) The payment of dividends in violation of Nevada Revised Statutes
(N.R.S.) 78.300.
The foregoing Restated of Articles of Incorporation has been duly approved
by the Board of Directors in accordance with Section 78.207 of the Nevada
Revised Statutes.
The foregoing amendments of Articles of Incorporation have been duly
approved by the required written Consent of Shareholders in accordance with
Section 78.390 of the Nevada Revised Statutes. The total number of outstanding
shares of the Corporation is 27,030,018. The number of shares voting in favor of
the Amendments was 13,978,780 shares representing 51.72%. The percentage of vote
required was more than 50%.
The undersigned declare under the penalty of perjury that the matters set
forth in the foregoing certificate are true of their own knowledge.
Page 3 of 4
<PAGE>
Dated: August 5, 1999
/S/ Allen D. hardman /S/ Alfredo Alex S. Cruz III
- -------------------------------- ---------------------------------
Allen D. Hardman- Vice President Alfredo Alex S. Cruz III-Secretary
STATE OF CALIFORNIA }
}
COUNTY OF SAN DIEGO }
On August 5, 1999, before me, personally appeared Allen D. Hardman, 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, 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.
WITNESS my hand and official seal
/s/ George G. Chachas
- ---------------------------------
Notary Public
STATE OF CALIFORNIA }
}
COUNTY OF SAN DIEGO }
On August 5, 1999, before me, personally appeared Alfredo Alex S. Cruz III,
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, 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.
WITNESS my hand and official seal
/s/ George G. Chachas
- ---------------------------------
Notary Public
Page 4 of 4
AMENDED AND RESTATED BYLAWS
OF
ZIASUN TECHNOLOGIES, INC.
(A Nevada Corporation)
================================================================================
ARTICLE I.
----------
OFFICES
-------
Section 1.01. Location of Offices. The corporation may maintain such
offices within or without the State of Nevada as the Board of Directors may from
time to time designate or require.
Section 1.02. Principal Office. The address of the principal office of the
corporation shall be at the address of the registered office of the corporation
as so designated in the office of the Secretary of State of the state of
incorporation, or at such other address as the Board of Directors shall from
time to time determine.
ARTICLE II.
-----------
MEETING OF SHAREHOLDERS
-----------------------
Section 2.01. Annual Meetings. The annual meeting of the shareholders shall
be held on such date as the Board of Directors shall determine by resolution. If
the election of directors shall not be held on the day thus designated for any
annual meeting of the shareholders, or at any adjournment thereof, the Board of
Directors shall cause the election to be held at a special meeting of the
shareholders as soon thereafter as may be practical.
Section 2.02. Special Meetings. Special meetings of the stockholders may be
held at the office of the corporation in the State of Nevada, or elsewhere,
whenever called by the President, or by the Board of Directors, or by vote of,
or by an instrument in writing signed by the holders of a majority of the issued
and outstanding capital stock. Not less than ten (10) nor more than sixty (60)
days written notice of such meeting, specifying the day, hour and place, when
and where such meeting shall be convened, and the objects for calling the same,
shall be mailed in the United States Post Office, or via express or overnight
mail, addressed to each of the stockholders of record at the time of issuing the
notice, and at his, her, or its address last known, as the same appears on the
books of the corporation.
The written certificate of the officer or officers calling any special
meeting setting forth the substance of the notice, and the time and place of the
mailing of the same to the several stockholders, and the respective addresses to
which the same were mailed, shall be prima facie evidence of the manner and fact
of the calling and giving such notice.
Page 1 of 18
<PAGE>
All business to be lawfully transacted by the stockholders of the
corporation may be transacted at any special meeting or at the adjournment
thereof. Only such business, however, shall be acted upon at special meeting of
the stockholders as shall have been referred to in the notice calling such
meetings; but at any stockholders' meeting at which all of the outstanding
capital stock of the corporation is represented, either in person or by proxy,
any lawful business may be transacted, and such meeting shall be valid for all
purposes.
Section 2.03. Place of Meetings. The Board of Directors may designate any
place, either within or without the state of incorporation, as the place of
meeting for any annual or special meeting. A waiver of notice, signed by all
shareholders entitled to vote at a meeting, may designate any place, either
within or without the state of incorporation, as the place for the holding of
such meeting. If no designation is made, the place of meeting shall be the
registered office of the corporation in the state of incorporation.
Section 2.04. Notice of Meetings. Notification of the annual meeting shall
state the purpose or purposes for which the meeting is called and the date,
time, and the place, which may be within or without this state, where it is to
be held. A copy of such notice shall be either delivered personally to, or shall
be mailed with postage prepaid, to each stockholder of record entitled to vote
at such meeting not less than ten (10) nor more than sixty (60) days before such
meeting. If mailed, notice shall be directed to a stockholder at his address as
it appears upon the records of the corporation. Upon such mailing of any such
notice, the service thereof shall be complete and the time of the notice shall
begin to run from the date upon such notice is deposited in the mail for
transmission to said stockholder. Personal delivery of such notice to any
officer of a corporation, association, or any member of a partnership, shall
constitute delivery of such notice to such corporation, association, or any
member of a partnership.
Section 2.05. Waiver of Notice. If all the stockholders of the corporation
shall waive notice of the annual or special meeting, no notice of such meeting
shall be required. Further, whenever all the stockholders shall meet in person
or by proxy, such meeting shall be valid for all purposes without call or
notice, and at such meeting any corporate action may be taken.
Section 2.06. Default Notice. If the address of any stockholder does not
appear upon the books of the corporation, it will be sufficient to address any
notice to said stockholder at the registered office of the corporation within
the state of Nevada.
Section 2.07. Fixing Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any annual meeting of
shareholders or any adjournment thereof, or shareholders entitled to receive
payment of any dividend or in order to make a determination of shareholders for
any other proper purpose, the Board of Directors of the corporation may provide
that the share transfer books shall be closed, for the purpose of determining
shareholders entitled to notice of or to vote at such meeting, but not for a
period exceeding sixty (60) days. If the share transfer books are closed for the
Page 2 of 18
<PAGE>
purpose of determining shareholders entitled to notice of or to vote at such
meeting, such books shall be closed for at least ten (10) days immediately
preceding such meeting.
In lieu of closing the share transfer books, the Board of Directors may fix
in advance a date as the record date for any such determination of shareholders,
such date in any case to be not more than sixty (60) and, in case of a meeting
of shareholders, not less than ten (10) days prior to the date on which the
particular action requiring such determination of shareholders is to be taken.
If the share transfer books are not closed and no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting or
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 Board of Directors declaring
such dividend is adopted, as the case may be, shall be the record date for such
determination of shareholders. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this Section,
such determination shall apply to any adjournment thereof. Failure to comply
with this Section shall not affect the validity of any action taken at a meeting
of shareholders.
Section 2.08. Voting Lists. At each meeting of the stockholders, a full,
true and complete list, in alphabetical order, of all the stockholders entitled
to vote at such meeting, and indicating the number of shares held by each,
certified by the Secretary of the corporation, shall be furnished, which list
shall be prepared not less than ten (10) nor more than sixty (60) days before
such meeting, and shall be open to the inspection of the stockholders, or their
agents or proxies, at the place where such meeting is to be held, and not less
than ten (10) nor more than sixty (60) days prior thereto. Only the persons in
whose names shares of stock are registered on the books of the corporation for
not less than ten (10) nor more than sixty (60) days preceding the date of such
meeting, as evidenced by the list of stockholders so furnished, shall be
entitled to vote at such meeting. Proxies and powers of attorney to vote must be
filed with the secretary of the corporation before an election or a meeting of
the stockholders, or they cannot be used at such election or meeting.
Section 2.09. Voting Rights. At each meeting of the stockholders, every
stockholder shall be entitled to vote in person or by his or her duly authorized
proxy appointed by instrument in writing subscribed by such stockholder or by
his or her duly authorized attorney. Each stockholder shall have one (1) vote
for each share of stock standing registered in his or her or its name on the
books of the corporation. The votes for directors, and upon demand by any
stockholder, the votes upon any question before the meeting, shall be by viva
voce.
Section 2.10. Quorum. At all stockholders' meetings, the holders of a
majority of the entire issued and outstanding capital stock of the corporation,
shall constitute a quorum for all purposes of such meetings.
If holders of the amount of stock necessary to constitute a quorum shall
fail to attend, in person or by proxy, at the time and place fixed by these
Bylaws for any annual meeting, or fixed by a notice as above provided for a
special meeting, a majority in interest of the stockholders present in person or
by proxy may adjourn from time to time without notice other than by announcement
at the meeting, until holders of the amount of stock requisite to constitute a
quorum shall attend. At any such adjourned meeting at which a quorum shall be
present, any business may be transacted which might have been transacted as
originally called.
Page 3 of 18
<PAGE>
Section 2.11. Proxies. At each meeting of the shareholders, each
shareholder entitled to vote shall be entitled to vote in person or by proxy;
provided, however, that the right to vote by proxy shall exist only in case the
instrument authorizing such proxy to act shall have been executed in writing by
the registered holder or holders of such shares, as the case may be, as shown on
the share transfer of the corporation or by his or her or her attorney thereunto
duly authorized in writing. Such instrument authorizing a proxy to act shall be
delivered at the beginning of such meeting to the secretary of the corporation
or to such other officer or person who may, in the absence of the secretary, be
acting as secretary of the meeting. In the event that any such instrument shall
designate two or more persons to act as proxies, a majority of such persons
present at the meeting, or if only one be present, that one shall (unless the
instrument shall otherwise provide) have all of the powers conferred by the
instrument on all persons so designated. Persons holding stock in a fiduciary
capacity shall be entitled to vote the shares so held and the persons whose
shares are pledged shall be entitled to vote, unless in the transfer by the
pledge or on the books of the corporation he or she shall have expressly
empowered the pledgee to vote thereon, in which case the pledgee, or his or her
or her proxy, may represent such shares and vote thereon.
Section 2.12. Voting Procedures. At each meeting of the stockholders, the
polls shall be opened and closed; the proxies and ballots issued, received, and
be taken in charge of, for the purpose of the meeting, and all questions
touching the qualifications of voters and the validity of proxies, and the
acceptance or rejection of votes, shall be decided by two (2) inspectors. The
presiding officer of the meeting shall appoint such inspectors at or prior to
the meeting.
Section 2.13. Written Consent by Majority of Stockholders. In accordance
with NRS 78.320(b)(2), any action which may be taken at any annual or special
meeting of the stockholders may be taken without a meeting and without prior
notice if consent thereto is signed by stockholders holding at least a majority
of the voting power, except that if a different proportion of voting power is
required for such an action at a meeting, then that proportion of written
consent is required.
Section 2.14. Order of Business. At the stockholders' meetings, the regular
order of business shall be as follows:
(a) Reading and approval of the Minutes of previous meeting or
meetings; (b) Reports of the Board of Directors, the President,
Chief Financial Officer and Secretary of the corporation in the
order named; (c) Reports of Committees; (d) Election of
Directors; (e) Unfinished business; (f) New business; (g)
Adjournment.
Page 4 of 18
<PAGE>
ARTICLE III.
DIRECTORS AND THEIR MEETINGS
Section 3.01. General Powers. The property, affairs, and business of the
corporation shall be managed by its Board of Directors. The Board of Directors
is vested with the complete and unrestrained authority in the management of all
the affairs of the corporation, and is authorized to exercise for such purpose
as the General Agent of the corporation, its entire corporate authority. The
Board of Directors may exercise all the powers of the corporation whether
derived from law or the Articles of Incorporation, except such powers as are by
statute, by the Articles of Incorporation or by these Bylaws, vested solely in
the shareholders of the corporation.
Section 3.02. Number, Term, and Qualifications. The Board of Directors of
the corporation shall consist of such number, not less than three (3) or more
than seven (7) persons or such number as shall be fixed from time to time by the
Board of Directors. Each director shall hold office until the next annual
meeting of shareholders of the corporation and until his or her successor shall
have been duly elected and qualified. Directors need not be citizens of the
United States or residents of the state of incorporation or shareholders of the
corporation.
Section 3.03. Resignations. A director may resign at any time by delivering
a written resignation to either the president, a vice president, the secretary,
or assistant secretary, if any. The resignation shall become effective on its
acceptance by the Board of Directors; provided that if the board has not acted
thereon within ten days from the date presented, the resignation shall be deemed
accepted.
Section 3.04. Removal. At a meeting expressly called for that purpose, one
or more directors may be removed by a vote of a majority of the shares of
outstanding stock of the corporation entitled to vote at an election of
directors.
Section 3.05. Vacancies and Newly Created Directorship. All vacancies,
including those caused by an increase in the number of directors, may be filled
by a majority of the remaining directors, though less than a quorum, unless it
is otherwise provided in the Articles of Incorporation.
Section 3.06. Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this bylaw immediately following, and at
the same place as, the annual meeting of shareholders. The Board of Directors
may provide by resolution the time and place, either within or without the state
of incorporation, for the holding of additional regular meetings without other
notice than such resolution.
Section 3.07. Special Meetings. Special meetings of the Board of Directors
may be held on the call of the Chairman of the Board, Chief Executive Officer,
President, Vice President, Chief Financial Officer or Secretary on at least one
(1) day notice by mail, facsimile, e-mail or telegraph to directors' resident in
the State of Nevada, and on at least three (3) days notice by mail, or three (3)
days notice by mail, facsimile, e-mail or telegraph, to directors not resident
in said state.
Page 5 of 18
<PAGE>
Any meeting of the Board, no matter where held, at which all of the members
shall be present, even though without or of which notice shall have been waived
by all absentees, provided a quorum shall be present, shall be valid for all
purposes unless otherwise indicated in the notice calling the meeting or in the
waiver of notice. Any and all business may be transacted by any meeting, either
regular or special, of the Board of Directors.
Section 3.08. Location of Directors Meeting. Meetings of the directors may
be held at the principal office of the corporation in the State of Nevada, or
elsewhere, at such place or places as the Board of Directors may, from time to
time, determine.
Section 3.09. Meetings by Telephone Conference Call. The Board of Directors
may provide, by resolution, for the holding of additional regular meetings,
without notice other than such resolution. The Board of Directors may hold any
such additional regular meetings by telephone conference or other means of
electronic communication by which all directors can hear and speak to each of
the other directors.
Section 3.10. Quorum. A majority of the Board of Directors in office shall
constitute a quorum for the transaction of business, but if at any meeting of
the Board there be less than a quorum present, a majority of those present may
adjourn from time to time, until a quorum shall be present, and no notice of
such adjournment shall be required. The Board of Directors may prescribe rules
not in conflict with these Bylaws for the conduct of its business; provided,
however, that in the fixing of salaries of the officers of the corporation, the
unanimous action of all the directors shall be required.
Section 3.11. Manner of Acting. The act of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, and the individual directors shall have no power as such.
Section 3.12. Written Consent to Action by Directors. In accordance with
NRS 78.315(2), any action required or permitted to be taken at any annual or
special meeting of board of directors, or of a committee thereof may be taken
without a meeting, if before or after the action consent thereto is signed by
all members of the board or the committee.
Section 3.13. Order of Business. The regular order of business at meetings
of the Board of Directors shall be as follows:
(a) Reading and approval of the minutes of any previous meeting or
meetings;
(b) Reports of officers and committeemen;
(c) Election of officers;
(d) Unfinished business;
(e) New business;
(f) Adjournment.
Page 6 of 18
<PAGE>
Section 3.14. Report to and Action on behalf of the Stockholders. The Board
of Directors shall make a report to the stockholders at annual meetings of the
stockholders of the condition of the corporation, and shall furnish each of the
stockholders with a true copy thereof upon request.
The Board of Directors, in its discretion, may submit any contract or act
for approval or ratification at any annual meeting of the stockholders called
for the purpose of considering any such contract or act, which, if approved, or
ratified by the vote of the holders of a majority of the capital stock
represented in person or by proxy at such meeting, provided that a lawful quorum
of stockholders be there represented in person or by proxy, shall be valid and
binding upon the corporation and upon all the stockholders thereof, as if it had
been approved or ratified by every stockholder of the corporation.
Section 3.15. Formation of Executive Committee. The Board of Directors may,
by resolution passed by a majority of the whole Board, designate an Executive
Committee. This Committee shall consist of two (2) or more members besides the
President, who by virtue of his or her office, shall be a member and the
chairman thereof. The Committee shall in the interim between the meetings of the
Board, exercise all powers of that body in accordance with the general policy of
the corporation and under the direction of the Board of Directors. It shall also
attend to and supervise all the financial operations of the corporation, and
shall examine and audit all the corporation's accounts at the close of each
fiscal year, and at such other times, as it may deem necessary. The Secretary
shall be the Secretary of the Committee and shall attend its meetings, and its
meetings shall be held on the call of the President. All members of the
Committee must be given at least two (2) days notice of meetings either by mail,
facsimile, e-mail or telegraph or by personal communication, either by telephone
or otherwise. A majority of the members of the Committee shall keep due records
of all meetings and actions of the Committee, and such records shall at all
times be open to the inspection of any director.
Section 3.16. Compensation. By resolution of the Board of Directors, the
directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors, and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
Section 3.17. Presumption of Assent. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his or her or her dissent shall be entered in the minutes of the meeting, unless
he or she shall file his or her or her written dissent to such action with the
person acting as the secretary of the meeting before the adjournment thereof, or
shall forward such dissent by registered or certified 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.
Page 7 of 18
<PAGE>
ARTICLE IV.
-----------
OFFICERS AND THEIR DUTIES
-------------------------
Section 4.01. Number. The officers of the corporation shall be a president,
one or more vice-presidents, as shall be determined by resolution of the Board
of Directors, a secretary, a treasurer, and such other officers as may be
appointed by the Board of Directors. The Board of Directors may elect, but shall
not be required to elect, a chairman of the board and the Board of Directors may
appoint a general manager.
Section 4.02. Election, Term of Office, and Qualifications. The officers
shall be chosen by the Board of Directors annually at its annual meeting. In the
event of failure to choose officers at an annual meeting of the Board of
Directors, officers may be chosen at any regular or special meeting of the Board
of Directors. Each such officer (whether chosen at an annual meeting of the
Board of Directors to fill a vacancy or otherwise) shall hold his or her office
until the next ensuing annual meeting of the Board of Directors and until his or
her successor shall have been chosen and qualified, or until his or her death,
or until his or her resignation or removal in the manner provided in these
Bylaws. Any one person may hold any two or more of such offices, except that the
president shall not also be the secretary. No person holding two or more offices
shall act in or execute any instrument in the capacity of more than one office.
The chairman of the board, if any, shall be and remain a director of the
corporation during the term of his or her office. No other officer need be a
director.
Section 4.03. Subordinate Officers, Etc. The Board of Directors may from
time to time, by resolution, appoint such additional Vice Presidents and
additional Assistant Secretaries, Assistant Chief Financial Officers and
Transfer Agents as it may deem advisable; prescribe their duties, fix their
compensation, and all such appointed officers shall be subject to removal at any
time by the Board of Directors. All officers, agents and factors shall be chosen
and appointed in such manner and shall hold their office for such terms as the
Board of Directors may by resolution prescribe.
Section 4.04. Resignations. Any officer may resign at any time by
delivering a written resignation to the Board of Directors, the president, or
the secretary. Unless otherwise specified therein, such resignation shall take
effect on delivery.
Section 4.05. Removal. Any officer may be removed from office at any
special meeting of the Board of Directors called for that purpose or at a
regular meeting, by vote of a majority of the directors, with or without cause.
Any officer or agent appointed in accordance with the provisions of Section 4.03
hereof may also be removed, either with or without cause, by any officer on whom
such power of removal shall have been conferred by the Board of Directors.
Section 4.06. Vacancies and Newly Created Offices. If any vacancy shall
occur in any office by reason of death, resignation, removal, disqualification,
or any other cause, or if a new office shall be created, then such vacancies or
new created offices may be filled by the Board of Directors at any regular or
special meeting.
Page 8 of 18
<PAGE>
Section 4.07. The Chairman of the Board. The Chairman of the Board, if
there be such an officer, shall have the following powers and duties.
(a) He or she shall preside at all shareholders' meetings;
(b) He or she shall preside at all meetings of the Board of Directors; and
(c) He or she shall be a member of the executive committee, if any.
Section 4.08. The President. The president shall have the following powers
and duties:
(a) He or she shall be the chief executive officer of the corporation, and,
subject to the direction of the Board of Directors, shall have general charge of
the business, affairs, and property of the corporation and general supervision
over its officers, employees, and agents;
(b) If no chairman of the board has been chosen, or if such officer is
absent or disabled, he or she shall preside at meetings of the shareholders and
Board of Directors;
(c) He or she shall be a member of the executive committee, if any;
(d) He or she shall be empowered to sign certificates representing shares
of the corporation, the issuance of which shall have been authorized by the
Board of Directors; and
(e) He or she shall have all power and shall perform all duties normally
incident to the office of a president of a corporation, and shall exercise such
other powers and perform such other duties as from time to time may be assigned
to him or her by the Board of Directors.
Section 4.09. The Vice Presidents. The Board of Directors may, from time to
time, designate and elect one or more vice presidents, one of whom may be
designated to serve as executive vice president. Each vice president shall have
such powers and perform such duties as from time to time may be assigned to him
or her by the Board of Directors or the president. At the request or in the
absence or disability of the president, the executive vice president or, in the
absence or disability of the executive vice president, the vice president
designated by the Board of Directors or (in the absence of such designation by
the Board of Directors) by the president, the senior vice president, may perform
all 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.
Section 4.10. Chief Financial Officer. The Chief Financial Officer shall
have the custody of all the funds and securities of the corporation. When
necessary or proper, he or she shall endorse on behalf of the corporation for
collection checks, notes, an other obligations; he or she shall jointly with
such other officer as shall be designated by these Bylaws, sign all checks made
by the corporation, and shall pay out and dispose of the same under the
direction of the Board of Directors. The Chief Financial Officer shall sign with
the President all bills of exchange and promissory notes of the corporation; he
Page 9 of 18
<PAGE>
or she shall also have the care and custody of the stocks, bonds, certificates,
vouchers, evidence of debts, securities, and such other property belonging to
the corporation as the Board of Directors shall designate; he or she shall sign
all papers required by law or by these By-laws or the Board of Directors to be
signed by the Chief Financial Officer. Whenever required by the Board of
Directors, the Chief Financial Officer shall render a statement of the
corporation's cash account; he or she shall enter regularly in the books of the
corporation to be kept by him or her for the purpose, full and accurate accounts
of all moneys received and paid by him or her on account of the corporation. The
Chief Financial Officer shall at all reasonable times exhibit the books of
account to any Director of the corporation during business hours, and shall
perform all acts incident to the position of Chief Financial Officer subject to
the control of the Board of Directors.
The Chief Financial Officer shall, if required by the Board of Directors,
give bond to the corporation conditioned for the faithful performance of all his
or her duties as Chief Financial Officer in such sum, and with such security as
shall be approved by the Board of Directors, with the expense of such bond to be
borne by the corporation.
Section 4.11. Salaries. The salaries and other compensation of the officers
of the corporation shall be fixed from time to time by the Board of Directors,
except that the Board of Directors may delegate to any person or group of
persons the power to fix the salaries or other compensation of any subordinate
officers or agents appointed in accordance with the provisions of Section 4.03
hereof. No officer shall be prevented from receiving any such salary or
compensation by reason of the fact that he or she is also a director of the
corporation.
Section 4.12. Surety Bonds. In case the Board of Directors shall so
require, any officer or agent of the corporation shall execute to the
corporation a bond in such sums and with such surety or sureties as the Board of
Directors may direct, conditioned upon the faithful performance of his or her
duties to the corporation, including responsibility for negligence and for the
accounting of all property, monies, or securities of the corporation which may
come into his or her hands.
ARTICLE V.
----------
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
----------------------------------------
Section 5.01. How Constituted. The Board of Directors may designate an
executive committee and such other committees as the Board of Directors may deem
appropriate, each of which committees shall consist of two or more directors.
Members of the executive committee and of any such other committees shall be
designated annually at the annual meeting of the Board of Directors; provided,
however, that at any time the Board of Directors may abolish or reconstitute the
executive committee or any other committee. Each member of the executive
committee and of any other committee shall hold office until his or her
successor shall have been designated or until his or her resignation or removal
in the manner provided in these Bylaws.
Section 5.02. Powers. During the intervals between meetings of the Board of
Directors, the executive committee shall have and may exercise all powers of the
Board of Directors in the management of the business and affairs of the
corporation, except for the power to fill vacancies in the Board of Directors or
to amend these Bylaws, and except for such powers as by law may not be delegated
by the Board of Directors to an executive committee.
Page 10 of 18
<PAGE>
Section 5.03. Proceedings. The executive committee, and such other
committees as may be designated hereunder by the Board of Directors, may fix its
own presiding and recording officer or officers, and may meet at such place or
places, at such time or times and on such notice (or without notice) as it shall
determine from time to time. It will keep a record of its proceedings and shall
report such proceedings to the Board of Directors at the meeting of the Board of
Directors next following.
Section 5.04. Quorum and Manner of Acting. At all meetings of the executive
committee, and of such other committees as may be designated hereunder by the
Board of Directors, the presence of members constituting a majority of the total
authorized membership of the committee shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the act of a majority
of the members present at any meeting at which a quorum is present shall be the
act of such committee. The members of the executive committee, and of such other
committees as may be designated hereunder by the Board of Directors, shall act
only as a committee and the individual members thereof shall have no powers as
such.
Section 5.05. Vacancies. If any vacancies shall occur in the executive
committee or of any other committee designated by the Board of Directors
hereunder, by reason of disqualification, death, resignation, removal, or
otherwise, the remaining members shall, until the filling of such vacancy,
constitute the then total authorized membership of the committee and, provided
that two or more members are remaining, continue to act. Such vacancy may be
filled at any meeting of the Board of Directors.
Section 5.06. Compensation. The Board of Directors may allow a fixed sum
and expenses of attendance to any member of the executive committee, or of any
other committee designated by it hereunder, who is not an active salaried
employee of the corporation for attendance at each meeting of said committee.
Section 5.07. Resignations. Any member of the executive committee, and of
such other committees as may be designated hereunder by the Board of Directors,
may resign at any time by delivering a written resignation to either the
president, the secretary, or assistant secretary, or to the presiding officer of
the committee of which he or she is a member, if any shall have been appointed
and shall be in office. Unless otherwise specified herein, such resignation
shall take effect on delivery.
Section 5.08. Removal. The Board of Directors may at any time remove any
member of the executive committee or of any other committee designated by it
hereunder either for or without cause.
Page 11 of 18
<PAGE>
ARTICLE VI.
-----------
EXECUTION OF INSTRUMENTS, BORROWING OF MONEY,
---------------------------------------------
AND DEPOSIT OF CORPORATE FUNDS
------------------------------
Section 6.01. Execution of Instruments. Subject to any limitation contained
in the Articles of Incorporation or these Bylaws, the president or vice
president, may, in the name and on behalf of the corporation, execute and
deliver any contract or other instrument authorized in writing by the Board of
Directors. The Board of Directors may, subject to any limitation contained in
the Articles of Incorporation or in these Bylaws, authorize in writing any
officer or agent to execute and delivery any contract or other instrument in the
name and on behalf of the corporation; any such authorization may be general or
confined to specific instances.
Section 6.02. Loans. No loans or advances shall be contracted on behalf of
the corporation, no negotiable paper or other evidence of its obligation under
any loan or advance shall be issued in its name, and no property of the
corporation shall be mortgaged, pledged, hypothecated, transferred, or conveyed
as security for the payment of any loan, advance, indebtedness, or liability of
the corporation, unless and except as authorized by the Board of Directors. Any
such authorization may be general or confined to specific instances.
Section 6.03. Deposits. All moneys of the corporation shall be deposited
when and as received by the Chief Financial Officer in such bank or banks or
other depository as may from time to time be designated by the Board of
Directors, and such deposits shall be made in the name of the corporation.
Section 6.04. Checks, Drafts, Etc. No note, draft, acceptance, endorsement
to other evidence of indebtedness shall be valid or against the corporation
unless the same shall be signed by the President or a Vice President, and
attested by the Secretary or an Assistant Secretary, or signed by the Chief
Financial Officer or an Assistant Chief Financial Officer and countersigned by
the President, Vice President, or Secretary, except that the Chief Financial
Officer or an Assistant Chief Financial Officer, may, without countersignature,
sign payroll checks and make endorsements for deposit to the credit of the
corporation in all its duly authorized depositories. No check or order for money
shall be signed in blank by more than one (1) officer of the corporation.
Section 6.05. Bonds and Debentures. Every bond or debenture issued by the
corporation shall be evidenced by an appropriate instrument which shall be
signed by the president or a vice president and by the secretary and sealed with
the seal of the corporation. The seal may be a facsimile, engraved or printed.
Where such bond or debenture is authenticated with the manual signature of an
authorized officer of the corporation or other trustee designated by the
indenture of trust or other agreement under which such security is issued, the
signature of any of the corporation's officers named thereon may be a facsimile.
In case any officer who signed, or whose facsimile signature has been used on
any such bond or debenture, should cease to be an officer of the corporation for
any reason before the same has been delivered by the corporation, such bond or
debenture may nevertheless be adopted by the corporation and issued and
delivered as through the person who signed it or whose facsimile signature has
been used thereon had not ceased to be such officer. The corporation shall make
no loan or advance of money to any stockholder or officer therein unless the
Board of Directors shall otherwise authorize.
Page 12 of 18
<PAGE>
Section 6.06. Sale, Transfer, Etc. of Securities. Sales, transfers,
endorsements, and assignments of stocks, bonds, and other securities owned by or
standing in the name of the corporation, and the execution and delivery on
behalf of the corporation of any and all instruments in writing incident to any
such sale, transfer, endorsement, or assignment, shall be effected by the
president, or by any vice president, together with the secretary, or by any
officer or agent thereunto authorized by the Board of Directors.
Section 6.07. Proxies. Proxies to vote with respect to shares of other
corporations owned by or standing in the name of the corporation shall be
executed and delivered on behalf of the corporation by the president or any vice
president and the secretary or assistant secretary of the corporation, or by any
officer or agent thereunder authorized by the Board of Directors.
Section 6.08. Mortgages and Liens. The directors shall have the power to
authorize and cause to be executed, mortgages and liens without limit as to
amount upon the property and franchise of this corporation, and pursuant to the
affirmative vote, either in person or by proxy, of the holders of a majority of
the capital stock issued and outstanding; the directors shall have authority to
dispose in any manner of the whole property of this corporation.
ARTICLE VII.
------------
CAPITAL STOCK
-------------
Section 7.01. Issuance. The capital stock of the corporation shall be
issued in such manner and at such times and upon such conditions as shall be
prescribed by the Board of Directors.
Section 7.02. Stock Certificates. Ownership of stock in the corporation
shall be evidenced by certificates of stock in such forms as shall be prescribed
by the Board of Directors, and shall be under the seal of the corporation and
signed by the President or the Vice President and also by the Secretary or an
Assistant Secretary. All certificates shall be consecutively numbered; the name
of the person owing the shares represented thereby with the number of shares and
the date of issue shall be entered on the corporation's books. No certificates
shall be valid unless it is signed by the President or Vice President and by the
Secretary or Assistant Secretary. All certificates surrendered to the
corporation shall be canceled and no new certificate shall be issued until the
former certificate for the same number of shares shall have been surrendered or
canceled.
Section 7.03. Stock Transfer. No transfer of stock shall be valid as
against the corporation except on surrender and cancellation of the certificate
therefor, made either in person or under assignment; a new certificate shall be
issued therefor. Whenever any transfer shall be expressed as made for collateral
security and not absolutely, the same shall be so expressed in the entry of said
transfer on the books of the corporation.
Page 13 of 18
<PAGE>
Section 7.04. Transfer Rules and Transfer Agent. The Board of Directors
shall have the power and authority to make all such rules and regulations not
inconsistent herewith as it may deem expedient concerning the issue, transfer
and registration of certificates for shares of the capital stock of the
corporation. The Board of Directors may appoint a transfer agent and a registrar
of transfers and may require all stock certificates to near the signature of
each transfer agent and such registrar of transfer.
Section 7.05. Stock Ledgers. The Stock Transfer Books shall be closed for
all meetings of the stockholders for the period of ten (10) days prior to such
meetings and shall be closed for the payment of dividends during such periods
from time to time may be fixed by the Board of Directors, and during such
periods no stock shall be transferable.
Section 7.06. Lost or Destroyed Certificates. The corporation may issue a
new certificate for shares of the corporation in place of any certificate
theretofore issued by it, alleged to have been lost or destroyed, and the Board
of Directors may, in its discretion, require the owner of the lost or destroyed
certificate or his or her legal representatives, to give the corporation a bond
in such form and amount as the Board of Directors may direct, and with such
surety or sureties as may be satisfactory to the board, to indemnify the
corporation and its transfer agents and registrars, if any, against any claims
that may be made against it or any such transfer agent or registrar on account
of the issuance of such new certificate. A new certificate may be issued without
requiring any bond when, in the judgment of the Board of Directors, it is proper
to do so.
Section 7.07. Closing of Transfer Books and Fixing of Record Date.
-------------------------------------------------------------------
(a) The Board of Directors shall have power to close the share books of the
corporation for a period of not to exceed sixty (60) days preceding the date of
any meeting of shareholders, or the date for payment of any dividend, or the
date for the allotment of rights, or capital shares shall go into effect, or a
date in connection with obtaining the consent of shareholders for any purpose.
(b) In lieu of closing the share transfer books as aforesaid, the Board of
Directors may fix in advance a date, not exceeding sixty (60) days preceding the
date of any meeting of shareholders, or the date for the payment of any
dividend, or the date for the allotment of rights, or the date when any change
or conversion or exchange of capital shares shall go into effect, or a date in
connection with obtaining any such consent, as a record date for the
determination of the shareholders entitled to a notice of, and to vote at, any
such meeting and any adjournment thereof, or entitled to receive payment of any
such dividend, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, or to give
such consent.
(c) If the share transfer books shall be closed or a record date set for
the purpose of determining shareholders entitled to notice of or to vote at a
meeting of shareholders, such books shall be closed for, or such record date
shall be, at least ten (10) days immediately preceding such meeting.
Page 14 of 18
<PAGE>
Section 7.08. No Limitation on Voting Rights; Limitation on Dissenter's
Rights. To the extent permissible under the applicable law of any jurisdiction
to which the corporation may become subject by reason of the conduct of
business, the ownership of assets, the residence of shareholders, the location
of offices or facilities, or any other item, the corporation elects not to be
governed by the provisions of any statute that (i) limits, restricts, modified,
suspends, terminates, or otherwise affects the rights of any shareholder to cast
one vote for each share of common stock registered in the name of such
shareholder on the books of the corporation, without regard to whether such
shares were acquired directly from the corporation or from any other person and
without regard to whether such shareholder has the power to exercise or direct
the exercise of voting power over any specific fraction of the shares of common
stock of the corporation issued and outstanding or (ii) grants to any
shareholder the right to have his or her stock redeemed or purchased by the
corporation or any other shareholder on the acquisition by any person or group
of persons of shares of the corporation. In particular, to the extent permitted
under the laws of the state of incorporation, the corporation elects not to be
governed by any such provision, including the provisions of the Nevada Control
Share Acquisitions Act, Sections 78.378 to 78.3793, inclusive, of the Nevada
Revised Statutes, or any statute of similar effect or tenor.
Section 7.09. Dividends. The Board of Directors shall have the power to
reserve over and above the capital stock paid in, such an amount, in its
discretion, as it may deem advisable to fix as a reserve fund, and may, from
time to time, declare dividends from the accumulated profits of the corporation
in excess of the amounts so reserved, and pay the same to the stockholders of
the corporation, and may also, if it deems the same advisable, declare stock
dividends of the unissued capital stock.
ARTICLE VIII.
-------------
INDEMNIFICATION, INSURANCE, AND OFFICER AND DIRECTOR CONTRACTS
--------------------------------------------------------------
Section 8.01. Indemnification: Third Party Actions. The corporation shall
have the power to indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending, or completed action, or suit by or
in the right of the corporation to procure a judgment in its favor by reason of
the fact that he or she is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys'
fees) judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him or her in connection with any such action, suit or proceeding,
if he or she acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful. The termination of any action, suit, or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the corporation, and
with respect to any criminal action or proceeding, he or she had reasonable
cause to believe that his or her conduct was unlawful.
Page 15 of 18
<PAGE>
Section 8.02. Indemnification; Corporate Actions. The corporation shall
have the power to indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending, or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of the
fact that he or she is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection with the
defense or settlement of such action or suit, if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification shall be made
in respect of any claim, issue, or matter as to which such a person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his or her duty to the corporation, unless and only to the extent that the court
in which the action or suit was brought shall determine on application that,
despite the adjudication of liability but in view of all circumstances of the
case, the person is fairly and reasonably entitled to indemnity for such
expenses as the court deems proper.
Section 8.03. Determination. To the extent that a director, officer,
employee, or agent of the corporation has been successful on the merits or
otherwise in defense of any action, suit, or proceeding referred to in Sections
8.01 and 8.02 hereof, or in defense of any claim, issue, or matter therein, he
or she shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection therewith. Any
other indemnification under Sections 8.01 and 8.02 hereof, shall be made by the
corporation upon a determination that indemnification of the officer, director,
employee, or agent is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in Sections 8.01 and 8.02 hereof. Such
determination shall be made either (i) by the Board of Directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit, or proceeding; or (ii) by independent legal counsel on a written opinion;
or (iii) by the shareholders by a majority vote of a quorum of shareholders at
any meeting duly called for such purpose.
Section 8.04. General Indemnification. The indemnification provided by this
Section shall not be deemed exclusive of any other indemnification granted under
any provision of any statute, in the corporation's Articles of Incorporation,
these Bylaws, agreement, vote of shareholders or disinterested directors, or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee, or agent, and shall inure to
the benefit of the heirs and legal representatives of such a person.
Section 8.05. Advances. Expenses incurred in defending a civil or criminal
action, suit, or proceeding as contemplated in this Section may be paid by the
corporation in advance of the final disposition of such action, suit, or
proceeding upon a majority vote of a quorum of the Board of Directors and upon
receipt of an undertaking by or on behalf of the director, officers, employee,
or agent to repay such amount or amounts unless if it is ultimately determined
that he or she is to indemnified by the corporation as authorized by this
Section.
Page 16 of 18
<PAGE>
Section 8.06. Scope of Indemnification. The indemnification authorized by
this Section shall apply to all present and future directors, officers,
employees, and agents of the corporation and shall continue as to such persons
who ceases to be directors, officers, employees, or agents of the corporation,
and shall inure to the benefit of the heirs, executors, and administrators of
all such persons and shall be in addition to all other indemnification permitted
by law.
Section 8.07. Insurance. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, employee, or agent
of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against any liability asserted against him
or her and incurred by him or her in any such capacity, or arising out of his or
her status as such, whether or not the corporation would have the power to
indemnify him or her against any such liability and under the laws of the state
of incorporation, as the same may hereafter be amended or modified.
ARTICLE IX.
-----------
MISCELLANEOUS
-------------
Section 9.01. Company Records. A copy of the Stock and Transfer Books,
Articles of Incorporation and the Bylaws of the corporation shall be kept at its
principal office of the corporation in the State of Nevada, and at such other
places as may be prescribed by the Board of Directors.
Section 9.02. Salaries. No director nor executive officer shall be entitled
to any salary or compensation for any services performed for the corporation,
unless such salary or compensation shall be fixed by resolution of the Board of
Directors, adopted by the unanimous vote of all of the directors voting in favor
thereof.
ARTICLE X.
----------
AMENDMENT OF BYLAWS
-------------------
Section 10.01. Amendment Procedures. Amendments and changes of these Bylaws
may be made at any regular or special meeting of the Board of Directors by a
majority vote of the Board of Directors, or may be made by a vote of, or a
consent in writing signed by, the holders of a majority of the issued and
outstanding capital stock.
Page 17 of 18
<PAGE>
CERTIFICATE OF SECRETARY
The undersigned does hereby certify that he is the secretary of ZiaSun
Technologies, Inc., a corporation duly organized and existing under and by
virtue of the laws of the State of Nevada; that the above and foregoing Bylaws
of said corporation were duly adopted by the Board of Directors of the
corporation and by the Shareholders of the corporation, and that the above and
foregoing Bylaws are now in full force and effect.
Dated: 8/5/1999
/S/ Alfredo Alex S. Cruz III
--------------------------------
Alfredo Alex S. Cruz III - Secretary
Page 18 of 18
LICENSE AGREEMENT
THIS LICENSE AGREEMENT is made as of the 17th day of April, 1997, by and
between Fountain Fresh International, a corporation organized under the laws of
the State of Utah, U.S.A. (hereinafter referred to at times as the "Company" and
at times as Fountain Fresh) and Katori Consultants, Ltd., organized under the
laws of the British Virgin islands, its assignees, nominees 'or transferees
(hereinafter referred to at times as "Licensee").
R E C I T A L S
WHEREAS, Company has pioneered developed, patented and manufactures
In-store, self service, pressure fill, mini bottling plant/beverage centers for
worldwide distribution; and
WHEREAS, the Beverage Center Equipment is used to dispense Fountain Fresh
Beverages and purified water; and
WHEREAS, the Company operates under the name "Fountain Fresh under which
banner it has begun to establish an international network of purchasers of the
Beverage Center Equipment that have marketed and distributed the Beverage Center
Equipment in specific geographical territories; and
WHEREAS, Licensee recognizing the value of the Fountain Fresh products
wishes to act as the Company's distributor for the Beverage Center Equipment,
Optional Equipment and the Fountain Fresh Beverages and other Products, and the
Company is willing to appoint Licensee upon the terms and conditions specified
herein; and
WHEREAS, the business of Licensee will be, among other things, to place
Beverage Center Equipment and Optional Equipment in retail and wholesale
businesses to dispense Fountain Fresh' Beverages, to service and repair the
Beverage Center Equipment and to develop marketing, promotion and merchandising
programs for the Fountain Fresh Beverages, Beverage Center Equipment and
Optional Equipment and other Products.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and other good and valuable consideration, the receipt of which is acknowledged
by the Company and the Licensee, the Parties hereto agree to be bound and abide
by the following terms and conditions:
<PAGE>
1. DEFINITIONS
A. Beverage Center Equipment. The beverage dispenser and pump currently
referred to as the Beverage Center 2000 and all models, changes, improvements,
modifications thereto which Beverage Center is used for filling plastic
refillable bottles with carbonated and non-carbonated Beverage and Water
Products. The Beverage Center Equipment is also referred to herein at times as
the "Beverage Center".
B. Beverage(s). Beverage(s), as used herein, include all carbonated and
non-carbonated drinks made from the Company's Syrups, Juices, Purified Water,
and all other drink or syrup products produced or sold under the Fountain Fresh
trademark or label.
C. Beverage Dispensers. The equipment used for dispensing beverages
including the Beverage Center Equipment, the "Fountain Tower", the "Bubbler" and
the "Slush Machine".
D. Business Operating Unit. A Business Operating Unit is defined as fifteen
Beverage Centers plus a combination of Other Equipment as follows: forty
Fountain Towers, forty Bubblers and forth Slush Machines.
E. Bibs/Canister. One of the packaging units for the Syrups.
F. "Company" shall include the parent, any subsidiaries and other
affiliates of Fountain Fresh International, incorporated.
G. Concentrates. Fountain Fresh's basic flavor ingredients.
H. "Confidential Information" includes, but is not limited to, any and all
confidential inventions, trade secrets, manufacturing processes, know-how,
product designs, equipment designs, technical information, technical designs;
engineering data, specifications, blueprints, drawings, computer programs
formulas, recipes, compositions, profit margins, customer lists, vendor and
supplier lists and agreements, distributor and sales representative lists and
agreements, marketing and other business strategies, forms, sales aids, methods
of production, organization, pricing, discount structures, proposals and
correspondence and manufacturing processes and other confidential information
and materials that are heretofore or hereafter owned or controlled by the
Company and that relate to the design, production, operation, marketing, sale,
repair, distribution and use of the Products or that otherwise relate to the
business, products or services of the Company. Confidential Information shall
include any enhancements or modifications to any of the Products or any
components thereof developed or discovered by the Licensee or any of its
principals, stockholders, successors, assigns, agents or employees. The
-2-
<PAGE>
Licensee acknowledges and agrees that prior to the execution of this
Agreement it received samples or shipments of all of the Products and that
Fountain Fresh International's Confidential Property contained therein or
derivable therefrom are subject to the protection and restrictions of this
Agreement.
I. Dealers. Licensees, sub-licensees, franchisees or other Independent
agents selling, distributing or marketing the Products for Licensee In the
Territory.
J. "f.o.b." and "cif" shall have the meanings assigned to them in the ICC
terms, ICC Publication No. 350 (March 1980).
K. Ionization System. The water purifying system developed by the Company
and all Improvements, modifications, changes or adaptations and property rights
relating thereto.
L. Marketing Plan. Licensee's plan for the penetration of the Beverage
market and distribution of the Products in the Territory. It is anticipated that
Licensee will market the Products through distributors, sub-licensees,
franchisees or other independent agencies. The Marketing Plan must be approved
in writing by the Company and updated annually with the Company's written
approval. The Marketing Plan must include, among other items, a systematic plan
for penetrating the beverage market in the Territory, a list and background of
competitors and their market share, management, an estimate of market
penetration by year, an on-going five year forecast of Product sales, gross
sales projections by Product categories, estimated number of retail outlets
using the Equipment and their general location, advertising by media type and
financing and capital available for installation and service of the equipment
and implementation of the Marketing Plan.
M. Optional Equipment. The Company's alternative Beverage dispensers. This
equipment currently includes, but is not limited to, the "Fountain Tower", the
"Bubbler" and the "Slush Machine". The Fountain Tower is used to dispense
carbonated Beverages. The Bubbler is used to dispense non-carbonated Beverages.
The Slush Machine is used to dispense slushed-ice Beverages.
N. Patent Rights. Means the inventions and technology identified or
described in the Patents relating to the Beverage Center Equipment.
0. Products. Products refers to the Fountain Fresh Beverages, Syrups,
Water, Beverage Center Equipment, Optional Equipment and spare parts and
accessories as further described in Exhibit "A" attached hereto and by reference
made a part hereof and other products approved by the. Company from time to time
for sale by Licensee.
3
<PAGE>
P. Syrups. The Company's basic flavor Concentrates plus sugar and other
additives. The Syrups include, without limitation: carbonated flavors such as:
lemon lime, cola, diet cola, orange, rootbeer; non-carbonated flavors, juices,
and concentrates the formula for each of which constitutes confidential
Information and a trade secret of the Company.
Q. "Territory" The geographical area described on Exhibit "B" attached
hereto and by reference made a part hereof.
R. "Trademarks" refers to any and all of the trademarks, service marks,
trade names, logos and related commercial symbols whether or not registered by
the Company or Its subsidiaries or other affiliates in the Territory, Including
the trademarks set forth on Exhibit "C" attached hereto, and all good will
related thereto that are associated with the Products or any other business,
products and services of the Company or its affiliates.
S. Water. All water dispensed through the Beverage Centers, or Remote
Centers using the Fountain Fresh Ionization System or otherwise distributed or
sold by Licensee.
T. Remote Centers. Equipment related to the Beverage Centers used to
dispense Beverages separate from the Beverage Center itself (such as In the isle
or at the front of the store or for the Dealers own in-store use).
2. APPOINTMENT
A. Licensee. Subject to the terms and conditions of this Agreement and the
continuing performance by the Licensee of its obligations hereunder, except as
provided in paragraph 2D below, the Company grants to Licensee and Licensee
accepts appointment as the Company's exclusive distributor in the Territory to
market, sell, distribute, install and maintain the Products of the Company.
Licensee is authorized to promote, distribute and sell the Products only in the
Territory and Licensee is not authorized to sell, market or distribute any
products of the Company except as provided herein.
B. Licensee is authorized to market, sell and distribute the Products
through distributors, sub-licensees, franchisees or other independent agents and
Dealers as authorized in the Marketing Plan.
C. Product Modification. The Company may, in its sole discretion, upon
ninety days prior notice to Licensee: (a) modify, alter, improve, change or
discontinue any of the Products or Product lines; (b) make additions to,
deletions from or modifications in -the designs, specifications, components,
ingredients and packaging of 'any or all of the Products; (c) cease designing,
4
<PAGE>
developing, manufacturing and assembling any and all of the Products; and (d)
cease marketing, selling and distributing all or any of the Products from time
to time with prior notice to Licensee. Licensee shall have no claim against the
Company for damages resulting from any such modification, alteration,
improvement, change or discontinuance; however, this provision shall not affect
any express warranties of the Products.
D. Reservations. The Company reserves the right to sell, market and
distribute the Products in the Territory as follows:
E. Capital and Facilities. Licensee certifies that it has and will maintain
the knowledge, capital, facilities and personnel necessary to distribute,
promote and service the Products of the Company within the Territory in
accordance with its annually approved Marketing Plan.
F. Use of Name. Licensee shall not use the Company's Trademarks or any part
thereof as a part of Licensee's corporate name or any other name in which
Licensee may do business except as specifically provided herein. Licensee may
not use the name Fountain Fresh as a DBA or fictitious name in the Territory
without the express written permission of the Company. Licensee shall have a
right to use the trade name and trademarks, Fountain Fresh, and related
commercial symbols under a separate license in connection with Its Dealer
distribution and marketing program as provided in the Marketing Plan.
3. PRODUCT ORDERS AND TERMS OF SALE
A. Purchase Orders. Licensee shall purchase the Products from the Company
for its own account and shall re-sell the Products for its own account in the
Territory. Licensee shall not be deemed a sales agent for the Company. Licensee
shall purchase the Products pursuant to written orders on forms acceptable to
the Company. All purchase orders shall be deemed to incorporate the provisions
of this Agreement. Licensee agrees to comply with minimum orders for Products
and other requirements for Product orders reasonably established by the Company
from time to time. Licensee shall use its best efforts, based upon commercially
reasonable standards, to place purchase orders hereunder in a regular and even
fashion to assist the Company in efficiently scheduling production of the
Products.
B. Product Prices. The current purchase prices and certain other terms and
conditions for the purchase of the Beverage Center Equipment, Concentrates and
Syrups, Optional Equipment and certain spare parts as of the date hereof are set
5
<PAGE>
forth on Exhibit "D" attached hereto and incorporated herein. The purchase
prices for the Syrups and Concentrates shall be reasonably determined by the
Company from time to time, in good faith. Any Syrup or Concentrate price may be
reasonably changed, at any time, upon prior written notice to Licensee. The
Company may change, alter, delete or amend such terms and conditions of sale,
minimum order and prices for the non-concentrate and syrup Products at any time
and from time to time with 90 days prior written notice to Licensee for the
Equipment Products and 30 days for the other Non-Syrup Products. Prices are
f.o.b. the Company's warehouse. Payments by Licensee for all Products purchased
from the Company shall be made in United States Dollars, without any off-set or
counterclaim and free and clear of and without any deduction whatsoever. In
addition, Licensee shall pay a royalty on all Beverage sales as set forth in
paragraph 6B below. Failure to make payments when due shall constitute a
material breach of this Agreement. The Company may publish a suggested resale
price list from time to time, but Licensee is free to establish its own resale
prices and other terms and conditions under which it will re-sell the Products.
In the event Licensee falls to remit any payments due the Company under this
Agreement, the unpaid balance due to the Company shall bear Interest at eighteen
percent (18t) per annum or the permissible legal rate, whichever is lower, until
paid in full.
C. Acceptance of Orders. All orders for Products shall be subject to
acceptance by the Company. The Company will make reasonable efforts to see that
its manufacturing agent or agents promptly fill all accepted orders according to
instructions given by Licensee.
D. Taxes and Fees. Licensee shall pay and indemnify and hold the Company
harmless from all sales taxes, use taxes, Import taxes and other taxes of any
type levied upon the sale of Products and performance of this Agreement in the
Territory.
E. Shipping Costs and Insurance. All shipping charges and insurance shall
be borne by Licensee. Licensee shall be responsible for Product safety, care,
damage and insurance in shipping. Licensee shall, at its own expense, make and
negotiate all claims against. any carrier.
F. Defective Products. Each of the delivered Non-Syrup and Concentrate
Products shall be deemed accepted by Licensee unless notice of defect is
received within sixty (60) days of actual receipt (cif) thereof by Licensee and
the defective Product(s) are shipped back to the Company within the sixty (60)
day period or other arrangements are made. In the event of discovery of a
defective Non-Syrup Product, and such defect is determined by the Company to be
a valid complaint, Licensee's sole remedy shall be to exchange such defective
Product for a new one of the same type; provided, however nothing herein shall
6
<PAGE>
be construed as limiting the coverage of any Product liability insurance or
other insurance coverage of the Company or Licensee. A copy of the equipment
warranty of the Company is attached as Exhibit "E" hereto. Remedies for
defective Syrup and Concentrate Products shall be governed by the policies and
procedures of the respective manufacturers of the Syrups. Products may be
returned to the Company If required for repair. However, the Company must give
written authorization for any such returns.
G. Packaging of Products. The Products shall be packaged for sale as the
Company typically packages similar products. All packaging shall be in the
English language unless the Licensee provides otherwise In writing and provides
to the. Company true, complete and accurate specimens of all such packaging in
the requested foreign language. Packaging changes reasonably requested by
Licensee shall be made at Licensee's expense.
H. Beverage Dispenser Manufacturing. It is understood that the Company may
choose to manufacture the Beverage Center Equipment and Syrups itself or third
parties may manufacture the Beverage Center Equipment or Syrups either in the
United States or elsewhere, in Its discretion. At present, the Optional
Equipment Is manufactured for the Company by third parties under a private
label.
I. Initial Order. Licensee's initial order of the Products is attached
hereto at Exhibit "I" and by reference made a binding and material part hereof.
4. TERM
A. Initial Term. The initial term of this Agreement shall be for five (5)
years commencing on the date of execution of this Agreement.
B. Renewals. Licensee will have the option to renew this Licensee Agreement
at the expiration of the initial term hereof for an additional five (5) year
term and for up to a total of five (5) additional five (5) year successive terms
at the end of each subsequent renewal period for a total of thirty years;
provided that, at the time of each renewal:
(1) Licensee is not in material default of this Agreement, has timely paid
for all Products ordered, has substantially complied with the provisions of this
Agreement during the term hereof and agrees to execute the then standard form of
Agreement of the Company. Any changes that occur in future Agreements will be
commercially reasonable.
(2) If Licensee does not meet the requirements described above, or if
Licensee does not desire to renew this Agreement, this
7
<PAGE>
Agreement shall expire at the end of the initial term or the applicable
renewal term.
5. DEVELOPMENT OF TERRITORY AND MINIMUM PERFORMANCE
A. Development of Territory. The development of the Territory on a
state-by- state basis shall be approved by the Company as part of the Marketing
Plan.
B. Product Purchases. Licensee agrees to purchase the minimum quantities of
the Products from the Company as specified in Exhibit "F" ("Minimum Purchase
Schedule") attached hereto and by reference made a part hereof.
C. In addition, Licensee agrees to pay the following minimum royalties each
year:
Year 1 $15,000
Year 2 $30,000
Thereafter the minimum royalty shall increase by 20% per year based on the
immediate prior year's sales for years three through ten percent per year based
on the immediate prior year's sales for years eleven through twenty.
In the event the royalty fees paid by Licensee in any year (as provided in
paragraph 6B below) are less than its minimum royalty, as provided above,
Licensee shall pay the difference to the Company within 30 days after the end of
the applicable year.
D. In the event Licensee fails to meet the Minimum Purchases set forth on
Exhibit "F", from time to time, the Company shall have the option, in its sole
discretion, to terminate this License Agreement as provided in Article 12
hereof.
6. FEES AND ROYALTIES AND OTHER RESPONSIBILITIES OF LICENSEE
In addition to its other duties and responsibilities set forth in this
agreement, Licensee shall, in good faith, perform the following duties and
obligations:
A. Pay an initial license fee of $5 million (USD) payable as follows:
$500,000 on or before .......................... April 1, 1997
$500,000 on or before .......................... June 15, 1997
$500,000 on or before .......................... January 20, 1998
$500,000 on or before .......................... January 20, 1999
8
<PAGE>
$250,000 on or before ............................... January 20, 2000
$250,000 each year thereafter including ............. January 20, 2003
$200,000 on or before ........................... January 20, 2004
$200,000 each year thereafter including ......... January 20, 2010
$100,000 on or before ........................... January 20, 2011
$100,000 each year thereafter through ........... January 20, 2016
TOTAL: $5,000,000 which is 4 payments of $500,000;
4 payments of $250,000;
7 payments of $200,000 and
6 payments of $100,000
B. Pay an additional license fee of 10% of each sub-license or Dealer fee
for each Dealer or Licensee sold or established in the Territory. This fee shall
be paid within twenty (20) days of such sale or establishment.
C. Asset Purchase Effective March 1, 1997 Licensee shall purchase the
existing Installed equipment base for operating units in the United States for
$1,595,964.57 (USD) upon the following terms and conditions.
$500,000 on ........................... or before March 31, 1997
$500,000 on ........................... or before June 15, 1997
$595,744.57 on or before .............. October 1, 1997
In addition, Licensee agrees to undertake and pay all operating costs and
expenses from the date of purchase, including, personnel, warehousing,
distribution, servicing, maintenance vehicle costs and other operating expenses.
A schedule of such assets is attached hereto at Exhibit "A-1".
D. In addition, Licensee shall pay to the Company a continuing monthly
royalty fee in an amount equal to one cent ($.01) per liter of Beverage sold in
the Territory through the Beverage Centers, Remote Centers, Optional Equipment
or other Beverage Dispenser Equipment (exclusive of Water) and three cents
($.03) (USD) per liter of Water sold in the Territory through the Optional
Equipment, Beverage Center, Remote Center or other Beverage Dispenser Equipment.
The royalty is payable on or before the 20th day of each month (the "Due Date")
for sales in the preceding calendar month. Royalty Fees which are not paid when
due will bear a late charge of $100.00 and shall accrue interest at the rate of
eighteen percent (18%) per annum from the due date until paid in full provided
that such interest rate shall not exceed the interest rate allowed by law in the
Territory.
9
<PAGE>
E. Using its best efforts, based upon commercially reasonable standards,
and to devote such time as is necessary to vigorously and consistently promote
the sale of the' Products and to attain and sustain maximum sales of the
Products In the Territory and to meet Its obligations under the Marketing Plan.
In this regard, Licensee will keep the Beverage Centers fully stocked and clean
with In-store advertising and promotions. . Licensee shall refrain from engaging
in any activity whatsoever that might reasonably be deemed as injurious to the
sales potential of the Products in the Territory.
F. Being responsible to obtain, at its sole cost and expense, all
governmental approvals licenses and certificates for Licensee to do business in
the Territory and to strictly comply with all laws and regulations in the
Territory applicable to importation, marketing and sales of the Products, and
Installation and maintenance of the Equipment in the Territory, the selling of
Dealerships, and the remittance of all sales taxes, government withholdings,
withholdings taxes for employees, Income taxes, reporting of distributor income
information to appropriate government agencies as well as payment of all
government taxes and fees.
G. At its expense, Licensee shall be responsible for and shall oversee the
operations of all marketing and distribution of the Products in the Territory,
including, without limitation:
(1) With the approval of the Company, establishing the Marketing Plan which
is to be annually updated and approved by the Company within thirty (30) days
prior to the anniversary date hereof. To assist Licensee in preparing its
Marketing Plan, the Company may prepare computer models based upon market
surveys conducted by Licensee. Such surveys and models are not Intended to take
the place of Licensee's own analysis and surveys of the relevant markets.
Licensee is responsible for its own market analysis and the preparation of the
Marketing Plan for the Territory;
(2) Setting up advertising and marketing campaigns and to service,
maintain, stock and otherwise merchandise and promote the Beverage Centers,
Optional Equipment, Beverages and other Products In the Territory. All
advertising materials, technical literature and promotional materials must be
approved by the Company in writing prior to release or distribution;
(3) Establishing legal contracts, forms, etc. in the Territory for its
Dealers, retailers and wholesalers;
(4) Providing continuing training and education to Dealers, retailers and
customers of the Products. Licensee shall indemnify and hold the Company
harmless from the performance, non-performance, costs, liabilities and claims
relating to or resulting from Licensee's duties, obligations and
responsibilities hereunder, whatsoever.
10
<PAGE>
H. Except as expressly provided herein, conducting its own business in its
own name and in such manner as it sees fit, being solely responsible for the
acts and conduct of its employees and agents. Licensee shall be responsible for
the selection, training, supervision of and the payment of compensation to its
employees and Dealers.
I. Maintaining a current computer mailing list of Dealers and prospective
Dealers, J. Not engaging in any unfair trade practice or making any false or
misleading representation with regard to the Products or the Company.
K. Marketing, selling, supplying and distributing only products that do not
compete or conflict with the Company's Products. Licensee agrees not to
knowingly sell, market, distribute or ship the Products outside of the
Territory, nor to sell the Products to third parties who are selling, marketing,
distributing or shipping the Products outside of the Territory.
L. Obtaining and forwarding to the Company any information concerning
activities of competitors of the Company in the Territory, including
competitors' literature and price information.
M. Marketing, selling, supplying & distributing only products and services
reasonably approved in writing by the Company and abide by the Company's
policies and procedures for the ordering, installation, service, maintenance,
use and sale of the Products in effect from time to time. Licensee shall market,
sell and distribute the Company's entire line of Products, including without
limitation, new, changed or modified Products available from time to time. Only
Fountain Fresh Beverages and other Products may be sold through the Beverage
Centers, Remote Centers and Optional Equipment and other Beverage Dispensers.
All Syrups and Concentrates, Beverage Center Equipment, Optional Equipment parts
and supplies will be purchased only from the Company or its designated agents
and approved suppliers. The items set forth on Exhibit "G" must be purchased
from the Company, other items may be purchased only from approved suppliers.
N. Notifying the Company promptly of any existing or possible claim
involving the Licensee, Dealers or retail customers which may involve the
Company.
11
<PAGE>
0. Not doing any act with respect to the Trademarks or Products not
specifically authorized by this Agreement; making no application for
registration or other protection or use of any of the Trademarks or any item or
items similar thereto without the prior written consent of the Company and then
only upon the terms and conditions specified by the Company in connection
therewith. It Is agreed that the filing of slogans, logos and other commercial
symbols in a non-English language shall be at the expense of Licensee, but such
slogans, logos and other commercial symbols shall be filed In the name of and
owned by the Company.
P. Requiring its principals to execute a Non-Disclosure-Non-Competition
Agreement, substantially in the form of the Agreement, attached hereto as
Exhibit "H". This Confidential Information Agreement may be amended with the
approval of the Company's counsel on advise of Licensee's counsel.
0. Being responsible for and bearing the costs of any and all custom art
work, design, negatives, plates, set up costs, translations, labels or
publications (other than any product labels and literature which the Company has
available) which Licensee may choose to create or shall be required by
regulatory agencies In the Territory for the sale of the Products.
R. Being responsible for all costs of its doing business in the Territory,
Including, without limitation, postage, telephone, photocopying, salaries,
travel, overhead, certification of the Products with Health Departments and
other regulating bodies, taxes, regulatory requirements and the like. Licensee
agrees to indemnify and hold the Company harmless from any and all such costs
and expenses.
S. Maintaining an adequate inventory of parts for the Products as required
by the Company in order to provide for the prompt repair and service of the
Products.
T. Installing and maintaining all Beverage Center Equipment and Optional
Equipment at its expense; establishing and providing on-going service to and
repair of the Beverage Center Equipment and Optional Equipment for all customers
and Dealers in the Territory.
U. Licensee further agrees to appoint a representative to act with full
authority in matters and agreements between the Parties. Initially, the
representative for Licensee is as set forth on Exhibit "J". Such representative
may be changed from time to time upon written notice to the Company. The
corporate representative of Licensee shall have the authority to make final
decisions for the Licensee and shall be authorized to sign documents for all
matters between the Parties.
12
<PAGE>
V. Not modifying, altering or changing the Products or their components,
ingredients, packaging or labels without the prior written consent of Fountain
Fresh.
W. Completing the required training set forth In item 7A below.
X. In addition, Licensee represents and warrants that during the initial
term hereof, it has available a minimum of $5,000,000 ( USD ) working capital to
introduce the Products into the Territory and to otherwise Implement the
Marketing Plan.
6. RESPONSIBILITIES OF THE COMPANY
A. Training. The Company will furnish a training program of up to 30 days
for up to 10 employees of the Licensee. The training shall be held at Salt Lake
City, Utah, U.S.A. or as otherwise mutually agreed. The training shall be
without charge to the Licensee; however., the cost of all travel, meals and
lodging of Licensee and Its attendees are to be paid by the Licensee. Licensee
must complete the training session before commencement of operations.
B. Marketing Assistance. Upon reasonable prior written request from the
Licensee, the Company will, during the term of this Agreement, make its staff
and departments available at Salt Lake City, Utah, U.S.A. or such other location
as the Company shall designate, for consultation with representatives of
Licensee's staff on matters concerning the Company's Products at a per them rate
as agreed, but not less than U.S. $350.00 per day. Licensee shall also pay all
transportation, lodging, food and other travel and lodging costs of the Company
in connection with such consultation.
C. Technical Assistance. The Company will provide drawings and
specifications for accessories and an installation manual and operating manual.
Upon written request, the Company will provide to Licensee qualified technicians
familiar with the Products for reasonable periods during the term of this
Agreement, but at such times and for such periods as not to Interfere unduly
with the Company's business, at a per them rate as agreed, but not less than
U.S. $350.00 per day. Licensee shall also pay all transportation, lodging, food
and other travel and lodging costs of the Company in connection with such
consultation.
D. Promotional Material. The Company will provide Licensee with such
English language promotional, sales and technical information, literature and
brochures, catalog sheets, price lists, order forms and other information and
sales aides as may be made available by the Company for use by Licensee;
provided, however, that the Company may charge Licensee a reasonable price for
- 13 -
<PAGE>
such materials. Licensee may, at its cost, produce materials for the Territory;
however, the company must first pre-approve, in writing, all samples of
advertising and other promotional materials which must be supplied to the
Company not less than twenty days prior to use by Licensee.
E. Additional Marketing Support. To the extent the Company deems
appropriate, provide marketing support programs such as advertising, promotional
materials, public and customer relations, publicity, and corporate identity
programs.
F. Warranty. The Company warrants only the Beverage Center Equipment as
provided in the warranty attached at Exhibit "E". The warranty on optional
equipment will be provided by the manufacturer.
G. Referrals. The Company will refer to Licensee all inquiries received by
it for purchase of the Products in the Territory, except as provided in
paragraph 2C above.
H. Patent Rights. The Company shall, at its sole cost and expense, take all
actions which it reasonably believes to be necessary to obtain and to defend
patent rights to the Beverage Center Equipment and to prosecute infringement
claims.
8. ADVERTISING & PROMOTION
A. Licensee agrees to advertise and promote the Products in the Territory.
Licensee agrees to spend on advertising and promotional programs in the
Territory the amount approved by Fountain Fresh in the Marketing Plan which
amount will be not less than one percent (1%) of its monthly Gross Receipts from
the sale or lease of the Products unless otherwise agreed in writing by the
Company. All advertising by Licensee shall be conducted in a dignified manner,
shall conform to the standards established from time to time by the Company and
shall display the Trademarks only in the manner approved by the Company. In
addition, all Licensee Is advertisements must conform to the advertising
guidelines published by in the Company and must be pre-approved by the Company.
B. Further, Licensee agrees to contribute to the Company a percentage of
its Gross Receipts for regional advertising programs in the Territory. The
Company will provide an annual non-audited accounting to Licensee on the use of
these funds. The advertising fee shall be paid so as to be received by the
Company not later than the 20th day of each month.
C. The term "Gross Receipts" includes the total receipts from the sale or
lease or rent of all Products and services rendered by Licensee in the
Territory.
14
<PAGE>
9. RECORDS AND REPORTING
A. During the term of this Agreement, Licensee agrees, at Its expense, to
maintain at its principal office and preserve for three (3) years from the date
of their preparation or such greater period as may be required by applicable
law, full, complete and accurate books, records and accounts.
B. Licensee further agrees to submit a monthly report in the format
specified by the Company on a store-by-store, Dealer by Dealer basis setting
forth the volume of sales of the respective Products, by brand and package,
equipment installation, category sales In comparison with the competition,
competitive sales prices, market share volumes, margins, problem areas and other
information reasonably requested by the Company in the Territory and forecasting
Product sales for each of the Products for the current quarter and the following
quarter, updated monthly. The reports are due not later than the twentieth day
of each month.
C. Licensee shall furnish quarterly financial statements to the Company in
a form prescribed by the Company. Within 30 days after the end of each fiscal
year Licensee will provide to the Company annual statements of profit and loss
and source and application of funds for the fiscal year and a balance sheet as
of the end of the fiscal year, verified and signed by Licensee.
D. Upon reasonable notice, the Company, or its agents, shall have the right
to examine and make copies of the books and records, financial statements and
sales and Income tax returns of Licensee.
10. PROTECTIVE PROVISIONS
A. Confidential Information. Confidential Information concerning the
Company, its business, its affiliates or the Products which is disclosed to
Licensee, or which otherwise becomes known to the Licensee as a result of the
relationship created by this Agreement, shall be used by Licensee only during
the term and for the purposes of this Agreement. Licensee acknowledges and
agrees that the Confidential Information is commercially valuable. At all times
during and after the term of this Agreement, Licensee shall maintain In
confidence, and shall take all necessary steps to insure that its shareholders,
directors and employees maintain in confidence, all such Confidential
Information and Licensee shall refrain from in any way disclosing, selling,
transferring or marketing available any portion thereof to others, excepting
only to such persons and extent as may be specifically authorized in writing by
the Company. Any unauthorized use of the Confidential Information by Licensee
shall constitute an infringement of the rights of the Company in and to the
Confidential Information. Licensee agrees that all unauthorized usage of the
15
<PAGE>
Confidential Information by Licensee and any monies earned or received by
Licensee shall inure to the exclusive benefit of the Company.
B. Non-Competition. Licensee represents and warrants to the Company that it
is not, directly or indirectly, acting as an agent, representative or
distributor and is not designing, developing, manufacturing, licensing,
promoting, selling or distributing any Products which are similar to or
competitive with the Products. Furthermore, during the term of this Agreement
and for a period of two (2) years thereafter neither Licensee, nor its
subsidiaries or affiliates, nor partners, shareholders or principals of the
shareholder, shall, directly or indirectly, on its or their own account or as an
officer, director, or shareholder of any other person, firm, entity, partnership
or corporation, own, operate, lease, license, conduct, engage In, be connected
with, have any Interest in or assist any person or entity engaged in the design,
development, manufacture, license, promotion, selling or distribution in the
Territory, or anywhere In the world, any products that are similar to or
competitive with the Products.
C. Termination. Licensee agrees that any breach of its obligations under
this Article shall constitute just cause for termination of this Agreement. The
provisions of this Article 10 shall survive any termination of this Agreement.
D. Enforceability. It is the desire and Intent of the Parties to this
Agreement that the provisions of this Article be enforced to the fullest extent
permissible under applicable laws.
11. TRADEMARKS
A. Licensee is permitted by the Company to use the Company's Trademarks and
Licensee agrees to use the Trademarks In marketing the Products to the extent
permitted in the Territory. However, such Trademarks and their derivatives shall
remain the property of the Company and Licensee's right to use such names or
trademarks shall terminate upon expiration or termination of this Agreement.
B. Licensee acknowledges that Licensee has no proprietary interest
whatsoever In the Trademarks or the Confidential Information and that Licensee's
right to use the Trademarks or Confidential Information is derived solely from
this Agreement and is limited to the conduct of its business pursuant to and in
compliance with this Agreement and all applicable specifications, standards and
procedures prescribed by the Company.
C. Licensee's use of the Trademarks shall be in accordance with applicable
Trademark law. Licensee shall not use any Trademark as part of any corporate or
trade name or with any prefix, suffix, or other modifying words, terms, designs
16
<PAGE>
or symbols, or in any modified form without the Company's consent, nor may
Licensee use any Trademark In connection with the sale of any unauthorized
products or service or in any other manner not expressly authorized under this
Agreement. Licensee agrees to display the Trademarks prominently and in the
manner prescribed by the Company. Further, Licensee agrees to give such notice
of trademark registrations and to make written acknowledgements of the Company's
exclusive ownership of the Trademarks. In the event the Company authorizes
Licensee to register or should Licensee acquire any of the Company's Trademarks,
Licensee agrees that such registration or acquisition Is made as an agent of the
Company and In the name of the Company or assigned to the Company, and the
Company will have full title and ownership of such Trademarks.
D. Licensee shall notify the Company immediately in writing of any apparent
Infringement of or challenge to Licensee's use of any Trademark or claim by any
person of any rights in any Trademark or any similar trade name, trademark or
service mark of which Licensee becomes aware. Licensee shall not communicate
with any person other than the Company and Its counsel In connection with any
such infringement, challenge or claim except as may be required by law. The
Company shall have sole discretion to take such action as it deems appropriate
and the right to exclusively control any litigation, proceeding or other
administrative claim or other action relating to any Trademark. Licensee agrees
to execute any and all instruments and documents, render such assistance and do
such acts and things at the Company's expense as may, in the opinion of the
Company's counsel, be necessary or advisable to protect and maintain the
interest of the Company in any such litigation, proceeding or other
administrative proceeding or to otherwise protect and maintain the interests of
the Company in the Trademarks. If it becomes advisable at any time, in the
Company's sole discretion exercised in good faith, for the Company and/or
Licensee to modify or discontinue use of any Trademark, and/or use one or more
additional or substitute trademarks or service marks, Licensee agrees, at its
expense, to comply therewith within a reasonable time after notice thereof by
the Company.
E. Any goodwill arising from the use of the Trademarks in the Territory
shall inure to the sole benefit of the Company.
F. Licensee shall not sell the Products under any Trademark other than the
Company's Trademarks without the prior written approval of the Company. Licensee
shall not remove, conceal or alter any Trademark.
G. Licensee represents that it has not sought or obtained and agrees that
it shall not seek or obtain any Trademark registration involving the Trademarks
or any patent or other Intellectual property protection for the Company's
Confidential Information.
17
<PAGE>
12. THE COMPANY'S RIGHTS OF TERMINATION
A. In addition to the Company's other rights of termination that it may
have at law or equity or as contained in this Agreement, the Company shall have
the following rights of termination:
(1) If Licensee fails to meet its Minimum Performance obligations from time
to time, as set forth In Article 5 above and Exhibits "F" and "F-1" attached
hereto, the Company shall have the right to terminate this Agreement effective
ninety (90) days after delivery of notice of default if such default is not
cured within the 90-day notice period. In the alternative, Licensee may, in its
sole discretion, after the notice period, keep the Agreement in force, but
terminate the exclusive rights of Licensee in the Territory.
(2) In addition, the Company shall have the right to terminate this
Agreement should Licensee violate any other material term of this Agreement and
such violation Is not cured within 15 days if such default is for failure to pay
any money payable by Licensee pursuant to any provision of this Agreement and 30
days after written notice of default for any other material default (which
notice shall describe the event of default and the action that Licensee must
take to correct the same).
(3) The Company shall also have the right to terminate this Agreement
effective upon delivery of notice of termination to Licensee if:
a. Licensee or any of its owners makes an unauthorized assignment of
this Agreement without the consent of the Company, which consent will not
be unreasonably withheld or delayed;
b. Licensee or any of its directors or officers are convicted of , or
plead guilty to a charge of a material violation of any law relating to the
Licensee's business;
C. Licensee consistently fails to timely pay any of its obligations or
liabilities due and owing to the Company.
d. Licensee is insolvent or is a party to any receivership or similar
proceeding, other than as a creditor;
e. Licensee makes an assignment for the benefit of creditors or enters
into any similar arrangement for the disposition of its assets for the
benefit of creditors;
18
<PAGE>
f. Licensee voluntarily or otherwise abandons the business hereunder;
g. Licensee repeatedly fails to materially comply with this Agreement
(defined as occurring three or more times during any term of this
Agreement), whether or not such failures to comply are corrected after
notice thereof Is delivered to Licensee.
h. Licensee breaches the Protective provisions set forth In Article 10
above.
B. The Parties agree that if a violation or default is not cured within any
period allowed for the correction of the violation or default, termination of
this Agreement will occur automatically without further notice.
13. THE COMPANY'S RIGHTS AND LICENSEE'S OBLIGATIONS
UPON TERMINATION OR EXPIRATION
Upon expiration or termination of this Agreement:
A. The Company shall be free to sell and distribute the Products within the
Territory. and license others to also do so anywhere in the Territory.
B. The payment date of all monies due to the Company by Licensee shall
automatically be accelerated so that they shall become due and payable on the
effective date of termination, even if longer terms had been provided
previously.
C. Licensee shall:
(1) Within 10 days after expiration or termination of this Agreement,
pay to the Company all amounts due -and/or owing under this Agreement;
(2) Except for inventory on hand, cease selling or otherwise
distributing the Products;
(3) Immediately cease and desist from using or displaying any of the
Trademarks, Product names and other forms of advertising indicative of
the Licensee's Fountain Fresh business, Products or operations; and
(4) Return in good condition all manuals, advertising materials and
all other printed material pertaining to the operation of the
Licensee's business received from the Company.
The foregoing are in addition to any other right or remedy of the Company
at law or equity.
19
<PAGE>
14. LIMITATIONS
EXCEPT FOR THE EXPRESS WARRANTY SET FORTH IN PARAGRAPHS F AND G OF ARTICLE
3, THE COMPANY MAKES NO WARRANTIES RELATING TO THE PRODUCTS, EXPRESS, OR
IMPLIED, AND EXPRESSLY EXCLUDES ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE
OR MERCHANTABILITY. NO PERSON IS AUTHORIZED TO MAKE ANY OTHER WARRANTY OR
REPRESENTATION CONCERNING THE PRODUCTS OTHER THAN AS PROVIDED IN THIS PARAGRAPH.
LICENSEE SHALL MAKE NO OTHER WARRANTY, EXPRESS OR IMPLIED, ON BEHALF OF THE
COMPANY.
15. ASSIGNMENT
A. Licensee understands and acknowledges that the rights and duties created
by this Agreement are personal to Licensee and that the Company has granted this
Agreement in reliance upon the Individual or collective character, skill,
aptitude, attitude, business ability and financial capacity of Licensee.
Therefore, neither this Agreement nor any interest therein may be voluntarily,
involuntarily, directly or indirectly, assigned, sold, sublicensed or otherwise
transferred by Licensee or, its owners (including, without limitation, by
consolidation or merger) without the prior written approval of the Company,
which approval will not be unreasonably withheld. In addition, any such
assignment or transfer without such approval shall constitute a material breach
hereof and shall convey no rights to or Interests In this Agreement to such
transferee. Consent to an assignment otherwise permissible under this Article
may be refused by the Company unless, prior to the effective date of the
assignment: (a) all obligations of Licensee incurred in connection with this
Agreement shall have been assumed by the assignee; (b) Licensee shall have paid
fees and other amounts owing the Company; (c) the transferee or its owners shall
have completed any training program required of new Licensees and are willing to
execute and be bound by the Company's them current form of License Agreement;
(d) Licensee or transferee shall have paid a training and transfer fee to the
Company to cover the Company's administrative, legal and training expenses
incurred in connection with such transfer in an amount equal to $20,000 for a
transfer to any third party that is not affiliated with Licensee. For this
purpose, an affiliate is any entity is one in which Licensee has at least a
sixty (60%) ownership interest; and (e) Licensee shall sign a general release in
favor of the Company.
B. If Licensee or its owners shall, at any time, determine to sell, assign
or transfer this Agreement (or an interest therein) or an ownership interest in
Licensee, then Licensee or its owners shall obtain a bona fide, executed written
offer from a responsible and fully disclosed potential purchaser and shall
submit an exact copy of such offer to the Company. The Company shall have the
right, exercisable by written notice delivered to Licensee or its owners within
20
<PAGE>
60 days from the date of delivery of an exact copy of such offer to the Company,
to purchase this Agreement and the Licensee's rights thereunder (or such
interest in this Agreement) or such ownership Interest in Licensee for the price
and on the terms and conditions contained In such offer, however, the Company
may substitute cash for any form of payment proposed in such offer and Licensee
shall have not less than 60 days to prepare for closing. If the Company does not
exercise its right of first refusal within the 60 day time period, Licensee or
its owners may complete the sale to such purchaser pursuant to and on the terms
of such offer; however, that if the sale to such purchaser is not completed
within 150 days after delivery of such offer to the Company, or if there is a
material change in the terms of the sale, the Company shall again have the right
of first refusal herein provided. These provisions shall not apply an approved
transfer to a wholly-owned subsidiary of Licensee.
16. INSURANCE
A. Licensee shall procure and maintain in full force and effect, at Its
sole cost and expense, comprehensive public liability Insurance against claims
for bodily and personal injury, death and property damage caused by or in
conjunction with its businesses pursuant to this Agreement of not less than
$1,000,000. Such insurance coverage shall be maintained under one or more
policies of insurance containing liability protection reasonably acceptable to
the Company. Licensee will provide the Company with certificates of Insurance no
later than the date Licensee Is opened for business in the Territory.
B. Licensee will obtain and keep in force in the Territory at its expense
product liability insurance for the Products in such amount as approved by the
Company.
17. INDEMNIFICATION
Licensee shall protect, indemnify and save harmless the Company from and
against any and all costs, damages, liabilities, including, but not limited to,
legal fees incurred by the Company or its officers and directors because of any
act, neglect or omission of Licensee, its servants, distributors, employees,
customers, agents or guests including, without limitation, malfeasance,
misstatements made to customers or Dealers, nonfeasance, failure to perform, and
breach of its duties and obligations under this Agreement.
18. NOTICES
All notices permitted or required under this Agreement shall be in writing
and shall be delivered as follows with notice deemed given as indicated (i) by
21
<PAGE>
personal delivery when delivered personally, (ii) by overnight courier upon
written verification of receipt, (iii) by telecopy or facsimile transmission
when confirmed by telecopier or facsimile transmission, during normal business
hours, Monday through Friday, holidays excepted, or (iv) by certified or
registered mail, return receipt requested, five (5) days after deposit in the
mall addressed as follows:
THE COMPANY:
Fountain Fresh International
2030 North Redwood Road, Suite 70
Salt Lake City, Utah 84116
LICENSEE:
Katori Consultants, Ltd.
Suite 102
SUDC Business Complex
448 Perimeter
Angeles City, Republic of Philippines
Subject to the right of either Party to designate by notice in writing to the
other Party any new address to Which notice or communication may be sent.
19. REPRESENTATIONS OF LICENSEE
Licensee understands that the success or failure of its business depends,
In major part, upon the efforts of Licensee. The Company has made no income
guarantees nor projections or any claims that Licensee will be successful.
Licensee has done its own investigation, due diligence and evaluations regarding
the business and has made its own independent determination of its value. This
Agreement contains all of the terms and conditions agreed upon by the Parties.
No promises or representations have been made by the Company or any of its
representatives or agents other than herein set forth. No modifications of the
terms of this Agreement shall be valid unless made in writing and executed by
both the Company and Licensee.
20. DISPUTES AND ARBITRATION
In the event any controversy or dispute shall arise between the Parties
hereto in connection with, arising from or with respect to the provisions
hereof, the relationship of the Parties hereto, the validity of this Agreement
or any provision hereof or any purchase order accepted by the Company, such
dispute. or controversy shall, on the request of either the Company or the
22
<PAGE>
Licensee be submitted for arbitration to the American Arbitration Association in
accordance with its International Commercial Arbitration Rules. All arbitration
hearings shall be conducted in Salt Lake City, Utah, U.S.A. and the laws of the
State of Utah, U.S.A. shall govern. The award shall be in writing in the English
language and shall provide written reasons for the award. The arbitrator will
have the power and jurisdiction to decide such controversy or dispute solely In
accordance with the express provisions of this Agreement. The prevailing Party
in any arbitration, suit or action to. enforce this Agreement, shall be entitled
to recover the administrative costs of the arbitration proceeding and the fee
for the arbitrator. The Parties agree that any claim hereunder shall result In
an award not more than 270 days from the date of the statement of claim filed
with the American Arbitration Association. The award and findings of the
arbitrators shall be conclusive and binding upon all Parties hereto and the
judgment upon the award may be entered in any Court of competent jurisdiction.
The provisions of this Article shall survive the expiration or termination of
this Agreement and are binding upon the Parties hereto.
21. MISCELLANEOUS
A. Independent Contractors. The Parties hereto are independent contractors
and nothing contained in this Agreement shall be construed to create the
relationship of partners, joint ventures, franchisor-franchisee or
employer-employee. Licensee acknowledges that it does not have, and shall not
make any representations to any third party, either directly or indirectly, that
Licensee has any authority to act In the name or on behalf of the Company or to
obligate the Company in any way whatsoever except as expressly provided herein.
Licensee shall not use -the word "agent" or any other designation which might
imply that the Company is responsible for the acts of Licensee.
B. Severability Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, not be
effective to the extent of such prohibition, but such prohibition shall not
invalidate the remaining provisions hereof or affect the validity or
enforceability of such provisions in any other jurisdiction.
C. Governing Law. The validity, enforcement, construction and rights and
liabilities of the Parties and provisions of this Agreement, including without
limitation, purchase orders hereunder shall be interpreted and governed in
accordance with the laws of the State of Utah, U.S.A. and Licensee consents to
the exercise over Licensee of general personal jurisdiction over the Licensee
and venue in the courts of record of the State of Utah, U,S,A, The Company and
Licensee . agree that all causes of action and claims arising out of this
Agreement that are not arbitrated shall be litigated in the courts of record in
23
<PAGE>
the State of Utah, U.S.A., even though it may otherwise be possible to obtain
jurisdiction over the Company elsewhere. Nothing herein shall prevent the
Company from obtaining injunctive relief and enforcement of judgments and
arbitration rulings in the courts of other jurisdictions. If the laws governing
this Agreement require provisions or terms other than or in addition to those In
this Agreement, then such terms shall be deemed incorporated herein, but only to
the extent necessary to prevent the invalidity of this Agreement or any of the
provisions hereof. All words In this Agreement shall be deemed to include any
number or gender as the context or sense of this Agreement requires.
D. Waiver. The failure of either Party to enforce, at any time or for any
period of time, any provision of this Agreement shall not be construed to be a
waiver of such provision or of the right of such Party thereafter to enforce its
rights with respect to such provision.
E. Amendment. This Agreement may be amended only by a written instrument
signed by duly authorized representatives of both Parties.
F. Headings, References. The headings of the Articles and Paragraphs hereof
are for reference and convenience purposes only and do not constitute a part of
this Agreement for purposes of interpretations. References to Exhibits herein
shall refer to the Exhibits attached hereto and by this reference made a part
hereof.
G. Entire Agreement. This Agreement, Exhibits and Schedules contain the
entire agreement and only understanding between the Parties with respect to the
subject matter hereof and supersedes all previous negotiations, agreements and
understandings between the Parties and affiliates of the Parties, in connection
with the subject matter covered herein, whether oral or written, and any
warranty, representation, promise or condition in connection therewith not
incorporated herein shall not be binding upon either Party.
H. Cumulative Rights. The rights of the Parties hereunder are cumulative
and no exercise or enforcement by the Parties of any right or remedy hereunder.
shall preclude the exercise or enforcement by the Parties of any other right or
remedy hereunder which the Company or Licensee is entitled by law or equity to
enforce. Nothing herein contained shall be Interpreted as to bar or waive the
Parties' right to obtain any remedy available at law or in equity.
I. Force Majeure. Neither Party shall be liable hereunder by reason of any
failure or delay in the performance of its obligations hereunder on account of
force majeure, including but not limited to, strikes, shortages, riots,
insurrection, fires, flood, storm, explosion, acts of God, war, governmental
24
<PAGE>
action, labor conditions, earthquakes or any other cause which is beyond the
reasonable control of such Party. This section shall not be interpreted to
relieve the Licensee from its obligation to pay as and when due all payments
required to be made by Licensee under this Agreement or any purchase order. In
the event of Force majeure, the affected Party shall promptly give Notice
thereof to the other Party.
J. Costs and Attorney's Fees. If a claim for amounts owed by Licensee to
the Company or its affiliate is asserted in any legal proceeding before a court
of competent jurisdiction, or if the Company or Licensee is required to enforce
this Agreement in a judicial or arbitration proceeding, the Party prevailing in
such proceeding shall be entitled to reimbursement of its costs and expenses,
including reasonable accounting and attorney's fees.
K. Costs and Expenses. Each Party shall pay its own costs and expenses in
connection with this Agreement.
L. Remedies for Breach. Licensee specifically acknowledges that the
Company's services under this Agreement are unique and extraordinary and that
irreparable injury will result to the Company and its business and property in
the event of a breach of the terms and conditions of this Agreement to be
performed by Licensee. Licensee agrees that in the event of his breach of any of
the terms and conditions of this Agreement to be performed by Licensee, the
Company shall be entitled, if it so elects, to institute and prosecute
proceedings in any court of competent jurisdiction, either at law or in equity,
to enjoin Licensee from performing services for or disclosing information to any
other person, firm or corporation in violation of any of the terms of this
Agreement, and to obtain damages for any breach of this Agreement. The remedies
provided herein shall be cumulative and in addition to any and all other
remedies which any party may have at law or in equity.
M. Authorization. The Licensee shall provide the Company with a certified
copy of its resolution authorizing this transaction. Facsimile copies of
signature pages are binding.
IN WITNESS WHEREOF, and by their signatures below, the parties herto acknowledge
that they have read, understand and agree to all of the terms and provisions of
this Agreement and have caused this Agreement to be executed as of the date
first above written with the full authority of the Company they represent.
The Company: Licensee:
FOUNTAIN FRESH INTERNATIONAL. KATORI CONSULTANTS, LTD.,
a Utah corporation a British Virgin Islands
corporation
/s/ Richard J. Maynes /s/ Eric Montandon
- ------------------------------- --------------------------------------
By: Richard J. Maynes By: Eric Montandon
Its: President Its: Managing Director
<PAGE>
EXHIBIT "A"
PRODUCTS
Beverage Center Equipment
- -------------------------
EA96 Beverage Center 2000
MS96 Beverage Center 2000
Syrups
- -------
Fountain Fresh Carbonated Beverage Syrups
Fountain Fresh Non-Carbonated Beverage Syrups
Fountain Fresh Non Juice Syrups
Fountain Fresh Water
- --------------------
Spare and Accessory Parts
- -------------------------
o The Beverage Center Proportioning Pumps
o The Beverage Center Filtered Assemblies and Components
o The Beverage Center Solenoid Block Assemblies
o The Beverage Center PC Boards
o Other Parts
Optional Equipment
- ------------------
o The Fountain Tower
o The Bubbler
o The Slush Machine
Other Approved Products
- -----------------------
Modified Products and other products approved by the Company from time
to time for sale and distribution by Licensee.
<PAGE>
SCHEDULE A-1
ASSETS
INSTALLED EQUIPMENT BASE
<PAGE>
EXHIBIT "B"
TERRITORY
The United States of America, including Washington, D.C.
The above listed Territory boundaries are acknowledged and accepted this
17th day of April, 1997.
THE COMPANY: LICENSEE:
FOUNTAIN FRESH INTERNATIONAL, INC. KATORI CONSULTANTS, LTD.
a Utah corporation a British Virgin Islands
corporation
/s/ Richard J. Maynes /s/ Eric Montandon
---------------------------- ----------------------------------
Richard J. Maynes Eric Montandan
Managing Director
<PAGE>
EXHIBIT "C"
U.S. TRADEMARKS
Fountain Fresh
In addition, the company has filed a trademark for the name "BetterStuff""
with the U. S. Patent and trademark office if accepted for registration,
BetterStuff' will become the brand name for Fountain Fresh products.
<PAGE>
EXHIBIT "D"
PRICE AND TERMS AND CONDITIONS
FOR SALE OF EQUIPMENT PRODUCTS
CURRENT PRICE OF BEVERAGE CENTER EQUIPMENT
See attached Schedule.
Terms of payment; The Beverage Center Equipment and spare parts are payable
as follows: 50% of the purchase price payable with the purchase order and the
balance upon delivery of the Products ordered to the carrier for shipment. The
balance shall be secured by Licensee's irrevocable letter of credit payable to
the Company upon delivery of the order to the carrier.
CURRENT PRICE OF CONCENTRATES
See attached Schedule.
CURRENT PRICE OF SPARE PARTS
See attached Schedule.
CURRENT PRICE OF OPTIONAL EQUIPMENT
See attached Schedule.
Shipments will be made by the best carriet f.o.b. manufacturer's warehouse.
All payments shall be made in U.S. dollars.
The terms, conditions and prices may be altered, changed, amended or
deleted at any time and from time to time by the Company as provided in the
Agreement.
TERMS AND CONDITIONS acknowledged this 17th day of April 1997.
The Company: Licensee:
FOUNTAIN FRESH INTERNATIONAL KATORI CONSULTANTS, LTD.
a Utah corporation a British Virgin Islands
corporation
/s/ Richard J. Maynes /s/ Eric Montandon
---------------------------- ----------------------------------
Richard J. Maynes Eric Montandan
Managing Director
<PAGE>
CURRENT PRICE OF BEVERAGE CENTER EQUIPMENT
New Beverage Center is in process of development and design. The price list will
be made to Licensee available as soon as it Is prepared and ready for
publication.
CURRENT PRICE OF SPARE PARTS
New spare parts are in the process of development and design. The price list
will be made available as soon as it is prepared and ready for publication.
<PAGE>
ASSIGNMENT OF LICENSE AGREEMENT
This Assignment of License Agreement is entered into as of the 18th day of
April, 1997 between Katori Consultants, Ltd., a British Virgin Islands
("Assignor") and Best Way, Inc., a Nevada corporation ("Assignee")
RECITALS
WHEREAS, Assignor entered into a license agreement with Fountain Fresh
International, a Utah corporation "FFI") on April 17, 1997, a copy of which is
attached hereto as Exhibit A and incorporated herein as though fully set forth
("License"); and
WHEREAS, Assignor desires to assign all of its rights and interest in the
License to Assignee and Assignee has agreed to assume all of Assign's
obligations under the License; and
WHEREAS, FFI has approved the assignment of the License, as aforesaid.
NOW THEREFORE, in consideration of mutual promises contained herein, and other
good and valuable consideration, the receipt of which is acknowledge by FFL
Assignor and Assignee, the parties hereto agree as follows:
I Assignor hereby assignee all of its rights and interest in and to the license
and Assignee accepts such assignment and hereby agrees to assume all of the
obligations of Assignor under the License.
2. FFI hereby consents to the assignment of the License.
3. FFL Assignor and Assignee hereby acknowledge that all of the terms and
conditions of Section 15 of the Assignment have been complied with or waived in
connection with the foregoing assignment of the License.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written.
FOUNTAIN FRESH INTERNATIONAL
A Utah corporation
/S/ Richard J. Mayne /S/
- --------------------------------- ----------------------------------
By: Richard J. Mayne, President Secretary
KATORI CONSULTANTS, LTD.
A British Virgin Island Corporation
/S/ Eric Montandon
- --------------------------
By: Eric Montandon, Director
BEST WAY, Inc.
/S/ Lynn Briggs /S/ Jennifer McMinn
- ------------------------------------ ------------------------------
By: Lynn Briggs, President By: Jennifer Mcminn, Secretary
UNSECURED PROMISSORY NOTE
================================================================================
PRINCIPAL AMOUNT: $50,000.00
INTEREST RATE: 6.0%
BORROWER: ASIA4SALE.COM, LTD.,
A HONG KONG REGISTERED COMPANY
LENDER: ZIASUN TECHNOLOGIES, INC.
A NEVADA CORPORATION
DUE DATE: MARCH 31, 2000
PAYMENTS: BALLOON PAYMENT OF PRINCIPAL AND INTEREST DUE ON OR
BEFORE MARCH 31, 2000.
1. For value received, Asia4sale.com LTD., a Hong Kong Registered Company,
hereinafter referred to as "Borrower" promises to pay to ZiaSun Technologies,
Inc., a Nevada Corporation, hereinafter referred to as "Lender", or to order,
the principal amount of $50,000.00 with interest thereon at the rate of six
percent (6.0%) per annum simple interest, commencing upon the date of execution,
due and payable in one balloon payment of principal and all unpaid accrued
interest on or before March 31, 2000.
2. Default. Borrower will be in default if any of the following occur:
(a) Borrower fails to make any payment when due; and
(b) 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.
3. Notices. Any notice, payment or other communication required or
permitted hereunder shall be expressed in writing and sent by certified or
registered mail, return receipt requested, to their respective parties at the
following addresses, or at such other addresses as the parties shall designate
by written notice to be the other:
If to Lender, addressed to it at:
---------------------------------
Mr. Anthony Tobin, President
ZiaSun Technologies, Inc.
12707 High Bluff Drive
2nd Floor
San Diego, California 92130
Page 1 of 2
<PAGE>
If to Borrower, addressed to it at:
-----------------------------------
Brian Hodgson
1st Floor, 67 Pak Wai,
Sai Kung,
New Territories,
Hong Kong
4. Attorneys Fees. Borrower agrees that if any legal action is necessary to
enforce or collect this Note, the prevailing party shall be entitled to
reasonable attorneys' fees in addition to any other relief to which that party
may be entitled. This provision shall be applicable to the entire Note.
5. Governing Law. This Note shall be governed and construed in accordance
with the laws of the State of California.
6. Method of Payment. Principal and interest shall be payable in lawful
money of the United States. Notwithstanding anything contained herein to the
contrary, the amount of interest payable under the terms of this Note shall in
no event exceed the maximum amount of interest permitted to be charged by law at
the date of execution hereof.
IN WITNESS WHEREOF, this Promissory Note was executed on the date and year
written below.
Asia4sale.com, LTD.
A Hong Kong Registered Company
Dated: March 31, 1999 /S/ Brian Hodgson
------------------------------------
By: Brian Hodgson
Its: President
Page 2 of 2
STOCK OPTION AGREEMENT
----------------------
This Stock Option Agreement (the "Option") effective as of date executed by
Optionor below, is by and between Brian Hodgson, hereinafter collectively
referred to as (the "Optionor") and ZiaSun Technologies, Inc., a Nevada
Corporation, hereinafter referred to as ("the Company" or the "Optionee").
Recitals
--------
A. Whereas, the Optionor has acquired a minimum of 50,000 shares of Common
Stock, $.001 Par Value of ZiaSun Technologies, Inc., a Nevada Corporation, in a
stock for stock exchange pursuant to the terms of that certain Acquisition
Agreement and Plan of Reorganization between the parties.
B. Whereas, the purpose of this Option is to provide the Company an
Option to purchase from the Optionor, up to 50,000 shares of the Common Stock of
the Company owned by Optionor, at an exercise price of $3.00 per share, for a
period of one (1) year, in the event that Asia4sale.com, Ltd., a Hong Kong
Registered Company ("Asia4sale"), has failed to reach positive cash flow by
September 30, 2000.
C. Whereas, in order to provide for the efficient separation between the
parties in the event that Asia4sale has failed to reach positive cash flow by
September 30, 2000, the Optionor desires to grant to the Optionee an option with
respect to up to 50,000 shares of the Common Stock of the Company owned by the
Optionor, on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration for the mutual covenants, promises and the
Option set forth herein, the parties agree as follows:
1. Grant of Option. The Optionor hereby grants to the Optionee an
irrevocable option (the "Option") to purchase up to a cumulative total of 50,000
shares of the Common Stock, $0.001 Par Value per share of ZiaSun Technologies,
Inc., a Nevada Corporation, owned by the Optionor (the "Shares"), at an exercise
price of $3.00 per share, as set forth below.
2. Time and Manner of Exercise of Option. The Option may be exercised by
the Optionee, at any time within a period of one (1) year from the date of this
Option, in the event that Asia4sale has failed to reach positive cash flow by
September 30, 2000.
3. Termination of Option. The Option shall terminate at 5:00 p.m., Pacific
Standard Time, one (1) year following the execution of this Option.
4. Conditions to Sale. The obligation of the Optionor to sell the Shares to
Optionee hereunder is subject to the conditions, that (a) all information and
payment for such Shares shall have been received by the Optionor with the
Exercise Notice; and (b) no preliminary or permanent injunction or other order
by any court of competent jurisdiction prohibiting or otherwise restraining such
sale shall be in effect.
1
<PAGE>
5. Representations and Warranties of the Optionor.
(a) The Optionor represents and warrants to Optionee that execution and
delivery of this Option by the Optionor and the consummation of the transactions
contemplated hereby have been duly authorized on their part.
(b) This Option when duly executed and delivered by the Optionor,
constitutes a valid and binding obligation of the Optionor and, assuming this
Option constitutes a valid and binding obligation of Optionee, is enforceable
against the Optionor in accordance with its terms.
(c) Upon delivery of the Shares to Optionee upon the exercise of the
Option, Optionee will acquire the Shares free and clear of all claims, liens,
charges, encumbrances and security interests of any nature whatsoever.
6. Representations and Warranties of Optionee. The Optionee hereto
represents and warrants to the Optionor that:
(a) Such Optionee has the authority to enter into this Option and to carry
out its obligations hereunder;
(b) The execution and delivery of this Option by each such Optionee and the
consummation by Optionee of the transactions contemplated hereby have been duly
authorized by any party to which Optionee is required to obtain authorization;
7. Adjustment Upon Changes in Capitalization. Without limitation contained
in this Option in the event of any change in Company common stock by reason of
stock dividends, split-ups, reverse splits, mergers (including the Merger),
recapitalizations, combinations, exchange of shares or the like, the type and
number of shares or securities subject to the Option, and the purchase price per
share provided in Section 1, shall be adjusted appropriately to restore to
Optionee to its rights hereunder.
8. Binding Effect; No Assignment; No Third Party Beneficiaries. This Option
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Except as expressly provided for in
this Option, neither this Option nor the rights or the obligations of either
party hereto are assignable, except by operation of law, or with the written
consent of the other party. Nothing contained in this Option, express or
implied, is intended to confer upon any person other than the parties hereto and
their respective permitted assigns any rights or remedies of any nature
whatsoever by reason of this Option.
9. Entire Agreement. This Option constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, among the parties or any
of them with respect to the subject matter hereof.
10. Further Assurances. Each party will execute and deliver all such
further documents and instruments and take all such further action as may be
necessary in order to consummate the transactions contemplated hereby.
2
<PAGE>
11. Validity. The invalidity or unenforceability of any provision of this
Option shall not affect the validity or enforceability of the other provisions
of this Option, which shall remain in full force and effect. In the event any
court or other competent authority holds any provisions of this Option to be
null, void or unenforceable, the parties hereto shall negotiate in good faith
the execution and delivery of an amendment to this Option in order, as nearly as
possible, to effectuate, to the extent permitted by law, the intent of the
parties hereto with respect to such provision and the economic effects thereof.
Each party agrees that, should any court or other competent authority hold any
provision of this Option or part hereof to be null, void or unenforceable, or
order any party to take any action inconsistent herewith, or not take any action
required herein, the other party shall not be entitled to specific performance
of such provision or part hereof or to any other remedy, including but not
limited to money damages, for breach hereof or of any other provision of this
Option or part hereof as the result of such holding or order.
12. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if (i) delivered personally, or (ii) sent by
reputable overnight courier service, or (iii) telecopied (which is confirmed),
or (iv) five days after being mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
If to the Company or Optionee, addressed to it at:
--------------------------------------------------
Mr. Anthony Tobin, President
ZiaSun Technologies, Inc.
12707 High Bluff Drive
2nd Floor
San Diego, California 92130
With copy to Counsel, addressed to:
-----------------------------------
George G. Chachas, Esq.
Wenthur & Chachas
4180 La Jolla Village Drive
Suite 500
La Jolla, California 92037
If to Optionor, addressed to them at:
-------------------------------------
Brian Hodgson
1st Floor, 67 Pak Wai,
Sai Kung,
New Territories,
Hong Kong
13. Governing Law; Choice of Forum. This Option shall be governed by and
construed in accordance with the laws of the State of California applicable to
agreements made and to be performed entirely within such State and without
regard to its choice of law principles. All parties hereto (a) consents to
submit itself to the personal jurisdiction of any federal court located in the
3
<PAGE>
State of California or any California state court in the event any dispute
arises out of this Option or any of the transactions contemplated by this
Option, (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court and (c)
agrees that it will not bring any action relating to this Option or any of the
transactions contemplated by this Option in any court other than a federal court
sitting in the State of California or a California state court.
14. Counterparts. This Option may be executed in one or more counterparts,
all of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same instrument.
15. Facsimile Signatures. It is expressly agreed that the parties may
execute this Option via facsimile signature and such facsimile signature pages
shall be treated as originals for all purposes.
16. Amendments; Waiver. This Option may be amended by the parties hereto
and the terms and conditions hereof may be waived only by an instrument in
writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
IN WITNESS WHEREOF, the parties hereto have caused this Option to be
executed as of the date first above written.
OPTIONOR
/S/ Brian Hodgson
------------------------------------
Brian Hodgson
OPTIONEE
ZIASUN TECHNOLOGIES, INC.
A Nevada Corporation
Dated: June 16, 1999 /S/ Anthony Tobin
------------------------------------
By: Anthony Tobin
Its: President
Dated: March 25, 1999 /S/ Jennifer McMinn
------------------------------------
By: Jennifer C. McMinn
Its: Secretary
4
AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This Agreement made and executed this 12th day of February 1999 by and
between:
ZIASUN TECHNOLOGIES, INC., a corporation duly organized and
existing under the laws of the State of Nevada, U.S.A., with business
address at 12707 High Bluff Drive, 2nd Floor, San Diego, CA 92130,
represented herein by its duly authorized President and CEO, Mr.
Anthony L. Tobin, hereinafter referred to as "ZiaSun";
- and -
GLOBAL DIRECT MARKETING LIMITED, a corporation duly organized and
existing under the laws of the British Virgin Islands, with business
address at 80 Raffles Place, #16-20 U.O.B. Plaza #2, Singapore 048624,
represented herein by its duly authorized representative, Mr. Mark
O'Connor, hereinafter referred to as "Global Direct;
WITNESSETH: That
WHEREAS, Global Direct is engaged in the business of packaging, arranging
and marketing investments and credit facilities;
WHEREAS, ZiaSun expressed interest in acquiring on-going concerns which
will compliment and enhance its main line of business;
WHEREAS, Global Direct introduced and referred ZiaSun to Online Investors
Advantage Incorporated, a Utah registered corporation hereinafter referred to as
"Online Investors", for possible acquisition;
WHEREAS, the parties desire to define the services to be provided by and
the compensation to be paid to Global Direct in connection with the referral of
the proposed acquisition by ZiaSun of Online Investors;
NOW THEREFORE, for and in consideration of the foregoing premises, the
parties hereto agree as follows:
<PAGE>
Section 1 REFERRAL - Ziasun acknowledges that Global Direct introduced and
referred Ziasun to Online Investors for possible acquisition.
Section 2. SERVICES - Global Direct shall assist ZiaSun in negotiating for
the possible acquisition of all the outstanding capital stock of Online
Investors. The services by Global Direct shall include, but not be limited to,
the following:
(a) assign an individual or team that will assist the representatives of
ZiaSun in negotiating with the representatives of Online Investors;
(b) provide the logistics, liaison and support which may be necessary in
the course of negotiations by ZiaSun with Online Investors;
(c) cause the preparation of all documents which may be required for the
acquisition; and
(d) provide all other services and assistance which may be necessary to
ensure that ZiaSun obtains the most favorable terms and conditions.
Section 3. COMPENSATION - For and in consideration of the referral of and
the services to be provided by Global Direct, Ziasun shall pay Global Direct
Seventy Five Thousand (75,000) shares of restricted common stock of Ziasun:
Provided, That the referral and services of Global Direct result in the
consummation of the acquisition by ZiaSun of all the outstanding capital stock
of Online Investors. The said shares are to be issued exactly 9 months after the
actual acquisition date.
Section 4. EXPENSES - The compensation set forth in Section 3 hereof shall
be full, complete and final settlement to Global Direct. All expenses which may
be incurred by Global Direct in the course of providing the services hereunder
shall be for the sole account of and paid by Global Direct.
Section 5. AMENDMENTS - The written consent of the parties shall be
required for an amendment or any waiver of the provisions of this Agreement.
Section 6. ASSIGNMENT - No party shall have the right to transfer its
rights or obligations hereunder without the prior written consent of the other
party.
2
<PAGE>
Section 7. ENTIRE AGREEMENT - This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and shall
supersede any prior expressions of intent or understanding with respect to this
transaction.
IN WITNESS WHEREOF, the parties hereto set their hands on the date first
stated above.
ZIASUN TECHNOLOGIES, INC. GLOBAL DIRECT
MARKETING LIMITED
By: /S/ Anthony L. Tobin By: /S/ Mark O'Connor
- ------------------------- ---------------------------------
ANTHONY L. TOBIN MARK O'CONNOR
3
Hongkong Telecom
AGREEMENT
Agreement for on-line Internet shopping business.
This Agreement is made the 29 day of March One thousand nine hundred and
ninety nine
Between:
Hong Kong Telecom IMS ("HKTIMS") whose principle place of business is at 22F,
Tower 11, Grand Central Plaza, Shatin, Hong Kong and
Asia4sale.com Ltd ("A4S") whose principle place of business is at 12A First
Pacific Bank Centre, 56 Gloucester Road, Wanchai, Hong Kong.
Whereas
(A) A4S is operating an on-line shopping service called "ShoppingAsia" at
www.asia4sale.com and www.shoppingasia.com
(B) A4S will collaborate with HKTIMS to promote the on-line shopping service to
Netvigator subscribers via the Internet on the terms and conditions herein
after contained
Now it is hereby agreed as follows:
1. Definition
1.1 "ShoppingAsia" means the on-line shopping service operated and managed
by A4S on the Internet located at www.asia4sale.com and
www.shoppingasia.com
1.2 "Netvigator" means the Internet service operated and managed by HKTIMS
located at www.netvigator.com
1.3 "Netvigator's store owners" means Internet users who have opened
on-line stores with A4S's ShoppingAsia service via the Netvigator
website located at www.netvigator.com
<PAGE>
1.4 "Shoppers" means those Internet visitors to the A4S websites who
purchase products or services on-line
1.5 Commission means the percentage of sales transactions generated
through store owners signed from Netvigator.
2. Obligation of A4S
2.1 Pay HKTIMS a commission of three per cent (3%) on all sales shoppers
visiting ShoppingAsia via Netvigator
2.2 During the terms of this agreement A4S shall, with such marketing
material of ShoppingAsia in English and Chinese from time to time as
A4S considers necessary in its opinion to assist HKTIMS with the
promotion of the service.
2.3 Not submit any material which is protected by copyright or other
intellectual property unless AS4 owns or controls the rights thereto
2.4 Grant HKTIMS the right to display ShoppingAsia logo or trademark on
the Internet
2.5 At its own cost administer the ShoppingAsia business including
a) collect payment from on-line shoppers by credit card processing
b) organize the supply and delivery of goods or services
c) pay commission due on a monthly basis to store owners
d) pay commission due on a monthly basis to HKTIMS
e) pay suppliers for all good delivered
2.6 Take care of Netvigator store owners' complaints if any.
2.7 Maintain regular communication with store owners via the Internet
3. Obligations of HKTIMS During the term of this agreement, HKTIMS shall:
3.1 For a consideration of HK$34,200 from A4S provide a customized
application to enable ShoppingAsia to recruit store owners and provide
<PAGE>
members with a virtual storefront with a unique URL. The application
also contains administratio and shopping cart features.(please refer
to appendix for details)
3.2 Transfer the copyright of above application to A4S
3.3 Promotion via Netvigator or other appropriate medium This to include
banner advertising, hyperlink and advertorial (if applicable) at all
times while the agreement is valid
3.4 During the first six (6) months after service launch HKTIMS will not
undergo the same marketing program with those companies offering
similar service within Netvigator.
4 Commission to HKTIMS
4.2 A4S shall pay to HKTIMS an amount of commission equal to three percent
(3%) of sales generated by Netvigator store owners' virtual shopfronts
at ShoppingAsia
4.3 Commissions to HKTIMS shall be made monthly within 30 days of the end
of each calendar month by a crossed cheque made payable to "HongKong
Telecom IMS Ltd." The cheque should be sent to the principle place of
business of HKTIMS.
4.4 Within 30 days after the end of each calendar month A4S shall send to
HKTIMS an account showing particulars of the amount due to HKTIMS by
way of commission accrued in that month accompanied by a remittance
for the Commission due.
4.5 HKTIMS reserves the right to audit the accounts relating to
ShoppingAsia and Netvigator store owners at its own expense.
5 Term and Termination
5.1 This agreement shall commence on the day both parties have signed the
agreement and be valid until terminated
<PAGE>
5.2 The agreement can only be terminated by one party if the other party
is in breach of conditions
5.3 Upon termination of this agreement
a) all terms within the agreement will be ceased
b) HKTIMS will be entitled to remove any web pages, links or
advertorial for ShoppingAsia from Netvigator
c) A4S will pay to HKTIMS any outstanding commission prior to
termination date within sixty (60) days of such termination
6. Miscellaneous
6.1 Neither party will at any time either during the term hereof or
thereafter, disclose, communicate, divulge, use for the benefit of any
other person or third person any confidential information or other
information which relates to the affairs of the other party without
the prior written consent of that party or otherwise required by law.
6.2 This agreement shall be governed by and construed in accordance with
the laws of Hong Kong SAR and the parties hereby irrevocably submit to
the non-exclusive jurisdiction of Hong Kong SAR courts.
In witness whereof this agreement has been executed on the day and year above
Signed for and Signed for and
on behalf of on behalf of
Hong Kong Telecom IMS Asia4sale.com Ltd
Signed: /S/ Ricky Chang Signed: /S/ Brian Hodgson
Name: Ricky Chang Name: Brian Hodgson
Title: Business Development Manager Title: Director
Date: March 29, 1999 Date: March 23, 1999
<PAGE>
Appendix
Functional Specification
HK Telecom IMS will develop a customized application for A4S to run network
marketing business on the Internet. The application contains the following
features:
i) Member Registration - Any Internet users can register to the
application and become a network member to own a virtual storefront
with unique URL.
ii) Virtual Storefront - the storefront embraces a product catalogue, a
checkout form and form-to-email utility.
iii) Administration for Host - the host can undergo following admin:
Member: track member list and his/her personal information.
Category: add, remove or modify the product categories in member's
storefront.
Product: add, remove or modify the product items inside the product
catalogue of member's storefront.
Order: track orders and their profile from every member's storefront.
Accounting: input commission to members
i) Administration for Member - members can undergo following admin:
update his/her personal information. check order amount and commission
from his/her storefront.
Customized features
HK Telecom IMS will customize the application to cater for A4S
business needs. The additional features include:
bilingual - we recommend to input bilingual info. (both Big5 Chinese
and English) into the product catalogue of member's storefront to
avoid the complication of maintaining two identical databases (in
different language). The administration interface for host can allow
PBC to input both Big5 Chinese and English info. to the product
catalogue.
<PAGE>
DBI - the application is applying text files as database format
currently. We do not recommend to change the current database format
to DBI or other forms because it will result to the change of Perl
language of the application. As the current text-file database can
fulfill few thousands members, it may not be cost justified to
initiate the change at this stage.
Credit card payment - We will modify the check-out form to accept
credit card namely Visa, Master, Dinner and AE.
Delivery Charge - We will incorporate a program to calculate the
delivery cost on top of the order amount.
US$ vs. HK$ - We will add one more column to the product catalogue to
illustrate the product cost in both US dollar and HK dollar.
Interface to U.S Certificate Authority - We note the need to pass the
credit card information to U.S. Certificate Authority for online
authorization and credit card settlement.
Dated this 1st day of April 1999
MOMENTUM INTERNET INC.
and
HAYS BUSINESS SYSTEMS
AGREEMENT
Horvath & Giles
16th Floor On Hing Building
No. 1 On Hing Terrace
Central
Hong Kong
Tel. No.: 2522 9118
<PAGE>
AN AGREEMENT made the 1st day of April
Nine Hundred Ninety-Nine
BETWEEN
MOMENTUM INTERNET INC. whose registered address is situate at P.O. Box 957,
Offshore Incorporated Centre, Road Town, Tortola, British Virgin Islands
(hereinafter called "MII") of the one part and
HAYS BUSINESS SYSTEMS having a place of business at 23 Hays Walk, Sutton,
Surrey, SM2, United Kingdom (hereinafter called "the Consultant") of the other
part.
WHEREBY IT IS AGREED as follows:-
1) M11 engages the Consultant to provide all administrative, promotional and
technical support services to enable MII to carry on business as an
internet publishing and marketing company as effectively as possible on the
following terms and conditions.
2) The Consultant agrees:
(a) To assist in the internet publishing and marketing of products of MII
which include Swiftrade, M Finance, PINmail, MediaHits, Search Dragon
and others to be added from time to time;
(b) To provide professional, administrative and technical assistance
required in relation to the holding of internet assets, to assist in
the acquiring of equipment and machinery including computers and at
the direction of MII the training of personnel in relation thereto;
(c) To undertake any other action necessary, and which it can reasonably
provide, to enable MII to continue in operation with adequate
administrative and technical support,
3) MII agrees to pay the Consultant a service fee of 1,250 per month for the
period from 1st April 1999 and shall continue unless either party shall
have given at least one month's notice in writing to terminate this
Agreement.
IN WITNESS whereof the parties have hereunto set their hands the day and year
first above written.
SIGNED by Anthony Leonard )
) /s/ Anthony Tobbin
Tobin for and on behalf of ) ------------------
1
<PAGE>
Momentum Internet Inc. in the )
presence of Karina Lec )
SIGNED by Richard Denny )
for and on behalf of Hays Business ) /s/ Richard Denny
Systems in the presence of )
MA. Mydee Jimenez
2
LOAN AGREEMENT
This Loan Agreement, made and executed by and between:
NEW AGE PUBLICATIONS, INC., a corporation duly organized and existing under
Philippine laws, with business address at Building 8584 Boton Wharf, Subic Bay
Freeport, Philippines, represented herein by its President, ERIC MONTANDON
hereinafter referred to as "NEW AGE";
-and-
TOUCHSTONE TRANSPORT SERVICES, INC., a corporation duly organized and
existing under Philippine laws, with office address at Bldg. 8584, Boton Wharf
Subic Bay Freeport, Philippines, represented herein by its Vice President, KEN
HACKETT, JR., hereinafter referred to as "TOUCHSTONE"
WITNESSETH That:
WHEREAS, TOUCHSTONE intends to purchase from GAVINO L. BALOY two (2)
parcels of land (the "PROPERTIES") situated in the Barrios of Barretto and
Matain, City of Olongapo, Philippines, which are more particularly described as
follows:
TCT No. T-8040
--------------
A parcel of land (Lot 1-1-2 of the subdivision plan, Psd-03-086974 being a
portion of Lot 1-I, Psd-03-031751 LRC Rec. No. ), situated in the Barrio of
Barretto, Olongapo City. Bounded on the NW., along line 1-2 by Lot 1-MM
Psd-03-031751; on the E., along line 2-3 by Lot 3, Psu-214168; on the SW., along
line 3-4 by Salvage Zone; on the NW., along line 4-5 by Lot 1-1-1 of the subd.
plan; along line 5-1 by Lot 1-MM Psd-03-031751. Beginning at a point marked "1"
on plan being S. 70 deg. 18'E., 1324.93 m. from BLBM #1, Matain, Subic; thence
N. 58 deg. 24'E., 20.35 m. to pt. 2; S. 06 deg. 02'W., 38.84 m. to pt. 3; N. 63
deg. 01'W., 23.67 m. to pt. 4; N. 19 deg. 09'E., 18.97 m. to pt. 5; S. 69 deg.
14'E 1.83 m. to the pt. of beginning, containing an area of FIVE HUNDRED FIFTY
FOUR (554) SQUARE METERS, more or less. All points referred to are indicated on
the plan and are marked on the ground by Old PS and PS cyl. conc. mons. 15x6O
cm., bearings true, date of original survey, May 15-17, 1964 and that of the
subdivision survey, March 18, 1997 and was approved on March 21, 1997.
1
<PAGE>
and
TCT No. T-5485
--------------
A parcel of land (Lot 3, Plan Psu-214168, LRC Case No. N-13-0, LRC Record
No. N-30209), situated in the Barrio of Matain, City of Olongapo. Bounded on the
NE., SE., & SW., from point 2-6 by Subic Bay; and on the W., & NW., from points
6-1-2 by Lot 1. Beginning at a pt. marked "1" on plan being S. 72 deg. 04'E.,
1350.00 m. from B.L.B.M. #1, Bo. of Matain, Municipality of Zambales; thence N.
75 deg. 37'E., 55.28 m to point 2; S. 43 deg. 01'E., 80.30 m. to point 3; S. 18
deg. 01'W., 29.99 m. to pt. 4; S. 66 deg 01'W., 35.06 m. to pt. 6; N. 6 deg.
02'E., 65.83 m. to the point of beginning; containing an area of EIGHT THOUSAND
EIGHTY TWO (8,082) SQUARE METERS, more or less. All points referred to me
indicated on the plan and are marked on the ground, bearings true, dates of
Survey, May 15-17, 1964.
evidenced by Transfer Certificates, of Title Nos. 8040 and 5485 of the
Office of the Register of Deeds of Olongapo City.
WHEREAS, TOUCHSTONE desires to obtain financing from NEW AGE in order to
purchase the PROPERTIES;
WHEREAS, NEW AGE is willing to provide the funding requirements of
TOUCHSTONE subject to certain terms and conditions hereinafter set forth;
NOW THEREFORE, for and in consideration of the foregoing premises, the
parties agree as follows:
Section 1. LOAN AMOUNT- NEW AGE hereby agrees to provide a loan in favor of
TOUCHSTONE in the total amount of Six Million Pesos (P 6,000,000.00) or its U.S.
dollar equivalent [the "LOAN"] to be remitted in one (1) or several tranches
over a period of sixty (60) days from the signing of this Agreement in bank
account to be identified by TOUCHSTONE.
Section 2. LOAN PURPOSE- TOUCHSTONE commits and undertakes to use the
proceeds of the LOAN exclusively for the purchase of the PROPERTIES.
Section 3. INTEREST - The LOAN shall earn interest at the rate of Five (5%)
percent per annum payable at the end of each year.
Section 4. REPAYMENT OF PRINCIPAL - The LOAN shall be repaid within a
period of five (5) years from the date of this Agreement; Provided, however That
after the first anniversary date of this Agreement, the principal of the LOAN or
fifty (50%) percent of the appraised value of the Properties (as of date of
demand), whichever is higher, shall be payable on written demand.
2
<PAGE>
Section 5. PENALTY INTEREST - TOUCHSTONE shall be liable to pay late
payment penalty charges on any overdue amount under this Agreement at the rate
of Two Percent (2%) per month in addition to the interest payable hereunder.
Section 6. SECURITY - The LOAN shall be secured by a Real Estate Mortgage
on the PROPERTIES to be annotated in the Transfer Certificates of Title of the
PROPERTIES at any time upon demand by NEW AGE. All expenses, taxes, and fees
resulting from or in connection with the registration and annotation of the
mortgage shall be for the sole account of TOUCHSTONE.
TOUCHSTONE shall be prohibited from using the PROPERTIES to secure other
obligations or executing a second mortgage thereon without the prior written
consent of NEW AGE.
Section 7. EVENTS OF DEFAULT - Each of the following events shall
constitute an Event of Default hereunder:
a. TOUCHSTONE defaults in the payment when due of any amount payable under
this Agreement or violates any other provision herein,
b. Any representation or warranty made by TOUCHSTONE in this Agreement or
in any agreement or document executed, issued or rendered in connection
herewith, shall be found to have been incorrect or inaccurate in any material
respect as of the time that it was made or deemed to have been made; or
c. There shall have been entered against TOUCHSTONE a decree or order by a
court or any other judicial or quasi-judicial body adjudging TOUCHSTONE bankrupt
or insolvent or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of TOUCHSTONE under any
applicable law, or appointing a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of TOUCHSTONE or of any part of its
property or other assets, or ordering the winding up or liquidation of its
affairs; or institution by TOUCHSTONE of proceedings to be adjudicated bankrupt
or insolvent, or the consent by it to the institution of bankruptcy or
insolvency proceedings against it, or the filing by it of a petition for
suspension of payments or otherwise seeking reorganization or relief under any
applicable law, or the consent by it to the filing of any such petition or to
the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of TOUCHSTONE or of any part of its property, or the
making by it of an assignment for the benefit of its creditors generally, or the
admission by it in writing of its inability to pay its debts generally as they
become due.
Section 8. DECLARATION OF DEFAULT - If an Event of Default shall have
occurred, then at any time thereafter, if any such event shall then be
3
<PAGE>
continuing, NEW AGE, shall by written notice to the TOUCHSTONE, declare the
entire unpaid principal amount of the LOAN, all interest accrued and unpaid
thereon and all, other amounts payable hereunder to be forthwith due and
payable, whereupon the same shall become immediately due and payable, without
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the TOUCHSTONE.
Section 9. REMEDIES UPON DECLARATION OF DEFAULT - NEW AGE may take such
action and exercise such remedies as it may deem, appropriate in order to
protect and enforce its rights under this Agreement including, without
limitation, the right to foreclose upon any of the Collateral pursuant to the
terms of the Deed of Real Estate Mortgage and to take such other action and
exercise such other and further remedies as are provided under any applicable
law.
Section 10. WAIVER - No failure or delay on the part of NEW AGE in
exercising any right, power or remedy accruing to it upon any breach or default
of TOUCHSTONE under this Agreement shall impair any such right, power or remedy
nor shall it be construed as a waiver of any such breach or default thereafter
occurring, nor shall a waiver of any single breach or default be deemed a waiver
of any other breach or default theretofore or thereafter occurring, nor shall
any single or partial exercise of any such right or power prelude any other or
further exercise thereof or the exercise of any other right or power hereunder.
All remedies, either under this Agreement or by law or otherwise afforded NEW
AGE shall be cumulative and not alternative. No notice to or demand on
TOUCHSTONE in any case shall entitle it to any other or further notice or demand
in similar or other circumstances.
Section 11. AMENDMENTS - The written consent of the parties shall be
required for an amendment or any waiver of the provisions of this Agreement.
Section 12. VENUE FOR SUIT - The parties agree that any legal action suit
or preceding arising out of or relating to this Agreement maybe instituted only
at the competent courts in Olongapo City to the exclusion of all other venues.
The foregoing, however; shall not limit or be construed to limit the rights of
the parties, to commence proceedings or to obtain execution of judgement against
the other party in any venue or jurisdiction where the asset of the guilty party
maybe found.
Section 13. ASSIGNMENT - Neither party my assign this Agreement or any of
its rights thereto to any third party without the prior written consent of the
other.
IN WITNESS WHEREOF, the parties have hereunto have signed these presents at
Pasig City, Metro Manila, on this 1st day of May 1997.
4
<PAGE>
NEW AGE PUBLICATIONS, INC. TOUCHSTONE TRANSPORT SERVICES, INC.
By:/S/ Eric Montandon By: /S/ Ken Hackett Jr.
- --------------------------------- -----------------------------------
ERIC MONTANDON KEN HACKETT, JR.
President Vice-President
SIGNED IN THE PRESENCE OF:
- --------------------------------- --------------------------------
ACKNOWLEDGEMENT
REPUBLIC OF THE PHILIPPINES )
) SS.
BEFORE ME, a Notary Public for and in ______________, on this ______ day of
_____________19__, personally appeared the following:
NAME CTC NO./PASSPORT NO. DATE/PLACE ISSUED
Eric Montandon
Ken Hackett, Jr.
known to we to be the same persons who executed the foregoing instrument and
acknowledged to me that the same is their free and voluntary acts and deeds.
This Loan Agreement, consisting of five (5) pages including this page on
which this acknowledgement is written has been signed by the parties and their
instrumental witnesses on each and every page hereof.
WITNESS MY HAND AND SEAL on the date and place first above written.
Do. No.
Page No.
Book No.
Series of _________.
REAL ESTATE MORTGAGE
KNOW ALL MEN BY THESE PRESENTS:
This REAL ESTATE MORTGAGE, made and executed by and between
NEW AGE PUBLICATIONS, INC., a corporation duly organized and existing
under Philippine laws, with business address at Building 8584 Boton
Wharf Subic Bay Freeport, Philippines, represented herein by its
President, ERIC MONTANDON, hereinafter referred to as the "NEW AGE";
-and-
TOUCHSTONE TRANSPORT SERVICES, INC., a corporation duly organized and
existing under Philippine laws with office address at Bldg. 8584,
Boton Wbarf Subic Bay Freeport, Philippines. represented herein by its
Vice-President, KEN HACKETT, JR., hereinafter referred to as
"TOUCHSTONE"
WITNESSETH That:
TOUCHSTONE hereby conveys by way of real estate mortgage unto NEW AGE the
following described real properties together with all the therein, both situated
in Olongapo City, to wit:
TCT No. T-8197
--------------
A parcel of land (Lot 3, Plan Psu-214168, LRC Case No. N-13-0, LRC Record
No. N-30209), situated in the Barrio of Matain, City of Olongapo. Bounded on the
NE., SE., & SW., from point 2-6 by Subic Bay; and on the W., & NW., from points
6-1-2 by Lot 1. Beginning at a pt marked "1" on plan being S. 72 deg. 04'E.,
1350.00 m. from B.L.B.M. #1, Bo. of Matain, Municipality of Zambales; thence N.
75 deg. 37'E., 55.28 m. to point 2; S. 43 deg. 01'E., 80.30 m. to point 3; S. 18
deg. 01'W., 29.99 m. to pt. 4; S. 66 deg. 01'W., 35.06 m. to pt. 6; N. 6 deg.
02'E., 65.83 m. to the point of beginning; containing an area of EIGHT THOUSAND
EIGHTY TWO (8,082) SQUARE METERS, more or less. All points referred to are
indicated on the plan and are marked on the ground, bearings true, dates of
Survey, May 15-17, 1964.
1
<PAGE>
and
TCT No. T-8198
--------------
A parcel of land (Lot 1-I-2 of the subdivision plan, Psd-03-086974
being a portion of Lot 1-I Psd-03-031751 LRC Rec.No. ), situated in
the Barrio of Barretto, Olongapo City. Bounded on the NW., along line
1-2 by Lot 1-MM Psd-03-031751; on the E., along line 2-3 by Lot 3,
Psu-214168; on the SW., along line 3-4 by Salvage Zone; on the NW.,
along line 4-5 by Lot 1-I-1 of the subd. plan; along line 5-1 by Lot
1-MM Psd-03-031751. Beginning at a point marked "1" on plan being S.
70 deg. 18'E., 1324.93 m. from BLBM #1, Matain, Subic; thence N. 58
deg. 24'E., 20.35 m. to pt. 2; S. 06 deg. 02W., 38.84 m. to pt 3; N.
63 deg 01'W., 23.67 m. to pt. 4; N. 19 deg. 09'E., 18.97 m. to pt. 5;
S. 69 deg. 14'E 1.83 m. to the pt. of beginning, containing an area of
FIVE HUNDRED FIFTY FOUR (554) SQUARE METERS, more or less. All points
referred to are indicated on the plan and are marked on the ground by
Old PS and PS cyl. conc. mons. 15x60 cm., bearings true, date of
original survey, May 15-17, 1964 and that of the subdivision survey,
March 18, 1997 and was approved on March 21, 1997.
of which real properties TOUCHSTONE is the registered owner in accordance with
the provisions of the Land Registration Act, its title thereto being evidenced
by Transfer Certificates of Title Nos. 8197 and 8198, of the Registry of Deeds
of Olongapo City;
This real estate mortgage is given as security for the payment to NEW AGE
of a certain loan in the amount of Six Million Pesos (P 6,000,000.00) or its
U.S. dollar equivalent with interest at the interest of Five (5%) percent per
annum pursuant to a Loan Agreement dated 1 May 1997 which is attached as Annex
"A" and made an integral part of this Deed of Real Estate Mortgage.
The conditions of this REAL ESTATE MORTGAGE are such that if TOUCHSTONE
shall well and truly pay or cause to be paid unto NEW AGE the aforesaid sum with
accrued interest, then this mortgage shall be of no force and effect; OTHERWISE,
the same shall remain in full force and effect and shall be enforceable in the
manner provided by law.
IN WITNESS WHEREOF, the parties have hereunto have signed these presents at
the City of Manila, on this ________ day of _______________.
2
<PAGE>
NEW AGE PUBLICATIONS., INC. TOUCHSTONE TRANSPORT
SERVICES, INC.
NEW AGE PUBLICATIONS, INC. TOUCHSTONE TRANSPORT SERVICES, INC.
By:/S/ Eric Montandon By: /S/ Ken Hackett Jr.
- --------------------------------- -----------------------------------
ERIC MONTANDON KEN HACKETT, JR.
President Vice-President
SIGNED IN THE PRESENCE OF:
- -------------------------- ---------------------------------
ACKNOWLEDGEMENT
REPUBLIC OF THE PHILIPPINES )
) SS.
BEFORE ME, a Notary Public for and in ___________, on this _____ day of
______________ 19___, personally appeared the following:
NAME CTC No./PASSPORT NO. DATE/PLACE ISSUED
Eric Montandon
Ken Hackett, Jr.
known to me to be the same persons who executed the foregoing instrument and
acknowledged to me that the same are their free and voluntary acts and deeds.
This Real Estate Mortgage consisting of three (3) pages including this page
on which this acknowledgement is written has been signed by the parties and
their instrumental witnesses on each and every page hereof.
WITNESS MY HAND AND SEAL on the date and place first above written.
Do. No.
Page No.
Book No.
Series of ___________.
NEW AGE PUBLICATIONS, INC.
Subic/ Bldg. 8584 Boton Wharf, Subic Bay Freeport Zone, Philippines 2200
Clark/Bldg. PTI-07, 1961" Area, Philexcel Compound, Clark Special Economic Zone
Pampanga, Philippines
SUBSCRIBER'S AGREEMENT
----------------------
This agreement made and entered into by and between:
NEW AGE PUBLICATIONS, INC., holding office at the above addresses and
hereinafter referred to as he "COMPANY";
and
TORQUAY ASSOCIATES LTD., with main office at 82/9 Sukhumvit 77
Road,Suanluang, Suanluang, Bangkok 10 110 Thailand, hereinafter referred to as
the "SUBSCRIBER";
THE PARTIES AGREE AS FOLLOWS:
Section 1. SERVICES - The COMPANY shall provide to the SUBSCRIBER the
following facilities and services:
1.1 The use of Five Hundred Forty (540) square meters of office space, no
part of which is to be separately guarded, restricted or closed to the
COMPANY'S employees who may utilize shared portions of the space, more
particularly described in a map attached and made an integral part
hereof as Annex "A";
1.2 Availment of equipment and services necessary for the SUBSCRIBER'S day
to day operations, in particular the provision of furniture,
telecommunications, computers and peripherals, and mailing services,
more particularly described in a list attached and made an integral
part hereof as Annex "B";
1.3 Housing and transportation for the SUBSCRIBER'S employees, more
particularly described in a list attached and made an integral part
hereof an Annex "C";
1.4 The production of printed materials and the use of letter shop
facilities at cost price;
1.5 The use and direction of any of the COMPANY's designated client liason
employees or contractors for the coordination of printing, mailing,
facilities maintenance and accounting;
1.6 The use of telephone and Internet facilities, utilities, and access to
courier and mailing services, etc. for which the COMPANY will invoice
SUBSCRIBER for its portion of such services paid by the COMPANY on
behalf of SUBSCRIBER upon approval of breakdown by SUBSCRIBER; and
1.7 Assistance in hiring new personnel to work in the premises on a
permanent or contract basis.
Section 2. TERM - The subscription period shall commence on 30 June, 1998
and shall expire on June 30, 2003.
<PAGE>
Section 3. FEES - The monthly fee shall be US DOLLARS TWENTY THOUSAND
($20,000) ONLY, payable monthly in advance for the entire term of this
agreement.
The COMPANY is a Non VAT registered corporation. Consequently, invoices in
connection with this agreement and all services provided hereunder shall be
billed exclusive of VAT.
Section 4. USE OF PREMISES - The SUBSCRIBER shall strictly adhere to the
following:
4.1 Use the facilities and services of the COMPANY only for moral and
lawful purposes;
4.2 Use its best efforts to property use and maintain the premises and
property in the premises;
4.3 Notify the COMPANY of any breakdown of any equipment in the premises;
4.4 At the end of the contract period, return the premises to the COMPANY
in the same condition as when the occupancy of the SUBSCRIBER began,
ordinary wear and tear excepted;
4.5 Be responsible for all damages on the premises, facilities and housing
(excluding damages resulting from or caused by an Act of God )
Section 5. SUBLEASE - Without prior written consent of the COMPANY, the
SUBSCRIBER may not sublease, lend, transfer or in any other way take the whole
or a part of the premises for use by a third party.
Section 6. FREE AND HARMLESS The SUBSCRIBER shall have sole and exclusive
responsibility for all acts and omissions of its employees and employees of its
clients using the premises. The SUBSCRIBER shall hold the COMPANY free and
harmless from all claims by its employees or third parties arising from acts and
omissions of the SUBSCRIBER and/or its employees. Furthermore, the SUBSCRIBER
shall reimburse the COMPANY for all expenses and costs which the COMPANY may be
required to pay resulting from all acts and omissions of SUBSCRIBER and/or its
employees and/or guests.
Section 7. CANCELLATION - The SUBSCRIBER may terminate this agreement at
any time during the period of the contract by providing seven (7) days prior
written notice,
Section 8. TERMINATION - In the event the SUBSCRIBER fails to comply with
any or all of the terms of this agreement or fails to make payment of the
monthly fee on due date, the COMPANY may terminate this agreement without prior
written notice.
Section 9. AMENDMENT - This agreement may not be amended without the
written consent of the parties.
Section 10. GOVERNING LAW - This Agreement shall be governed by and
construed in accordance with the laws of the Republic of the Philippines.
<PAGE>
Section 11. EFFECTIVITY - This Agreement shall take effect upon the signing
of both parties. The parties hereto will execute this Agreement in duplicate.
IN WITNESS WHEREOF, the parties have here unto set their hands in Clark
Special Economic Zone, Pampanga Philippines this day 30 June 1998.
NEW AGE PUBLICATIONS, INC. TORQUAY ASSOCIATES LTD.
By: /S/ Eric Montandon By: /S/ Mr. MICHAEL MANDELL
- --------------------------------- -----------------------------------
ERIC MONTANDON Mr. MICHAEL MANDELL
President SENIOER Vice-President
IN THE PRESENCE OF
- ----------------------------- ----------------------------
ACKNOWLEDGMENT
REPUBLIC OF THE PHILIPPINES)
) SS.
BEFORE ME, a Notary Public, for and in the City of this day of personally
appeared with Passport No. issued on _______ at the City of_______ and with
Passport No.issued on _______ at the City of ______________ known to me and to
me known to bee the same persons who executed the foregoing Subscriber's
Agreement consisting of four (4) pages including the page on which this
Acknowledgment is written and signed by the affiants and acknowledged to me that
the same are their free and voluntary acts and deeds.
WITNESS MY HAND AND SEAL on the date and at the place first above-written.
Doc. No.
Page No.
Book No.
Series of
SUB. NO.: HK29487
CONTRACT NO.: 129044,129312
Date: 22 April 1999
REUTERS ON-LINE S.A.
and
Momentum Internet Incorporated
REUTERS INVESTOR
DISTRIBUTION AGREEMENT
VERSION 2.4
<PAGE>
REUTERS INVESTOR DISTRIBUTOR AGREEMENT made on 22 April 1999
BETWEEN
(1) REUTERS ON-LINE S.A. whose registered office is at 5 rue de Jargonnant,
1207 Geneva, Switzerland ("Reuters")
and
(2) Momentum Internet Incorporated of 12a First Pacific Bank Centre, 56
Gloucester Road, Wanchai, Hong Kong ("the Client")
RECITALS
(A) Reuters supplies news and information to third parties on a global basis
and has developed the Reuters Investor Service, as defined below.
(B) The Client wishes to provide the Reuters Investor Service to Users, as
defined below, and Reuters is willing to provide the Reuters Investor
Service to the Client for such purpose in accordance with the provisions of
this Agreement.
1. DEFINITIONS
1.1 In this Agreement, the following expressions have the following meanings
unless the context requires otherwise:
Access Fees means the fees payable by the Client to Reuters for Reuters
Investor Service, and which are calculated on the basis of the number of
Access ID's provided to Users and more particularly described in Schedule
1;
Access ID means the specific user account/password issued to each User by
the Client;
Additional Reuters Content means the additional news content which may be
provided as part of the Reuters Investor Service pursuant to Clause 5.4 and
more particularly described in Schedule 2;
Administration Facility shall have the meaning set out in Clause 8.1;
Advertising Revenues means the sums to be paid by the Client to Reuters
calculated in accordance with Schedule 1;
Advertising Space means a portion of a Page which is available for
advertiser's content;
1
<PAGE>
Agreement means this Agreement and any attached schedules;
API means a written protocol to be incorporated into the Client Service
containing details of each instrument/data access code necessary for the
Client to retrieve Content via pre-formatted templates as well as raw XML
data files;
Charges means the amounts payable by the Client to Reuters in accordance
with the provisions of Clause 9 in respect of the provision of the Reuters
Investor Service more particularly set out in Schedule 1 as may be amended
by Reuters from time to time;
Client Content means the Content contained in the Client Service;
Client Marks means the trade marks and logos of the Client as set out in
Schedule 3 as may be amended from time to time by the Client;
Client Service means the service provided by the Client to end users by way
of the Internet and available via the World Wide Web and accessible at
Universal Resource Locator (URL) swiftrade.com;
Client Statement means any form (which will form part of the Agreement)
provided by Reuters and Reuters asks Client to complete in order to confirm
the details in the Agreement concerning the Client Service, the Site and
any location where Content is stored, the number of Users of the Client
Service, the average Page Views by Users of Qualifying Pages and the
Advertising Revenues raised during the period to which the Client Statement
relates;
Commencement Date means 22 April 1999;
Content means data or information in any form, whether text, visual (still
or moving) audio or any combination of the foregoing and whether received
in XML format or pre-formatted HTML pages;
Content Providers means any third party whose Content is included in the
Reuters Investor Service;
Display Period means in relation to any item of Content the period of seven
days from the date that item of Content was first displayed on the Client
Service;
Distributorship shall have the meaning set out in Clause 2.1;
Edit means edit, sub-title, dub and interpolate any Content and translate
any non-textual Content;
Equipment means hardware and/or Software and related documentations
supplied by Reuters;
2
<PAGE>
Hypertext Link means an icon, logo, highlighted or coloured text, figure or
image representing a URL which allows a user to move between pages,
Internet sites or locations within a document;
Intellectual Property Rights means patents, trade marks, service marks,
trade and service names, copyrights and design rights (whether or not any
of them are registered and including applications for registration of any
of them), moral rights, trade secrets and rights of confidence; all rights
of forms of protection of a similar nature or having similar or equivalent
effect to any of them which may subsist anywhere in the world;
Internet means the interconnected networks and computer systems, including
the World Wide Web through which the Reuters Investor Service is delivered
and/or the Client Service is made available;
Laws means applicable laws, regulations, rules, orders, standards or
guidelines of any government, administrative authority, court or body;
Maintenance Charge means the sum to be paid by the Client to Reuters per
annum in respect of Support of the Reuters Investor Service;
Marketing Costs means costs incurred by Client in the promotion and sales
of Advertising Space on Qualifying Pages (including agency fees);
Minimum Payments means the minimum amounts payable by Client to Reuters as
set out in Clause 9.1 and more particularly described in Schedule 1;
Page means an individual screen or file of Content within the Client
Service which may contain text, pictures or graphics;
Page Views means impressions by Users on Pages;
Qualifying Page means a Page which contains Reuters Content;
Reuters Content means the Content, including the news and financial data,
contained in the Reuters Investor Service and Additional Reuters Content,
if any, and more particularly described in Schedule 2, whether received in
XML format or in pre-formatted HTML pages;
Reuters Group means Reuters Group PLC and any of its direct or indirect
subsidiaries from time to time including Reuters;
Reuters Marks means the trade marks and logos of the Reuters Group set out
in Schedule 3 as may be amended by Reuters from time to time;
Reuters Investor Service means the Reuters Investor Premium Service, brief
details of which are set out in Schedule 2;
3
<PAGE>
Reuters Site means the Internet site from which the Reuters Content may be
accessed by the Client or a User subject to the execution of Subscriber
Agreement;
Service Fees means the fees charged by Reuters for the supply of the
Reuters Investor Service as specified in Schedule I including where
indicated the Access Fees, Advertising Revenues, payments per Page View or
the Minimum Payments whichever is the greater;
Site means the location specified in Schedule 5 to which the Reuters
Service will be supplied to the Client;
Software means the computer programs provided by Reuters necessary for the
operation of the Reuters Investor Service;
Start Up Charges means the one off fee payable to Reuters by the Client in
respect of the installation and set up costs of the Reuters Investor
Service, more particularly set out in Schedule 1;
Storage Period means in relation to any item of Content, the period of
three months from the date of delivery to Client of that item of Content;
Subscriber Agreement means an agreement between the Client and each User in
such form as shall be approved by Reuters, the current version of which as
at the Commencement Date is attached to this Agreement at Schedule 4;
Substantial Item means any still visual image (including any graphic), and
any paragraph of text which contains a substantial part (with respect to
quantity or quality) of the report or story from which it is extracted.
Support means the use of reasonable efforts by Reuters or its nominee to
maintain the Equipment in good operating condition and/or to restore the
Reuters Investor Service by repairing, correcting or replacing the
Equipment;
Support Hours means 7.30 a.m. to 7.00 p.m., local Hong Kong time, Monday to
Friday, excluding public holidays;
Term has the meaning set out in Clause 3;
URL means the Universal Resource Locator designating an Internet Site;
User means any person who has access to the Client Service.
1.2 In this Agreement:
(a) any reference to a notice means a written notice;
4
<PAGE>
(b) headings are for convenience only and do not affect the interpretation
of this Agreement; and
(c) words importing the singular include the plural and vice versa.
2. SCOPE OF THE AGREEMENT
2.1 Reuters appoints the Client to be its non-exclusive distributor of the
Reuters Investor Service in accordance with the provisions of this
Agreement and for this purpose grants to the Client the non-exclusive right
to market and distribute the Reuters Investor Service to Users. The Client
accepts such appointment in accordance with the provisions of this
Agreement. Such appointment is referred to as the Distributorship.
2.2 The Client recognises and acknowledges that Reuters may itself supply the
Reuters Investor Service to any other person or persons or appoint at its
discretion other distributors (and, in each case, on such terms as it may
think fit).
2.3 Reuters may from time to time by written notice require the Client not to,
and if so required the Client shall not solicit orders for the Reuters
Investor Service from particular or potential Users if Reuters in its
reasonable opinion considers that such Users are direct competitors of
Reuters or controlled by direct competitors of Reuters or Reuters has a
reasonable belief that such Users would not use the Reuters Investor
Service in accordance with the provisions of the Subscriber Agreement.
3. TERM
3.1 Subject to the provisions of Clause 13, this Agreement shall take effect on
Commencement Date, and will be for a term of one year ("Term").
4. USE OF CONTENT
4.1 Subject to the terms of this Agreement, Client may receive and view Reuters
Content at the Site and display only the Reuters Content set out in
Schedule 6 in the Client Service and may permit its Users to access and
view any such Reuters Content displayed on the Client Service and to
download and copy such Reuters Content for such User's personal use (but
not for the purposes of redistribution by that User), subject to the terms
of this Agreement.
4.2 Client may Edit any Reuters Content for the purpose of incorporating such
Reuters Content in the Client Service provided the Client does not distort
the meaning or value of any report, caption or figures comprised in the
Reuters Content. Client will publish a retraction in the applicable Client
Service in the form reasonably requested by Reuters if Client breaches this
Clause.
5
<PAGE>
4.3 Where any Reuters Content delivered by Reuters carries a "Reuters" credit
or a Content Provider's credit Client will reproduce the credit where a
Substantial Item of such Reuters Content is reproduced in the Client
Service. Where Client translates any item of Reuters Content from the
original language, Client will identify that it is the maker of the
translation.
4.4 Client may store any Reuters Content on the Site and at any offices
notified to Reuters which are located within the same country as the Site
for the Storage Period and may use the Reuters Content within the Storage
Period in accordance with this Agreement.
4.5 Client may display each item of Reuters Content incorporated in the Client
Service for the Display Period. Client agrees to delete any item of Reuters
Content from the Client Service in respect of which the Display Period has
ended.
4.6 Client may not use any item of Reuters Content for which the Storage Period
has ended and at the end of the Storage Period, Client agrees that it will
delete any such stored Reuters Content from any storage medium. Client will
provide Reuters upon request with satisfactory evidence that Client has
complied with this obligation.
4.7 Client shall display on each screen and in all custom built templates and
applications, that contain any Reuters Content the following notice:
"Copyright 1999 Reuters Limited. Click here for limitations and
restrictions on use."
Such notice shall contain a Hypertext Link to the following notice, which
shall appear in a legal notice area on the Client Service: "Reuters content
is the intellectual property of Reuters Limited. Any copying, republication
or redistribution of Reuters content, including by caching, framing or
similar means, is expressly prohibited without the prior written consent of
Reuters. Reuters shall not be liable for any errors or delays in content,
or for any actions taken in reliance thereon."
or such other similar notice as Reuters may designate from time to time and
shall comply with any guidelines relating to such notices provided by
Reuters to Client from time to time.
5. USE OF REUTERS SERVICES IN GENERAL
5.1 Client will:
(a) use the Reuters Investor Service in accordance with all applicable
Laws;
6
<PAGE>
(b) not remove or conceal any copyright, trade mark or other proprietary
notice displayed on the Reuters Investor Service;
(c) observe any restrictions which Reuters notifies to the Client
regarding the use of the Reuters Investor Service including any
restrictions imposed on Reuters by Content Providers or by any court
of competent authority; and
(d) be responsible for, except where notified by Reuters to the contrary,
obtaining and maintaining all consents and licences and making all
filings necessary to receive or use the Reuters Investor Service
including consents of telecommunication, exchange or similar
information providers or other government or regulatory authorities
and shall certify to Reuters in writing receipt of the same. For the
avoidance of doubt, except where agreed in writing between the
parties, the Client shall obtain and maintain all necessary licences
and consents necessary for the receipt of any data provided by an
exchange or similar body as part of the Reuters Investor Service.
5.2 Client will not acquire any intellectual property or other similar rights
in the Reuters Investor Service and agrees to comply with all notices
bringing such rights to its attention and all Laws relating to such rights.
5.3 Reuters will send Client a Client Statement not more than once per calendar
month which Client will complete and return to Reuters within the period
specified.
5.4 Reuters may, subject to the provisions of Clause 9.1, and on the reasonable
written request of the Client, include the Additional Reuters Content as
part of the Reuters Investor Service. The Client agrees that the provisions
of this Agreement shall apply to the Additional Reuters Content which shall
be incorporated into and form part of the Reuters Investor Service.
5.5 The Client shall ensure no User has access to the Reuters Investor Service
unless and until such User has entered into a Subscriber Agreement and that
Access IDs are required for access to the Reuters Investor Service.
5.6 Client agrees to indemnify Reuters against any loss or damage Reuters may
suffer arising out of any breach by Client of its obligations under any
contract with the relevant exchanges or similar information providers.
6. EQUIPMENT
6.1 General
6.1.1 Client agrees that Reuters owns the Equipment and all rights in the
Equipment or has obtained from a third party the right to supply them
to Client. Client agrees that it will acquire no proprietary rights in
the Equipment.
7
<PAGE>
6.1.2 Itis Client's obligation to provide necessary consumable items and a
satisfactory operating environment for the Equipment designated by
Reuters.
6.1.3 Client will not:
(a) dispose of or transfer or encumber the Equipment;
(b) remove the Equipment from the Site;
(c) infringe any intellectual property or other similar rights in the
Equipment;
(d) allow the Equipment to become subject to any third party claims;
(e) make any alteration, connection or interface to the Equipment,
except as permitted under the Agreement or advised by Reuters in
writing; or
(f) permit the support or repair of the Equipment or allow the
Equipment to be damaged or interfered with by a party other than
Reuters nominee.
6.1.4 On termination of the Agreement, Client will either return the
Equipment (and any copies) to Reuters or deal with the Equipment as
Reuters may reasonably request.
6.1.5 Certain Equipment will be subject to United States and other export
regulations for high technology items. Client warrants that it is not
subject to any such restriction on delivery of the Equipment and
agrees to comply with such restrictions.
6.1.6 Client will provide all connections from its own computer systems to
the Equipment and will be responsible for transmission of the Reuter
Investor Service from the Equipment to its own computer systems.
6.1.7 Reuters may at any time upon thirty days' written notice, replace the
Equipment with other equipment (which will be treated as the
Equipment) or replace the means of transmission of the Reuters
Investor Service with another means of transmission provided that
Reuters shall use reasonable efforts to ensure that the implementation
of such replacement shall not disrupt the operations of Client.
8
<PAGE>
6.2 Conditions Applying to Software
6.2.1 Reuters grants Client a non-exclusive, non transferable licence to use
the Software at the Site. Client agrees that each copy of the Software
will only be used for its internal operations on the designated
hardware.
6.2.2 Client will not:
(a) sub-license;
(b) assign;
(c) copy (except two copies for back-up purposes);
(d) modify;
(e) merge;
(f) distribute;
(g) transfer; or
(h) decompile or reverse engineer;
the Software except as allowed by us in writing or to the extent this
restriction is not permitted under applicable law.
6.3 Compatibility
Where the Equipment supplied to Client can be operated in conjunction
with Client's hardware and software, the parties agree:
(a) Reuters does not guarantee that the Equipment will perform
satisfactorily with any hardware or software supplied by Client;
(b) Reuters will not be responsible for any reduced performance of
the Reuter Investor Service or loss (including loss of the
Content) or damage which is due to Client adding or accessing the
Equipment in conjunction with any system, software, or equipment
not provided by Reuters; and
(c) Client may be required by Reuters to upgrade its hardware or
software to maintain compatibility with modification to the means
of transmission of the Reuter Services, the Reuter communications
protocols and format of the Content.
7. SUPPORT
7.1 General
So that Reuters can provide Client with Support, Client must:
9
<PAGE>
(a) arrange for Reuters and/or its nominees to have access to the Site at
all reasonable times; and
(b) provide necessary co-operation and facilities.
7.2 The Support Reuters will provide will consist of
(a) supplying and installing the Equipment at the Site; and
(b) providing a reasonable level of training to Client's staff in the use
of the Equipment;
(c) removing or relocating the Equipment as required by Client;
(d) wherever available, providing on-line Support for the Services,
Support and consultancy services.
7.3 Reuters will advise Client about any applicable Charges for Support at
Client's request.
7.4 Excluded Support
7.4.1 The Charges do not include:
(a) Support required as a result of Act of God, accident, negligence or
misuse not attributable to Reuters;
Support resulting from failure of operating environment or causes
other than ordinary use in accordance with Reuters operating manuals;
(c) Support resulting from any attempt made to repair, service or modify
the Equipment by persons other than the personnel of Reuters or its
nominees;
(d) Support of non-cuffent versions of the Equipment where current
versions have been made available to Client or Support of current
versions containing unauthorised modifications;
(e) Support of associated operating Equipment;
(f) Support of, and Support which is necessitated by the operation of,
software or hardware not supplied by Reuters;
(g) Support arising from overload of the network or hardware not caused by
Reuters; and
10
<PAGE>
(h) any visit to a Site at Client's request where there is no fault or
failure caused by the Equipment.
7.4.2 Reuters shall not be obliged to undertake Support in relation to any
of the matters specified in clause 7.4, 1, although Reuters may
undertake such Support at its own discretion and at Client's request
at Reuters then current standard charges.
7.5 Modifications and Enhancements
Reuters may modify and/or enhance the Equipment from time to time, provided
that such modifications and/or enhancements:
(a) result in the substantially similar or improved performance of the
Equipment; and
(b) are made during normal working hours.
8. PREMIUM SERVICE
8.1 Reuters shall provide reasonable assistance to the Client to facilitate the
production of sales literature by the Client.
8.2 Without prejudice to the provisions of Clause 8.5, Reuters shall notify the
Client of its recommended list price for the Reuters Investor Service from
time to time but, for the avoidance of doubt, such recommended list prices
shall not be binding on the Client.
8.3 The Client shall ensure that:
(a) the Subscriber Agreement contains provisions which are adequate to
protect Reuters rights to no lesser extent than in this Agreement and
the form of such agreement and any changes thereto shall be approved
by Reuters prior to such agreement becoming binding such approval not
to be unreasonably withheld;
The Client shall, at its own expense, enforce the obligations of each
User under any Subscriber Agreement and shall promptly report to
Reuters any breach of any Subscriber Agreement of which it becomes
aware. The Client shall assign to Reuters, at Reuters written request,
any rights that the Client has against its Users under such Subscriber
Agreement and, after any such assignment, the Client agrees to
cooperate fully with Reuters in any proceedings or actions connected
therewith at Reuters expense;
11
<PAGE>
(c) The Client shall fully comply with all its obligations under any
Subscriber Agreement.
8.4 The Client undertakes that no Access IDs shall be distributed to a User
unless and until a User has accepted the provisions of the Subscriber
Agreement, and that each User will be allocated a unique Access ID personal
to that User which shall not be transferable or shared. The Client
undertakes to impose reasonable security procedures in respect of its
management of Access IDs.
8.5 The Client shall be entitled to charge Users such price as it considers fit
for access to the Reuters Investor Service provided that any such prices
charged are not such as to make the Reuters Investor Service commercially
unattractive or unacceptable when compared with the costs of accessing the
Client Service or any similar service. In addition, the Client shall not
sell access to the Reuters Investor Service at prices or on terms which
would result in the Reuters Investor Service being treated as a "loss
leader" in relation to other services supplied by the Client. For the
purpose of this Clause 8.5, the Reuters Investor Service shall be regarded
as a "loss leader" if it is sold by Client not for the purpose of making a
profit but for the purpose of attracting Users likely to purchase other
products or services supplied by the Client or otherwise for the purpose of
advertising the business of the Client. 8.6 The Client shall not be
entitled to include any advertising or promotional material in the Reuters
Investor Service without the prior written consent of Reuters.
9. CHARGES
9.1 The Client will pay the following Charges to Reuters:
(a) the Start Up Charges;
(b) the Service Fees;
(c) the Maintenance Charges;
(d) the Charges for inclusion of Additional Reuters Content in the Reuters
Investor Service, if any; and
(e) any other additional Charges agreed between Reuters and the Client
from time to time.
9.2 All invoices in respect of the Charges sent to the Client by or on behalf
of Reuters shall be due and payable within 30 days of the date of the
invoice.
9.3 All Charges specified in this Agreement are exclusive of sales, value added
or similar taxes (not being in the nature of a tax on income), or any tax
in the
12
<PAGE>
nature of withholding tax, stamp duty, import duty or levy and shall be
paid in United States Dollars..
9.4 The Client shall keep and shall make available to Reuters on request
accurate records including details of Access IDs allocated to Users to
enable Reuters to verify payments due to Reuters pursuant to this Agreement
and to verify the Client's compliance with the provisions of this
Agreement.
9.5 Where the Service Fees include payment of Advertising Revenues in respect
of sales of Advertising Space on Qualifying Pages, Client shall sell or
rent Advertising Space of Qualifying Pages at a rate that is comparable to
the rate charged on other Pages on the Client Service, taking into account
the number of times that Qualifying Pages are accessed in relation to the
rest of the Client Service and the reasonable demand for Qualifying Pages.
9.6 Where the Service Fees include payment of Advertising Revenues in respect
of Advertising Space on Qualifying Pages, Client will provide Reuters with
a written statement showing the total gross revenue attributable to sales
of Advertising Space on QuaWng Pages, the number of sales of Advertising
Space on Qualifying Pages and the royalty earned per sale calculated in
accordance with Schedule I together with a full breakdown of applicable
Marketing Costs within 30 days of the end of each Quarter.
9.7 Reuters or its Authorized Representative may at any time during normal
business hours on reasonable prior written notice inspect all records of
the Client relating to the Reuters Investor Service in order to verify the
accuracy of the reports made pursuant to Clause 9.6.
9.8 Reuters and Content Providers will be entitled, at its own cost, once every
twelve months during the term of this Agreement on giving the Client
reasonable notice in writing, to audit or to have its auditors audit
Client's records which related directly to the calculation of payments due
to Reuters under this clause 9. Any such audit will be conducted during
Client's normal business hours and at the location where the relevant
records are kept in the normal course of business. Any information Client
provides to Reuters or its auditors pursuant to this clause 9.8 will be
treated by Reuters and its auditors as confidential information within the
meaning of Clause 15 and will not be used for any purpose other than to
conduct the audit.
9.9 The certificate of such auditors shall be final and binding on the parties
and the costs of the investigation shall be borne by Reuters unless the
investigation discloses an underpayment by Client in excess of 5% of the
total due to Reuters, in which case the Client will bear the cost.
9.10 If the Client fails to make a payment to Reuters under this Agreement on
the due date then without prejudice to any other right or remedy available
to Reuters, Reuters shall be entitled to:
13
<PAGE>
(a) suspend the performance or further performance of its obligations
under this Agreement without liability to the Client; and/or
(b) suspend (by notice in writing) the Client's rights to provide any
fiirther Access IDs until payment in full is made (and the Client
shall so comply with such suspension)).
9.11 Reuters shall be entitled to charge the Client interest (both before and
after judgement) on any overdue payment from the date payment was due to
the date payment in full is made on a daily basis at the rate of 2% per
annurn over the base rate of Hong Kong & Shanghai Banking Corporation from
time to time. Such interest shall be payable within 14 days of the date of
written request by Reuters.
9.12 Reuters may modify the Charges no more than once in any 6-month period and
upon three months' written notice to the Client. If the Client does not
agree to such modification it shall be entitled to terminate this Agreement
on at least one months written notice to Reuters to expire on the date of
introduction of such modification.
10. SUPPORT AND MAINTENANCE
10.1 The Client agrees and acknowledges that it will provide first level support
to Users. For the purpose of this Clause 10. 1, "first level support" means
that the Client will ensure that it has in place a help desk staffed by
suitably qualified personnel to answer queries from Users in respect of the
Reuters Investor Service. The Client acknowledges that Reuters will not
accept calls directly from Users in respect of the Reuters Investor Service
but only from the Client's help desk.
10.2 Reuters agrees and acknowledges that it shall provide second level support
to the Client. For the purposes of this Clause 10.2, "second level support"
means that the Client shall be entitled to call Reuters help desk for
advice and assistance in respect of the Reuters Investor Service. Reuters
shall, when it receives- the call from the Client, escalate the call to the
appropriately qualified personnel to respond to the Client's queries in
respect of the Reuters Investor Service. Advice by telephone help desk
shall be available during the Support Hours.
10.3 Reuters agrees that, subject to the payment of the Maintenance Charges, it
shall provide Support Services in respect of the Reuters Investor Service
during the Support Hours at the Reuters Site. For the purposes of this
Clause 9.3, "Support Services" means the use of reasonable efforts by
Reuters to rectify errors and defects in the API and the Reuters Investor
Service, including communications facilities.
11. INTELLECTUAL PROPERTY RIGHTS
14
<PAGE>
11.1 The Client acknowledges that Reuters and its Content Providers have
Intellectual Property Rights in the Reuters Investor Service, including the
Reuters Content. The Client will not acquire any Intellectual Property
Rights in the Reuters Investor Service and agrees to comply with all
notices bringing such rights to its attention and all laws relating to such
rights. The Client agrees to notify Reuters promptly if it becomes aware of
any unauthorised distribution of the Reuters Investor Service including the
Reuters Content and to co-operate with Reuters to prevent the use or
distribution of the Reuters Investor Service in any manner not expressly
authorised by this Agreement.
11.2 Except as specifically authorised in Clauses 4 and 11, the Client shall not
use Reuters name or any Reuters Marks without Reuters prior written
consent. Client may not make any statement (whether oral or in writing) in
an external advertising, marketing or promotion materials regarding Reuters
or the Reuters Investor Service without the prior written consent of
Reuters, provided that materials that are substantially identical to those
previously approved need not be submitted for re-approval.
11.3 Reuters acknowledges that the Client has Intellectual Property Rights in
the Client Service, including the Client Content. Reuters will not acquire
any Intellectual Property Rights in the Client Service and agrees to comply
with all notices bringing such rights to its attention and all laws
relating to such rights.
11.4 All Intellectual Property Rights in the Client Marks are and shall remain
vested in the Client absolutely. The Client grants to Reuters for the Term
a nonexclusive licence to use the Client Marks solely for the purposes of
the activities contemplated in the Agreement and Reuters shall make no
other use of the Client Marks.
11.5 Any reference to the Reuters Marks or to the Reuters Investor Service shall
be accompanied by a statement by the Client that any Intellectual Property
Rights remain with Reuters, as follows:
"REUTERS, Reuters Dotted Logo and the Sphere Logo are trade marks and
registered trade marks of the Reuters Group of Companies around the world".
11.6 Each of the parties agrees that the home page of the Reuters Site shall
have reference to each of the Reuters Marks and the Client Marks and that
equal prominence shall be given to the Reuters Marks and to the Client
Marks on the Reuters Site. Reuters will provide the Client with a graphics
file containing the Reuters Mark. The Client will insert the Reuters Mark
at the top of any page containing any Reuters Content, except where the
Reuters Content is less than 50% of the Content shown on that page, in a
size not smaller than 164 pixels by 41 pixels, or in accordance with such
other guidelines issued by Reuters from time to time.
15
<PAGE>
11.7 Subject to Clause 11.8, Reuters shall indemnify the Client against each
loss, liability and cost incurred by the Client arising out of any claim of
infhngement of any Intellectual Property Fights arising as a result of or
in connection with the supply or use of the Reuters Content or the Reuters
Investor Service or any part thereof in accordance with the provisions of
this Agreement (an "IPR Claim"), provided that:
i. the relevant claim does not arise from any modification of the Reuters
Content or Software made by the Client or any person receiving the
Reuters Content through the Client;
ii. the relevant claim does not concern Reuters Content that Reuters
notified the Client should not be used;
iii. the relevant claim is not based upon content obtained by Reuters from
a third party; and
iv. with respect to the Software, Reuters obligation to indemnify the
Client shall not apply to any claim for inflingement of patent rights.
11.8 The Client shall:
(a) notify Reuters promptly in writing of an IPR Claim;
(b) permit Reuters to control the defence of the IPR Claim;
(c) not agree to any settlement of the IPR claim without the prior written
consent of Reuters; and
(d) not prejudice the manner of conduct of the IPR Claim by Reuters or a
member of the Reuters Group.
11.9 Subject to Clause 11.10 the Client shall indemnify Reuters against each
loss, liability and cost incurred by Reuters arising out of any claim of
infhngement of any Intellectual Property Right arising as a result of or in
connection with the supply or use of the Client Service or the Client
Content or any part thereof in accordance with the provisions of this
Agreement (an "IEPR Claim").
11.10 Reuters shall:
(a) notify the Client promptly in writing of an IPR Claim;
(b) permit the Client to control the defence of the IPR Claim;
(c) not agree to any settlement of the IPR claim without the prior written
consent of the Client; and
(d) not prejudice the manner of the conduct of the IPR Claim by the
Client.
16
<PAGE>
12. RELATIONSHIP BETWEEN THE PARTIES
12.1 The relationship established pursuant to this Agreement between Reuters and
the Client shall be that of vendor and purchaser and the Client shall act
for its own account as an independent principal.
12.2 the Client shall have no right or authority to create or assume any
obligations whatsoever, whether express or implied, in the name or on
behalf of Reuters nor to bind Reuters in any manner whatsoever.
12.3 The Client shall be entitled to describe itself as an authorised dealer in
or distributor of the Reuters Investor Service but shall not be entitled to
describe itself as agent for Reuters or in any words indicating any
relationship of agency existing between the parties.
12.4 Reuters shall not in any event be responsible for any statement or
representation made in regard to any of the Reuters Investor Service in any
sales literature or advertising material issued by the Client (other than
material supplied or agreed by Reuters), and to the extent that any such
responsibility shall fall on Reuters as a result of statutory regulations
or otherwise the Client shall indemnify Reuters against any claims or
demands arising out of any such statement or representation.
12.5 Nothing in this Agreement shall be deemed to constitute a joint venture or
partnership between the parties.
13. TERMINATION
13.1 Either of the parties may terminate the Agreement in whole or in part if
the other is in breach of any material obligations under this Agreement
and:
(a) in the case of any such breach which cannot be remedied, upon written
notice with immediate effect; or
(b) in the case of any other such breach which can be but which has not
been remedied, within thirty days of a written request to do so.
13.2 Either of the parties may terminate the Agreement immediately and withou
notice if
(a) the other enters into a composition with its creditors;
(b) an order is made for the winding up of the other;
(c) an effective resolution is passed for the winding up of the other
(other than for the purposes of amalgamation or reconstruction on
terms approved by the first party (such approval not to be
unreasonably withheld)); or
17
<PAGE>
(d) the other has a receiver, manager, administrative receiver or
administrator appointed in respect of it.
13.3 Reuters may cancel the Reuters Investor Service or a part of the Reuters
Investor Service, as the case may be, by written notice if the provision of
all or part of the Service:
(a) depends on an agreement between a Reuters Group member and a third
party, and that agreement is modified or terminated for any reason or
breached by the third party and as a result Reuters is unable to
continue to provide all or part of the Reuters Investor Service upon
terms reasonably acceptable to Reuters; or
(b) becomes illegal or contrary to any rule, regulation, guideline or
request of any exchange or regulatory authority.
13.4 If Clause 13.3 applies, Reuters only obligation to Client will be to refund
the part of the Charges paid in advance for the cancelled part of the
Reuters Investor Service.
13.5 Upon expiration or termination of this Agreement in whole or in part,
Client must delete the API and any Content contained in the terminated
Reuters Investor Service.
13.6 The following will continue to apply after termination of the Agreement:
(a) all disclaimers, indemnities and restrictions relating to the Reuter
Investor Service; and
(b) the confidentiality undertaking in Clause 15.
(c) Reuters right to recover liquidated damages under Clause 13.6.
13.7 If:
(a) Client cancels the Reuters Investor Service other than when permitted
by this Agreement; or
(b) Client is in breach of any payment obligations under this Agreement
entitling Reuters to terminate the Agreement, or terminates this
Agreement at any time without cause;
Reuters will be entitled to recover from Client as liquidated damages
an amount equal to 75% of the relevant Service Fees, or the Mnimum
Payment where the Service Fees have a variable element, which would
have been payable until the end of the term set out in Clause 2. Both
parties agree that this constitutes a realistic pre-estimate of their
loss and is not intended to be a penalty.
18
<PAGE>
14. LIABILITY
14.1 Although Reuters will use all reasonable endeavours to ensure the accuracy
and reliability of the Reuters Investor Service, neither Reuters nor any
other member of the Reuters Group, nor any Content Provider, nor any third
party supplier will be liable for any loss or damage in connection with the
provision of or failure to provide the Reuters Investor Service except as
set out in Clause 14.2..
14.2 The Reuters Group accepts liability only for:
(a) death or personal injury caused by its negligence; and
(b) any other direct loss or damage caused by its gross negligence or
wilful misconduct.
14.3 Reuters warrants that it has the right to perform its obligations and
services which are the subject of this Agreement.
14.4 EXCEPT AS EXPRESSLY STATED IN THE AGREEMENT, ALL EXPRESS OR IMPLIED
CONDITIONS, WARRANTIES OR UNDERTAKINGS, WBETHER ORAL OR IN WRITING, IN LAW
OR IN FACT, INCLUDING WARRANTIES AS TO SATISFACTORY QUALITY AND FITNESS FOR
A PARTICULAR PURPOSE, ARE EXCLUDED.
14.5 Neither Reuters nor any member of the Reuters Group, nor any Content
Provider, nor any other third party supplier will be liable to the Client
or to any third party for any indirect, special or consequential loss or
damage arising out of any provision of the Agreement or the Reuters
Investor Service.
14.6 To the extent permitted by law and except for Clause 14.2(a), under no
circumstances will Reuters liability under the Agreement exceed one year's
Mnimum Payments, regardless of the cause or form of action.
14.7 The Client agrees to indemnify Reuters against any loss, damage or cost in
connection with any claim or action which may be brought by a third party
against Reuters relating to the Client Service or the Client's or its Users
or Users use of the Reuters Content or Reuters Investor Service other than
in accordance with the provisions of this Agreement.
15. CONFIDENTIALITY
15.1 Each of the parties acknowledges that information of a confidential nature
relating to the business of the other may be disclosed to it or otherwise
come to its attention. Each of the parties undertakes to hold such
information in confidence and not, without the consent of the other,
disclose it to any third
19
<PAGE>
party nor to use it for any purpose other than in the performance of the
Agreement.
15.2 This obligation of confidentiality will not apply to information that is
generally available to the public through no act or omission of the
receiving party, or becomes known to the receiving party through a third
party with no obligation of confidentiality, or is required to be disclosed
by law, court order or request by any government or regulatory authority.
15.3 This undertaking will be binding for as long as such information retains
commercial value.
15.4 No public announcement, press release, communication or circular (other
than to the extent required by law or regulation) concerning the Agreement
will be made or sent by either of us without the prior consent of the
other. This consent will not be unreasonably withheld.
16. GENERAL
16.1 (a) All notices under this Agreement will be sent by registered mail or by
fax or delivered in person to the following addresses for notices and
marked for the attention of the following persons:
(i) Reuters: Reuters Hong Kong Limited fax: 00 852 2884 9475 marked
for the attention of : Harry Ng
(ii) The Client: Momentum Internet Incorporated fax: 00 852 2866 8137
marked for the attention of. John Hirsch
(b) Notices will be deemed to be received 3 business days after being sent
or on proof of delivery, if earlier.
16.2 Neither of the parties may assign any right or obligation of the Agreement
or any part of it without the prior written consent of the other. This
consent may not be unreasonably withheld. However, the Client agrees that
Reuters may assign any of its rights or obligations to a member of the
Reuters Group.
16.3 The Agreement is governed by the laws of Switzerland. Both of the parties
submit to the exclusive jurisdiction of the courts of the Canton of Geneva.
16.4 If any part of the Agreement that is not fundamental is found to be illegal
or unenforceable, this will not affect the validity and enforceability of
the remainder of the Agreement.
20
<PAGE>
16.5 If either of the parties delays or fails to exercise any right or remedy
under the Agreement that party will not have waived that right or remedy.
16.6 Neither of the parties will be held liable for any loss or failure to
perform an obligation due to circumstances beyond its reasonable control.
Should such circumstances continue for more than 3 months, either of the
parties may terminate this Agreement immediately on notice.
16.7 The Agreement contains the parties entire understanding regarding the
Reuters Investor Service. In entering into the Agreement, the Client has
not relied on any warranty or representation (except in the case of fraud)
made by us other than those mentioned in the Agreement.
16.8 Except as set out elsewhere in the Agreement, the Agreement may only be
varied by an amendment signed by both of the parties.
21
<PAGE>
REUTERS ON-LINE S.A. MOMENTUM INTERNET INCORPORATED
Signed /s/ Signed /s/ Graham Daley
Name Name: Graham Daley
Position: Reuter Financial Director Position: Director
Date: Date: 28 April 1999
22
<PAGE>
SCHEDULE 1
SERVICE FEES
Reuters Investor Premium Service
The Service Fees will be calculated on the basis of Access Fees unless the
aggregate Access Fees payable in any month are less than the Minimum Payment in
which circumstances the Service Fees shall be equal to the Minimum Payments.
The Access Fee per Access ID amounts to US$9.60 per month
On each first working date of the month ("Monthly Adjustment Date") the total
number of Access IDs in the system will be counted. Any Access ID which has been
allocated will be included in the Access Fee calculation. This figure shall
constitute the Access Fees and shall be billed to the Client.
Any Access IDs allocated part way through a month will be billed from the next
Monthly Adjustment Date.
Cancellation of Access IDs shall take effect from the next Monthly Adjustment
Date.
MINIMUM PAYMENTS
US$9,000 per calendar month
OTHER CHARGES
Start Up Charges: HK$14,000
Maintenance Charges: N/A
23
<PAGE>
SCHEDULE 2
REUTERS INVESTOR SERVICE
Reuters Investor Premium Service
- -----------------------------------------
REUTERS INTERNATIONAL INVESTOR - content
Reuters Investor Datasets offer
Non fee-liable exchange quotes for stocks, stock options, warrants, indices and
index options and futures.
General Political and Economic news and sports news
Online company news in English
Domestic general and company news in local language
Market reports
Delayed cross-market data
Reuters Investor Datasets - CONTENT
GENERAL NEWS
Latest World
General& Pol
Glance
Human Interest
Latest Domestic
Glance OC
Latest Sport
Glance
Sport by category
Domestic Press
Digest
Domestic Diary
24
<PAGE>
EQUITIES NEWS
Dom Most Active
Share
Dom Market Report
New York Market Report
London Market Report
Tokyo Market Report
Euro+ Market Report
Amsterdam
Athens
Brussels
Copenhagen
Dublin
Frankfurt
Helsinki
Lisbon
Luxembourg
Madrid
Milan
NASDAQ
25
<PAGE>
Oslo
Paris
Stockholm
Vienna
Zurich
Remaining Int'l
countries Markets Reports
Hong Kong
Singapore
Sydney
Toronto
Wellington
Company News
7 day's Company News
INDICATORS,
INDICES &
STATISTICS
Economic
Indicators
Domestic
Economic
Indicators News
Latest G7
Economic
Indicators News
Indices
Domestic Indices
26
<PAGE>
Key World Indices
Key Asian Market
Index
Key Emerging
Market Index
Key European
Market Index
Key American
Market Index
Key Latin
American Index
Key Eastern
European Market
Indices
Market Statistics
Net Gainers
Net Losers
Percentage Gainers
Percentage Losers
Top Volume
Market Digest
EQUITIES DATA
Equities Data
(Non-fee liable delayed)
individual RIC via
27
<PAGE>
Search (Full Exchange
Content)
Corporate Background
Data
Key Domestic Index
Constituents
Other Domestic Index
Constituents
Euro Countries Index
Constituents
Athens
Amsterdam
Brussels
Copenhagen
Dublin
Frankfurt
Helsinki
Lisbon
London
Luxembourg
Madrid
Milan
NASDAQ
NYSE
28
<PAGE>
Oslo
Paris
Stockholm
Vienna
Zurich
Remaining Int'l
countries Index Constituents
Hong Kong
Japan
Singapore
Sydney
Toronto
Wellington
Euro STOXX Index
Constituents
Euro STOXX50 Index
Constituents
Euro STOXX Sector
Index Constituents:
Auto
Bank
Basic Resources
Chemical
Conglomerate
Construction
29
<PAGE>
Consumer Cyclical
Consumer
non-Cyclical
Energy
Financial Services
Food & Beverage
Industrial
Insurance
Media
Pharmaceutical
Retail
Technology
Telecom
Utility
Traded Stock
Options
Key Traded Index
Futures
Historical Data
records (TS1)
OTHER DATA
FOREX & MONEY
MARKETS
World Major Spot
Rates
Major Cross Rates
30
<PAGE>
Domestic Forwards
Domestic Cross Rates
Euro Cross Rates
Euro Bilateral Rates
Euro Locking Rates
Domestic IBOR Rates
CAPITAL MARKETS
US Govs Benchmark
Interbank Offered Rates
PRECIOUS METALS
Gold
Silver
Platinum
Palladium
ENERGY
Brent Oil
31
<PAGE>
SCHEDULE 3
REUTERS MARKS
CLIENT MARKS
[REUTERS LOGO]
32
<PAGE>
SCHEDULE 4
Subscriber Agreement for Reuters Investor Premium Service
IMPORTANT
PLEASE PRINT THIS AGREEMENT FOR YOUR PERSONAL RECORDS
Please read this agreement and the information concerning the Reuters Investor
Service on the [Client] home page carefully before you subscribe to the Reuters
Investor Service. YOU WELL BE LEGALLY BOUND BY THIS AGREEMENT AND THIS
INFORMATION WHEN [CLIENT] ACCEPTS YOUR SUBSCRIPTION.
GLOSSARY
[CLIENT] [ ] of [ ]
Information means all information and other content contained in or contributed
to the Service
Service means the Reuters Investor Service including the Information, in whole
or in part
Subscription means the [ ............] fee payable [monthly] for access to the
Service
1. LICENCE
While you continue to pay the Subscription, [CLIENT] grants you a non-exclusive
and non-transferable licence to access the Service and to read the Information
You must not:
o use the Service in any other way including copying, storing,
processing, re-selling or redistributing it.
o allow any third party to use your password.
2. SUBSCRIPTION
The Subscription is [ ] per month [including] [excluding]
taxes and duties. [CLIENT] may increase the Subscription by giving you no less
than I month's advance notice. [Specify method of payment for the service.]
3. WARRANTIES
You have read and understood the information concerning the Service on the
Service home page. You agree that:
o The Service is designed to provide you with pre-trade information and
assessments based on third party information. [CLIENT] will make
reasonable efforts to ensure the accuracy and reliability of the
Service.
o However, neither [CLIENT] nor any of its third party content providers
make any other representations or warranties concerning the Service
including warranties as to satisfactory quality and fitness for a
particular purpose, accuracy or completeness, or that the Service will
be uninterrupted or error free.
33
<PAGE>
4. LIABILITY AND INDEMNITY
o neither [CLIENT] nor its third party content providers will be liable
for any direct loss, damage or expense suffered by you or any third
party arising out of the Service (including any error in the
Information) or any transaction made in connection with the Service,
unless caused by [CLIENTI's wilful misconduct or gross negligence.
o [CLIENT] shall not be responsible for nor be in default under this
Agreement for any delays or failure of performance resulting from any
Internet Service Providers problems or failures or any communication or
delivery problems in respect of your receipt of the Service.
o neither [CLIENT] nor its third party content providers will be liable
for any special, indirect or consequential loss or damage (including
lost profit), however caused.
o In no event will [CLIENT]'s aggregate liability arising out of this
agreement exceed the total Subscription paid by you during the year in
which the alleged damage or loss occurred.
o You will indemnify [CLIENT] against any damage, loss or expense incurred
by [CLIENT] arising out of your use of the Service.
o Neither party will be liable for any loss or damage due to circumstances
beyond its reasonable control.
5. MODIFICATION AND WITHDRAWAL OF THE SERVICE
[CLIENT] may modify and/or withdraw the Service. If the Service is withdrawn,
[CLIENT] will refund to you any Subscription you have paid for the month in
which withdrawal occurs.
6. INTELLECTUAL PROPERTY RIGHTS AND CONFIDENTIALITY
[CLIENT] has the right to provide the Service including the intellectual
property rights in it. You will not acquire any intellectual property rights in
the Service. You acknowledge that third party content providers may have
intellectual property rights in the Service. The Service and the Information are
confidential.
7. TERMINATION
o You may cease to receive the Service by giving no less than 1 month's
advance notice to [CLIENT] at [ ].
o [CLIENT] may terminate your access to the Service immediately without
notice if you are in breach of any term or condition of it including if
you default in the payment of the Subscription. No refund of your
Subscription will be payable in either case.
o Clauses 3, 4 and 6 will survive termination of this Agreement.
8. GENERAL
o This agreement and the information concerning the Service on the Service
home page represent the entire agreement of the parties relating to the
Service. If there is a conflict between this agreement and the
information, this agreement will prevail. You have not relied on any
other representation (except in the case of fraud) by (CLIENT).
o Delay or failure by [CLIENT] in enforcing this agreement will not
constitute a waiver by [CLIENT] of its rights or remedies.
o [CLIENT] may modify this agreement on giving you no less than 1 month's
advance notice.
o If any part of this agreement is held to be invalid or unenforceable,
the validity or enforceability of the remainder will not be affected.
34
<PAGE>
9. NOTICES
[CLIENT] will give you general notices under this agreement via the Service home
page. These notices will be effective when they are published on that page. You
will give [CLIENT] notices through the Reuters Investor Service [home page mail
service] which will be effective when received by us.
10. GOVERNING LAW AND JURISDICTION
This agreement will be governed by and construed in accordance with [ ] law and
both parties submit to the non-exclusive jurisdiction of the [ ] courts.
NOTE : DATA PROTECTION - [CLIENT] may use your registration information to
provide you with information on other services and products which may be of
interest to you. If you would prefer not to receive such information, please
click in the box below.
HOW TO SUBSCRIBE TO THE SERVICE
If you want to subscribe to the Service and agree to be bound by this agreement,
complete the details sections below and return them to [ ] on [ ]. Any changes
to these details should be notified to [CLIENT] immediately.
You acknowledge that by typing in your details and clicking on "I accept", you
are executing the above Agreement and agree to be bound by the provisions of
this Agreement.
If you do not wish to be bound by the provisions of this Agreement, click on "I
do not accept", and your sign-up will be cancelled and you will be returned to
the home page.
[Specify required details i.e. name, address etc.]
35
<PAGE>
SCHEDULE 5
Site
swiftrade.com
Momentum Internet Incorporated
12a First Pacific Bank Centre
56 Gloucester Road
Wanchai
Hong Kong
36
MARKET DATAFEED SERVICE AGRE
AN AGREEMENT dated the 3rd day of May, 1999
BETWEEN:
(1) STOCK EXCHANGE INFORMATION SERVICES LIMITED whose registered office is at
1st Floor, 1 and 2 Exchange Square, Hong Kong ("SEIS"); and
(2) The person whose name and address is set out in Schedule I Part A hereto
("The Licensee").
WHEREAS:
(A) SEIS is a wholly owned subsidiary of The Stock Exchange of Hong Kong
Limited.
(B) It has been agreed that SEIS will grant to the Licensee a non-exclusive
license to use certain information, for the period and upon the terms and
conditions hereinafter appearing.
IT IS HEREBY AGREED as follows:
1. Interpretation
In this Agreement, unless otherwise expressed or required by the context,
the following expressions shall have the following meanings:
Expressions Meanings
"Agreement" this agreement together with any subsequent modifications
thereto agreed in writing by the parties.
"Commencement Date" the date on which the Licensee is connected to the
Exchange for the purpose of receiving information as specified in
Schedule 1 Part A.
"Exchange" The Stock Exchange of Hong Kong Limited whose registered office
is at 1st Floor, 1 and 2 Exchange Square, Hong Kong.
"Hong Kong" the island of Hong Kong, Kowloon and the New Territories.
"Information" information compiled by the Exchange and/or provided by SEIS
pursuant to this Agreement, including without limitation information
within any categories described by SEIS from time to time pursuant to
clause 2.3.
"Initial Transmission Method" the method of transmission of the Information
as notified in writing to the Licensee by SEIS prior to the
Commencement Date.
"LAO Statement" a statement in response to requests for information made by
SEIS of its licensees, as further provided for at clause 5.7.
<PAGE>
"License Fees" the fees to be paid by the Licensee to SEIS pursuant to
clause 5 of this Agreement.
"News" Information concerning announcements of the Exchange and companies
listed on the Stock Exchange, and other information of general
interest originating from the Exchange.
"Off Market" a trading floor or dealing service where (a) trading in
Securities listed on the Stock Exchange or of a type capable of being
so listed or (b) any other Securities relating to Securities described
at (a) above is being undertaken otherwise than at or through the
Stock Exchange.
"Permitted Purpose" the purposes for which Licensee may use the Information
as described in this Agreement, and as more particularl et out at
Schedule I Part A under the heading "Memorandum of Permitted Purpose"
or as defined in any revised Memorandum of Permitted Purpose issued by
SEIS pursuant to clause 2.4.
"Quarter" the quarters of each year ending on 31st March, 30th June,30th
September and 31st December.
"Related Company" shall mean, in relation to any company, any other company
which is for the time being a holding company of such company or a
subsidiary company of such company or a subsidiary of a holding
company of such company. For this purpose the expressions "subsidiary"
and "holding company" shall have the meanings ascribed to them by
Section 2 of the Companies Ordinance of Hong Kong.
"Securities" the same meaning as defined in Section 2(l) of the Securities
Ordinance (Cap. 333).
"Stock Exchange" the stock market established, operated and maintained by
the Exchange pursuant to Section 27 of the Stock Exchanges Unification
Ordinance(Cap. 361).
"Subscriber" a person to whom Information is provided by the Licensee in
accordance with clause 4.1 and with whom the Licensee has a subsisting
contract for the supply of inter alia Information.
"Subscriber Report" a statement as defined at clause 5.4.
"Subscriber Unit" the meaning set out at paragraph 6 of Schedule 1 Part B.
2 License
2.1
SEIS hereby grants to the Licensee a non-exclusive license to use the
Information for the Permitted Purpose and according to the terms set
out in this Agreement.
2.2 The Agreement shall commence on the Commencement Date.
2.3. The categories of Information initially provided to the Licensee
hereunder shall be those categories notified in writing to the
Licensee by SEIS prior to the Commencement Date ("the Categories
Notice"). SEIS shall have the right at any time to alter the
presentation or substance of the Information (unless the alteration
involves the deletion of one or more categories of
<PAGE>
Information described in the Categories Notice in which case the notice
period shall be a minimum of 30 days and, in that event, Licensee shall be
entitled at any time during the 21 days following service of such notice to
terminate this Agreement with effect from the date when the alteration is
to be implemented, by giving written notice to SEIS). Notwithstanding the
above SEIS shall have the right to alter the presentation or substance of
the Information without prior notice to the Licensee if required to do so
by reasons outside its control.
2.4 SEIS acknowledges and agrees that the Licensee may under and for the
purposes of this Agreement provide the Information to Subscribers in the
form or format in which the Information is supplied to Licensee hereunder
or in any other form or format including for use in composite information
systems provided always that (a) the Information is acknowledged as being
derived from the Exchange and its format or editing is in no way misleading
as to the nature or content of the Information and (b) the Licensee shall
not remove, displace or alter any copyright, confidentiality or other
proprietary notices or any disclaimer notice of the Exchange and (c)
whenever Licensee wishes to provide the Information in a different form or
manner, whether to constitute a new service to, or to modify, an existing
service specified in the Memorandum of Permitted Purpose, Licensee will
first give SEIS no less than one month's prior written notice of its
intention, and shall provide such further details as SEIS may reasonably
request. For the avoidance of doubt, nothing in this clause 2.4 shall
entitle Licensee to do anything outside the scope of the Permitted Purpose
without first obtaining SEIS' written consent, (such consent not to be
unreasonably withheld). SEIS may, at any time after receiving such notice,
issue a revised Memorandum of Permitted Purpose to re-define and/or
re-classify the services in question, which Memorandum shall form a part of
this Agreement and shall replace any then existing Memorandum of Permitted
Purpose with effect from its date of issue by SEIS or from the date when
the modified services are introduced, if later. (For the avoidance of
doubt, this clause is without prejudice and subject to clause 5.8.)
2.5 Licensee will incorporate the following disclaimer notice (or a disclaimer
notice to equivalent effect) into all contracts with Subscribers:
"THE STOCK EXCHANGE OF HONG KONG LIMITED ENDEAVOURS TO ENSURE THE ACCURACY
AND RELIABILITY OF THE INFORMATION PROVIDED BUT DOES NOT GUARANTEE ITS
ACCURACY OR RELIABILITY AND ACCEPTS NO LIABILITY (WHETHER IN TORT OR
CONTRACT OR OTHERWISE) FOR ANY LOSS OR DAMAGE ARISING FROM ANY INACCURACIES
OR OMISSIONS"
2.6 Licensee will ensure that, so long as it is technically possible to do so,
a disclaimer notice as described in clause 2.5 above shall be transmitted
to Subscribers so that it is conspicuously perceptible during or
immediately prior to each continuous period throughout which the relevant
Subscriber has access to the Information.
3 Transmission of Information
3.1 During the currency of this Agreement SEIS will procure the supply of the
Information to the Licensee in the form of electronic signals generated by
the computer system for the time being used by the Exchange. Licensee shall
effect (complying promptly with SEIS's requirements for such connection)
two connections to the Exchange's primary computer information system, and
one connection to the Exchange's backup computer information system, and
shall bear the costs of so connecting Licensee and of maintaining each such
connection (including without limitation the Port Fees set out at Schedule
I Part B and any other connection and/or maintenance charges levied in this
respect by SEIS or the Exchange), The connection equipment and
communication lines to be installed on the Exchange's premises must be
approved in advance by the Exchange.
<PAGE>
3.2 The Information shall initially be supplied in accordance with the Initial
Transmission Method but the method of transmission may be changed at any
time upon SEIS giving the Licensee not less than thirty days written notice
thereof. Notwithstanding the above, SEIS shall have the right to alter the
method of transmission without prior notice to the Licensee if required to
do so by reasons outside its control.
3.3 SEIS shall use its best endeavours to ensure that the Information is
provided to the Licensee on a continuous basis during the trading hours of
the Stock Exchange.
3.4 Licensee shall be responsible for complying with all relevant regulations,
governmental or otherwise, and the obtaining of all relevant licenses,
governmental or otherwise, relating to its use of the Information.
4. Permitted use of Information
4.1 The Licensee may use the Information for dissemination to Subscribers
provided that it pays to SEIS all applicable License Fees. It may not
disseminate the Information to any other person except as permitted by
clause 4.6 below.
4.2 The Licensee shall use reasonable endeavours to ensure that:
4.2.1 any equipment or software used to process the Information are
arranged;
4.2.2 other suitable procedures are in place so that no unauthorized person
or device can obtain access to the Information.
4.3 The Licensee shall ensure and procure that all and any dissemination of the
Information to any Subscriber shall be on terms that:
4.3.1 no Subscriber shall, without the prior written approval of SEIS (such
approval not to be unreasonably withheld) disseminate the Information
or Any part thereof to any other person;
4.3.2 no Subscriber shall use or permit the use of the Information or any
part thereof for any illegal purpose;
4.3.3 no Subscriber shall use the Information or any part thereof other
than in the ordinary course of its own business (which shall not
include dissemination to third parties); and
4.3.4 no Subscriber shall use the Information or any part thereof to
establish, maintain or provide or to assist in establishing,
maintaining or providing an Off Market.
4.4 The Licensee shall use best endeavours to assist SEIS in ensuring that no
Subscriber is using the Information or any part thereof contrary to the
Provisions of this clause 4 and shall promptly supply to SEIS the names and
addresses of any Subscriber whom the Licensee or SEIS suspects is in breach
of such provisions.
4.5 If SEIS suspects that a Subscriber is using the Information or any part
thereof contrary to the provisions of this clause 4, SEIS may serve a
written notice on the Licensee specifying the name of such Subscriber and
the nature of the suspected misuse and requiring the Licensee to notify
that Subscriber in writing that it must forthwith cease such misuse and
must provide such proof as SEIS may reasonably require that it has ceased
(or never committed) such misuse. The Licensee shall immediately comply
with such a notice on receipt. If the Subscriber fails to comply with
Licensee's notice within such period as SEIS may specify the Licensee shall
forthwith at SEIS' further written direction cease to supply the
Information to that Subscriber or reduce the supply to a level specified by
SEIS.
<PAGE>
4.6 The Licensee may not assign or sub-license the right to disseminate the
Information except as follows:
4.6.1 the Licensee may sub-license the right to disseminate the Information
to a Related Company, provided that
(i) the Licensee gives SEIS prior notice of the sub-licensing
together with evidence, to the satisfaction of SEIS, that the
sub-licensee is a Related Company,
(ii) The sub-license shall terminate upon its ceasing to be a Related
Company,
(iii) the sub-license shall impose on the Related Company all the
restrictions and obligations imposed on Licensee by this
Agreement relating to the use of the Information except that no
Related Company shall be liable to pay any License Fees in
addition to those payable by the Licensee pursuant to sub-clause
(v) below,
(iv) Licensee shall be personally liable hereunder for any breach by
such Related Company of such restrictions or obligations, so that
such breach shall be treated as a breach of this Agreement,
(v) Licensee shall, as part of its obligations under clause 5, be
directly responsible for providing payments and statements on
behalf of any such Related Companies as well as for itself, by
way of a single consolidated statement which consolidated
statement shall nevertheless also provide a breakdown of relevant
payments and other information ascribable to each Related
Company.
4.6.2 the Licensee may sub-license the right to disseminate the
Information to such other third parties as are approved in
advance in writing by SEIS, SEIS shall have complete discretion
as to the terms on which it agrees such sub-license. Without
prejudice to the foregoing, unless expressly otherwise agreed by
SEIS:
(i) the sub-license shall impose on the third party all the
restrictions and obligations imposed on Licensee by this
Agreement relating to the use of the Information,
(ii) Licensee shall be personally liable hereunder for any breach
by such third party of such restrictions or obligations, so
that such breach shall be treated as a breach of this
Agreement,
(iii) without prejudice to (i) and (ii), the third party
sub-licensee shall render a Subscriber Statement and payment
in accordance with clause 5 direct to SEIS.
4.6.3 SEIS may, in respect of any sub-license granted pursuant to
sub-clause 4.6.2 of this clause, at any time by notice in writing
given to the Licensee either require the Licensee to terminate
such sub-license or impose further conditions in respect of such
sub license or require that the sub-licensee enter into a direct
license with SEIS.
4.7 The Licensee shall not knowingly use the Information or any part thereof to
establish, maintain or provide, or assist in establishing, maintaining or
providing an Off Market nor shall the Licensee provide a Securities dealing
service in Hong Kong without obtaining the prior written consent of SEIS
(such consent not to be unreasonably withheld).
4.8 The Licensee shall comply with such directions as SEIS may reasonably
require from time to time concerning permitted use of the Information,
provided that
4.8.1 such directions are incorporated in the Memorandum of Permitted
Purpose or are otherwise given in writing by not less than 3 months
notice; and
<PAGE>
4.8.2 at any time during the 30 days following service of such notice
Licensee shall be entitled to terminate this Agreement with effect
from the date when the direction is to be implemented, by giving
written notice to SEIS.
5 Licence Fees and payments
5.1 During the currency of the License the Licensee shall pay the License Fees
calculated and payable to SEIS in accordance with the provisions of
Schedule 1 Part A and Schedule 1 Part B hereto.
5.2 SEIS shall have the right to amend the License Fees or any element of them
at any time upon giving the Licensee not less than three months notice in
writing thereof. At any time during the 30 days following service of such
notice Licensee shall be entitled to terminate this Agreement with effect
from the date when the amendment is to be implemented, by giving written
notice to SEIS. For the avoidance of doubt, SEIS's right to amend the
License Fees includes without limitation the right to introduce additional
License Fees to cover any new or existing types of service, to modify the
basis for calculating any License Fees and to change the classification of
any service so that an amended License Fee becomes payable.
5.3 No part of the License Fees will be refundable to the Licensee if this
Agreement terminates, for whatever reason, during a month for which the
License Fees or any part thereof have been paid in advance.
5.4 The Licensee shall provide a statement ('the Subscriber Report') to SEIS
within 15 days of the end of each month (unless the Subscriber Report
relates to Subscribers outside Hong Kong, in which case it shall be
provided within 30 days of the end of the month) as to:-
5.4.1 the names of the Subscribers to whom it has disseminated the
Information during the preceding month and stating the name or nature
of the service by which each received the Information, the number and
type of Subscriber Units for each Subscriber within Hong Kong and
outside Hong Kong; and
5.4.2 the License Fees payable for that month.
The Subscriber Report shall contain such further information and shall
be provided in such format as SEIS may reasonably require (by not less
than 90 days' written notice) from time to time.
5.5 The Licensee shall maintain complete-and accurate records of how the
License Fees specified in each Subscriber Report have been calculated and
shall make such records available to SEIS within 30 days of receiving SEIS'
written request. SEIS shall have the right not more than once in each
Quarter during and also once in the Quarter following termination of this
Agreement to inspect all documents pertaining to such records covering the
period of the preceding Quarter (and, if not yet so inspected, previous
Quarters) either itself or by its authorized agents. The Licensee shall,
upon receiving SEIS' written request, permit and/or (if so requested)
procure that SEIS may inspect promptly thereafter the premises and records
of the Licensee and any sub-licensee, for the purpose of satisfying SEIS by
whatever proofs SEIS may reasonably require that the License Fees are being
properly accounted for and/or that the Licensee and/or its sub-licensees
are using the Information for the Permitted Purpose only and are not using
Information contrary to the provisions of clause 4, provided always that
Licensee shall not be obliged to make and/or procure such inspection to
take place more than once in any Quarter. SEIS shall bear its costs
(including internal management time and expenses) of each inspection,
unless the inspection establishes that SEIS has been underpaid by 5% or
more of the amount actually paid in respect of License Fees for that
Quarter in which case Licensee shall bear such costs. For the avoidance of
doubt, such underpayment shall be deemed to have been payable with effect
from the due date for providing the Subscriber Report relevant to such
underpayment.
<PAGE>
5.6 The Licensee shall, upon receiving SEIS' written request, inspect and/or
(if so requested) procure that SEIS may inspect promptly thereafter the
premises and records of any Subscriber specified by SEIS, for the purpose
of satisfying SEIS by whatever proofs SEIS may reasonably require that the
Licence Fees in respect of that Subscriber are being properly accounted for
and/or that the Subscriber is not using Information contrary to the
provisions of clause 4, provided always that Licensee shall not be obliged
to make and/or procure such inspection (in respect of any one Subscriber)
to take place more than once in any Quarter,
5.7 The Licensee shall provide SEIS with a statement ('the LAO Statement') by
its auditors in such form and at such times as SEIS may reasonably require,
and initially in response to a Licensee's auditor questionnaire compiled by
SEIS and in accordance with the procedures provided for by Schedule 2. SEIS
shall notify any change in its requirements by not less than 90 days'
written notice unless SEIS is compelled to make such change on shorter or
without any notice for reasons which are beyond its control.
5.8 If SEIS establishes, by whatever means, that Information is being or has
been used to provide services (a) outside the scope of the Permitted
Purpose or (b) within the scope of the Permitted Purpose but in a manner
materially different to the manner in which Licensee had previously
represented to SEIS that those services would be provided, then SEIS shall
be entitled to issue a revised Memorandum of Permitted Purpose to re-define
and/or re-classify the services. If SEIS does so re-classify any services-
(i) Licensee shall be liable to pay Licence Fees in accordance with such
re-classification as if those services had been so classified from the
date when they were first so provided; and
(ii) Licensee shall pay promptly to SEIS or SEIS shall re-pay promptly to
Licensee, as the case may be, the balance of any monies thereby due.
5.9 If Licensee is late in paying any sums due to SEIS under this Agreement by
more than 30 days, interest shall be payable on such sums calculated from
the date such sums first become due in respect of each month or part
thereof for which they are not paid at a rate of 40% per annum.
5.10 Where an inspection is made pursuant to clauses 5.5 or 5.6 and SEIS in
consequence is of the opinion that SEIS has been underpaid by 5% or more of
the relevant Licence Fees, Licensee shall, upon receiving SEIS' written
request, permit and/or if so requested procure such further inspections by
SEIS as SEIS considers necessary to determine the proper basis on which
those Licence Fees should have been accounted.
6 Termination
6.1 Either party shall be entitled without stating a reason to terminate
this Agreement by giving not less than six complete calendar months
prior notice of termination in writing to the other party.
6.2 Either party shall be entitled to terminate this Agreement forthwith
by written notice (and thereupon the provision of the Information to
Licensee may cease) upon the occurrence of any of the following
events:
6.2.1 in the case of the other party being an individual or a
partnership, the death or bankruptcy of the other party or any
partner thereof, or a receiving order or judgment or levy being
made against any assets of the other party or any partner
thereof, or the other party or any partner thereof having entered
into any composition with any of his or her creditors or the
dissolution of the partnership; or
<PAGE>
6.2.2 in the case of the other party being a corporation, the
commencement of winding-up of the other party, or a receiver
having been appointed over or judgment or levy being made against
any assets of the other party, or the other party having entered
into any scheme, arrangement or composition with any of its
creditors; or
6.2.3 the other party having committed any irremediable breach of this
Agreement or, the terminating party having given written notice
to the other party to remedy any breach or default, the other
party shall have failed to do so within 30 days of such notice.
6.3 The Licensee shall be entitled to terminate this Agreement forthwith by
written notice if for any reason Information is not supplied to Licensee
for a period in excess of 10 consecutive working days on which the Stock
Exchange is open for the business of trading in Securities.
6.4 Upon termination of this Agreement, SEIS shall have the absolute right to
terminate the transmission of the Information with immediate effect, and
all sums due hereunder from Licensee shall become payable forthwith to
SEIS.
7 Exclusion of Liability and Indemnity
7.1 Nothing in this clause shall restrict or exclude liability of SEIS or the
Licensee in respect of death or personal injury resulting from negligence.
Further, if Information is not transmitted to the Licensee for a continuous
period of not less than 10 consecutive working days, SEIS shall be liable
to compensate the Licensee for loss arising from such non-transmission, but
its liability shall be limited to the amount of the Licence Fees payable in
respect of that period (reduced pro-rata when the fees are payable in
respect of a longer period).
7.2 Subject to the foregoing neither SEIS nor the Exchange shall be liable to
the Licensee or any person claiming through Licensee in respect of
consequential, economic or any other loss or damage arising from any act or
omission, mistake, delay, interruption, whether willful, negligent or
otherwise, arising from or in connection with (a) the collection, use or
transmission of the Information by or to the Licensee or (b) the
Information being inaccurate, incomplete or otherwise misleading or (c) any
other services to be provided by them pursuant to this Agreement. Further
the Licensee undertakes not to institute or attempt or threaten to
institute any proceedings in any jurisdiction in or outside Hong Kong
against SEIS or the Exchange for recovery of any of the aforesaid loss
suffered by the Licensee or by any other person or otherwise to maintain
any claim against SEIS or the Exchange for or in respect of any of the
aforesaid loss.
7.3 Subject to clause 7.1 the Licensee will at. all times hereafter indemnify
and keep SEIS and the Exchange effectively indemnified against and in
respect of all liabilities, economic or other losses, damages, costs,
claims, suits, demands, fees and expenses of whatsoever nature which may be
incurred by SEIS or the Exchange towards or in relation to any person or
which may be taken, made or claimed against SEIS or the Exchange by any
person as a result of or in connection with or arising out of any act,
omission, mistake, delay or interruption, on the part of Licensee, SEIS or
the Exchange, whether willful, negligent or otherwise, in relation to this
Agreement, including (without prejudice to the generality of the foregoing)
acts or omissions in respect of or in connection with or arising out of the
collection, use or transmission of the Information by or to the Licensee or
arising from the Information being inaccurate, incomplete or otherwise
misleading.
7.4 For the purposes of this clause, SEIS contracts as agent for the Exchange,
and Licensee agrees to said exclusion of liability and indemnity in favour
of the Exchange in consideration of the Exchange consenting to SEIS
entering into this Agreement.
<PAGE>
8 Free Subscription for SEIS
To enable SEIS to monitor the service provided by Licensee under the
Licence, Licensee shall for the duration of this Agreement and free of
charge allow SEIS access to the Information by supplying to SEIS all
services of Licensee and any relevant equipment by means of which it
transmits the Information to its Subscribers as if SEIS were a subscriber
thereto.
9 Notices
9.1 Any notice or other document to be given or served hereunder may be
delivered by hand or sent by pre-paid post, telex, telecopier or facsimile
transmission to the party to be served at its address stated herein or at
such other address as that party shall have notified the other in
accordance with this Agreement.
9.2 Any such notice or document shall be deemed to have been served:-
9.2.1 if delivered, at the time of delivery; or
9.2.2 if posted, at the expiration of seven days after the postage pre-paid
envelope containing the same shall have been put into the post; or
9.2.3 if sent by telex, telecopied or facsimile transmission, at the
expiration of 12 hours after the same shall have been despatched.
9.3 In proving such service it shall be sufficient to prove that delivery was
made or that the envelope containing such notice or document was properly
addressed and posted or that the telex, telecopier or facsimile
transmission was properly addressed and despatched as the case may be.
10 Proprietary Rights
10.1 Licensee hereby acknowledges that it has no entitlement to any proprietary
rights including without limitation rights of copyright in and to the
Information or the presentation of the Information, which rights are owned
by the Exchange or by other third parties. As regards rights owned by the
Exchange, Licensee acknowledges that the Exchange has authorized SEIS only
to supply the Information by way of this Agreement and SEIS warrants that
it has obtained such authorization.
10.2 Licensee may represent that it is supplying Information derived from the
Exchange under licence from SEIS but shall not make any other use save as
required by clause 2.4 of the Exchange's or SEIS' name nor of any logos or
other marks used by them. Upon termination of this Agreement, Licensee
shall cease forthwith so to represent itself and shall not make any other
commercial use of such marks.
10.3 Licensee shall at all times treat the Information and any information
ancillary thereto obtained pursuant to this Agreement as confidential and
shall not disclose such Information to any third party other than to a
Subscriber, irrespective of whether it is in the same format as supplied to
Licensee by the Exchange.
10.4 Licensee shall forthwith upon suspecting any infringement of such rights as
are described in this clause notify SEIS and thereafter provide such
assistance as SEIS or the Exchange may reasonably request to protect such
rights.
10.5 This clause shall continue to have effect notwithstanding termination of
the rest of this Agreement.
<PAGE>
11 Amendments, Waivers and Enforceability
11.1 A provision of this Agreement may be amended only if the parties agree in
writing.
11.2 No waiver or indulgence by any party to this Agreement shall be binding
unless in writing and in any event no waiver of one breach of any term or
condition of this Agreement shall operate as a continuing waiver unless so
expressed nor operate as a waiver of another breach of the same or any
other term or condition of this Agreement.
11.3 In the event that any provision in this Agreement is for any reason held to
be unenforceable, illegal or otherwise invalid, this shall not affect any
other provisions of this Agreement, and the provision in question shall be
construed in such reasonable manner as achieves the intention of the
parties without being invalid.
12 Entire Agreement
This Agreement sets out the entire agreement of the parties concerning the
subject matter hereof and supersedes all prior agreements, negotiations,
representations and proposals, whether written or oral.
13 Governing Law
This Agreement shall be governed by and construed in accordance with the
Laws of Hong Kong whose courts shall have non-exclusive jurisdiction in
relation thereto.
IN WITNESS whereof the parties have entered into this Agreement the day and
year first above written.
SIGNED by Roger Lee, Director
for and on behalf of
STOCK EXCHANGE INFORMATION SERVICES LIMITED /s/
in the presence of Fionne Chan
SIGNED by
for and on behalf of /s/ Anthony L. Tobin
Anthony L. Tobin
Momentum Internet Incorporated Director
in the presence of
<PAGE>
SCHEDULE 1
PART A
The Licensee
Name Address
Momentum Internet Incorporated P.O. Box 957
Offshore Incorporations Centre,
Road Town
Tortola
British Virgin Islands
Commencement Date
19 April 1999
<PAGE>
SCHEDULE I
PART A (CONTINUED)
MEMORANDUM OF PERMITTED PURPOSE (Cross reference clause
Description of Service/ Classification License Fees Start Date of
Permitted Purpose Service
(TO BE CONFIRMED UPON SEIS APPROVAL
ON LICENSEE'S PROPOSED SERVICES)
Notes: (1) News may only be disseminated as part of a Continuous Access Service.
<PAGE>
SCHEDULE 1
PART B
LICENSE FEES
1 Types of License Fee Payable
The types of License Fee and their basis for computation include those set
out in the Memorandum of Permitted Purpose which ate payable by reference
to the terms 'Standard Fee' and 'Subscriber Fee', in which context these
terms appear elsewhere in this Schedule and/or Agreement.
2 Standard Fee and Minimum Subscriber Fee
If Licensee offers more than one type of service during any month, only one
Standard Fee shall be payable in relation to that month, being the Standard
Fee of greatest amount, and only one minimum Subscriber Fee of HK$6,000
shall be payable in relation to that month.
3 Discretion to Introduce Additional License Fees
Subject to clause 5.2 of this Agreement, SEIS shall have sole discretion to
determine the different types of service in relation to which License Fees
are payable and reserves the right to introduce additional Licence Fees for
any types of service, including without limitation services for which no
Licence Fees are for the time being payable.
4 Port Fees
In addition to the License Fees payable pursuant to 1 to 3 above, an annual
Port Fee shall be payable as part of the License Fees in the sum of
HK$24,000 per annum for the 3 connections referred to at clause 3.1 of this
Agreement. This assumes that only one of the connections to the Exchange's
primary computer system is providing live production data at any one time.
If at any time during any Quarter, both connections at the primary system
are simultaneously providing the same live production data, an additional
Port Fee is payable of HK$70,000 per Quarter. Such additional Port Fee
shall not be reduced on a pro-rata or any other basis if the provision of
live production data is not maintained by both connections throughout the
Quarter in question.
5 SEIS Decision Is Final
Subject to clause 5.2 of this Agreement, SEIS shall have sole discretion to
determine from time to time without giving reasons the classification of
the types of service provided by the Licensee and, pursuant thereto, the
amount of Licence Fees payable by the Licensee. SEIS' decision shall be
final.
6 Subscriber Units
6.1 For the purpose of calculating Subscriber Fees, the number of Subscriber
Units shall, in relation to any single Subscriber during any one month, be
the number of end user receptors on the Specified Date (or if the number is
variable on that date, the maximum number) permitted to access the
Information by means of Licensee-derived authorization. Such authorization
shall include but shall not be limited to passwords, user ID logons, access
codes or security codes or any more general means of authorization such as
those granted 'en bloc' to a specified maximum number of individual users
and/or regulated by remote on-line audit tools without using passwords or
the like, 'End-user receptor' shall for this purpose mean any person or
point.
<PAGE>
which Licensee-derived Information is imparted so that the Information may
be perceived or processed otherwise than for the sole purpose of
re-disseminating the Information and shall include, without limitation
6.1.1 any device by means of which the Information can be perceived by
humans, including but not limited to dedicated terminals, portable
computers, wallboards, paging devices and mobile phones; and
6.1.2 any other type of device by means of which the Information is
processed; and.
6.1.3 any individual employed or otherwise directly controlled by the
Subscriber who has authorization to access the Information otherwise
than by means of an authorized device of the type described at 6.1.1
or 6.1.2 above
and each end-user receptor shall count as one Subscriber Unit.
6.2 For the purpose of 6.1, the Specified Date means the last day of the month
(or such other date as SEIS may from time to time substitute by written
notice on either a one-off, occasional or recurring basis).
7 Discounts and Delayed Data
7.1 Where there are more than 30 Subscriber Units (excluding unauthorized
end-user receptors) in relation to any one Subscriber each of which units
receives the same classification of service throughout a particular month,
the Subscriber Fee for that month in respect of those Subscriber Units
shall be discounted as follows:
No.of Subscriber Units Discount
---------------------- --------
31 to 60 10%
61 to 90 15%
91 to 500 20%
501 to 1000 40%
1001 or more 65%
7.2 Discounts must be claimed no later than the time due for submitting the
relevant Subscriber Report.
7.3 No Subscriber Fee shall be payable in relation to Licensee's making
Information available to Subscriber where a delay of at least 60 minutes
has occurred after the Information is first made available to the Licensee.
8 News Services
Subject to 3 above, no fee is payable for the dissemination of Information
which is in the nature of News.
9 Times when Payments are Due
9.1 The Standard Fee for the first Quarter shall become payable as soon as
Licensee begins disseminating the Information to Subscribers or, if sooner,
at the expiry of two months from the Commencement Date irrespective of
whether Licensee has begun disseminating the Information to Subscribers
provided that where the Standard Fee becomes payable for the first Quarter
<PAGE>
other than at the commencement of the relevant Quarter the Standard Fee
will be reduced by one third for each complete month elapsed; and
thereafter each Standard Fee shall be payable on or prior to commencement
of the Quarter to which that Standard Fee relates.
9.2 Licensee's first Subscriber Fee shall become payable at the expiry of the
first month during which it begins disseminating the Information to
Subscribers or, if sooner, at the expiry of four months from the
Commencement Date irrespective of whether Licensee has begun disseminating
the Information to Subscribers. Thereafter Subscriber Fees shall become
payable from the date when the Subscriber Report describing those
Subscriber Fees is due to be provided pursuant to clause 5.4 of the
Agreement.
9.3 The annual Port Fee shall be payable on the first business day of each year
or, in the first year of the connection to which the Port Fee relates, the
date when such connection is first made subject to a pro rata reduction of
HK$1,000 for each complete calendar month elapsed. Any additional Port Fee
shall be payable on or prior to commencement of the Quarter (or, if later,
commencement during that Quarter of the live feed) to which that additional
Port Fee relates.
<PAGE>
SCHEDULE 2
(Reference clause 5.7)
1 The Licensee shall, within 30 days of the date of any formal report made by
its auditors in relation to its audited annual financial accounting
statement for any of its accounting years, submit to SEIS a LAO Statement
signed by those same auditors giving answers to such questions in writing
as SEIS may reasonably specify to the Licensee from time to time but in
each case no later than 30 days after the accounting year end date for the
annual financial accounting statement in question.
2 Upon signing of this Agreement, the Licensee shall promptly notify SEIS in
writing of the date of its current accounting year end and the expected
date of the report of its auditors in relation thereto.
3 The Licensee shall thereafter promptly notify SEIS from time to time of any
changes in such dates, in relation to that accounting year or any
subsequent accounting year.
4 If requested by SEIS, the Licensee shall procure its auditors to provide
prompt clarification to SEIS of any answers given in the said LAO
Statement, such clarification to be provided either orally or in writing or
both.
5 Where the Licensee makes audited financial accounting statements other than
on an accounting year basis, the obligation to make LAO Statements to SEIS
hereunder shall be satisfied if the LAO Statement is submitted to SEIS
within 30 days of the date on which the corresponding formal auditor's
report is actually made.
THIS AGREEMENT made the 18th day of May, 1998
BETWEEN
1. MOMENTUM INTERNET INCORPORATED whose registered office is situated at PO
Box 71, Craigmuir Chambers, Roadtown, Tortola, British Virgin Islands
("Momentum"); and
2. OPTIONS DIRECT (Europe) Limited whose registered office is situated at
Upper Ground Floor, Salisbury House, London Wall, EC2M 5QQ, UK ("Options
Direct")
WHEREAS
1) Momentum is engaged in the business of providing websites and technical
support for Internet connectivity.
2) Options Direct is a stock broker and duly authorized to carry on
business as such under the laws of England and wishes to obtain the benefit of
the knowledge, skill and experience of Momentum in developing Internet trading
in securities on the terms and conditions hereinafter appearing
NOW IT IS HEREBY AGREED as follows:
1. Definition
1.1 The Service
The provision by Momentum of Internet connectivity Technical support Design
and construction of Options Direct's pages on the Momentum's Swiftrade website.
Hosting of Option Direct's web pages Trading and portfolio management software.
Marketing and promotion of the Momentum's Swiftrade website on the Internet and
in print publications.
1.2 The Business
The buying and selling of securities listed and/or quoted on the London
Stock Exchange.
1.3 The Business System
The method of utilising the Service developed and implemented by Momentum
in connection with the operation of the Business adopting the methods techniques
and knowledge of Momentum.
1
<PAGE>
1.4 The Operation
The operation by Options Direct of the Business through the Service using
the Business System.
2. The Grant
2.1 Momentum hereby grants to Options Direct the non-exclusive right to the
Service
2.2 Options Direct hereby acknowledges that it is bound to use the Service
exclusivcly through Momentum
3. Momentum's obligation
3.1 Momentum will provide advice and assistance in relation to the Service
4. Option Direct's obligations
4.1 All clients obtained through the Operation will be provided by Options
Direct with the services of a broker in its capacity as a stockbroker authorized
to carry on business in England
4.2 Options Direct will arrange for the transmission of detailed account
opening documents to the clients by automated electronic mail, obtaining
completed application forms and receiving funds
5. The Term
5.1 This agreement shall commence on the date hereof and will continue for
a period of five years unless terminated in accordance with the provisions
contained in clause 11 hereof
6. Exclusivity
6.1 The rights granted to Options Direct herein shall extend only to the
United Kingdom and Options Direct agrees unless with the prior written consent
of Momentum that it will not make use nor will it permit or authorize any use of
the Business System nor will it knowingly offer or provide any information or
assistance to any person, firm, company or undertaking which intends or may seek
to use such information
2
<PAGE>
7. Remuneration
7.1 Options Direct agrees to pay 15% of the Turnover of the Operation to
Momentum on the first 50 trades per trading day and to pay 25% of the Turnover
of the Operation to Momentum on trades over 50 per trading day.
7.2 "Turnover" for the purposes of calculation payments to be made by
Options Direct to Momentum is the gross commissions earned by Options Direct
from the Operation arising directly or indirectly from the utilization of the
Business System during each month of the term of this agreement (and for any
period less than a complete calendar month prior to the payment date) less any
costs of settlement.
7.3 The payment date will not be later than three weeks from the end of
each calendar month such payments to be made by cheque/telegraphic
transfer/banker's draft to a specified bank account of Momentum
7.4 In the event that any sums due to Mornentarn are not paid by Options
Direct on the due date, such sums shall bear interest from day to day at the
annual rate of 7%
8. Accounts and records
8.1 Options Direct will;
8.1.1 maintain or procure the maintaining of an accurate account and
record of the buying and selling of securities carried out using the
Business System each month and commissions received and shall send to
Momentum a monthly statement thereof prior to the payment date each month
8.1.2 Momentum or through its duly appointed agent shall be entitled
to examine the separate books and accounts kept by Options Direct in
connection with the Operation and be supplied at Momentum's expense, with
all relative information including invoices, operating statistics and other
such financial information in such form as Momentum may reasonably require
to be kept properly informed about the Operation and any other relevant
activities of Options Direct
3
<PAGE>
9. Termination
9.1 Momentum may terminate this agreement forthwith by giving notice in
writing to Options Direct in any of the following events;
9.1.1 if Options Direct shall at any time fail to pay any amounts due
and payable to Momentum hereunder within ten days of a notice in writing
requesting such payments:
9.1.2 if Options Direct shall fail to submit to Momentum in a timely
manner any of the accounting, financial or record information required to
be so submitted;
9.1.3 if Options Direct shall fail to operate or procure the Operation
of the Business in accordance with the Business System;
9.1.4 if Options Direct shall fail to commence operations within 90
days from the signing of this agreement;
9.2 Options Direct may at any time terminate this Agreement by giving not
less than one months' notice in writing to Momentum.
10. Consequences of Termination
10.1 Upon the termination or expiration of this agreement for any reason
Options Direct shall;
10.1.1 pay to Momentum the full amount of all monies then or
thereafter due together with any interest thereon up until the date of
payment as and when it would otherwise have been payable.
10.1.2 Immediately cease the Operation and to use the Business System
or authorize any other person so to do and shall not thereafter hold itself
out in any way as the operator of the Business System in Hong Kong and
refrain from any action that would or may indicate any relationship between
it and Momentum;
10.2 The expiration or termination of this Agreement shall be without
prejudice to the accrued rights of the parties and any provision hereof which
relates to or governs the acts of the parties hereto subsequent to such expiry
or termination hereof shall remain in full force and effect and shall be
enforceable notwithstanding such expiry or termination.
4
<PAGE>
11. Force majeure
11.1 Neither of the parties of this Agreement shall be responsible to the
other party for any delay in performance or non-performance due to any causes
beyond the reasonable control of the parties hereto, but the affected party
shall promptly upon the occurrence of any such cause so inform the other party
in writing, stating that such cause has delayed or prevented its performance
hereunder and thereafter such party shall take all action within its power to
comply with the terms of this Agreement as fully and promptly as possible
12. Notices
12.1 Any notice, demand or other communication to be given hereunder shall
be deemed to have been delivered (a) if given or made by letter, by airmail
witin seven (7) days from the date of posting; (b) if by hand when actually
delivered to the relevant address; (c) if given or made by fax or electronic
mail, when dispatched
12.2 Such notice shall be sent if by post or by hand to the last known
address of either party or in the case of electronic transmission to the last
known fax number or electronic mail number or either party
13. Governing law
13.1 This Agreement and all rights and obligations of the parties hereto
shall be governed and construed in accordance with the Laws of England and the
parties hereto hereby submit to the jurisdiction of the English Courts.
IN WITNESS whereof this Agreement has been executad on the day and year first
above written.
SIGNED by )
For and on behalf of Momentum ) /S/ Anthony Tobin
Internet Incorporated in the )
presence of: )
SIGNED by )
For and on behalf of Options )
Direct (Europe) Limited )
in the presence of: )
5
Terms and Condition
THIS AGREEMENT is made this 25 day of June, 1999
BETWEEN
Asia4Sale.com Ltd. whose registered address is situated at 12A First Pacific
Bank Centre, 56 Gloucester Road, Wanchai, Hong Kong ("the Distributor")
AND
Karrex (Hong Kong) Ltd. whose registered address is situated at 2401 Nanyang
Plaza, 57 Hung To Road,
Kwun Tong, Kowloon, Hong Kong, (the Supplier")
WHEREAS the Distributor is a company incorporated in Hong Kong to carry on
business of retail distribution of goods through an e-commerce interactive
website. AND WHEREAS the Supplier is a company incorporated in Hong Kong
carrying on business of Sale of Music CD Worldwide Excluding North America,
1. Definition.
Consumer means the consumer who may place an order with the Distributor
through the Internet for the supply of Goods.
Goods mean the goods which the Supplier may supply to the Distributor in
the manner provided for herein at the price agreed between the parties.
Office Hours mean 9:00am to 5:30pm from Monday to Friday and 9:00am to 1:00
pm on Saturday,
2. Advertising of Goods
2.1. The Distributor shall at its own cost advertise the Goods for sale
through its website to the Consumer.
2.2. The Supplier shall not be responsible for the advertisement and shall
not be liable for any action howsoever arising therefrom.
3. Supply of Goods
3.1.The Supplier endeavors at all times to make available Goods to the
Distributor.
3.2. The Distributor shall only place an order for the supply of Goods with
the Supplier during its Office Hours.
3.3. The Distributor shall place an order with the Supplier in writing
clearly stating out the Goods and quantity thereof required
3.4. The Distributor may place an order by fax or email.
3.5. The Supplier shall advise the Distributor if for any reason any Goods
become unavailable whereby the Distributor may remove the Goods in question from
its advertisement.
3.6. Unless otherwise stated the Supplier endeavors to ensure that Goods
are available for world-wide distribution.
3.7. The Supplier reserves the right not to accept any order.
4. Warranty of Goods
4.1. The Supplier shall only be responsible for the quality of the Goods
manufactured.
4.2. Any complaint regarding the quality of Goods raised by the Consumer
shall first be addressed to the Distributor. The Distributor shall then forward
the complaint to the Supplier for investigation.
4.3. Any complaint raised by the Consumer must be made within 14 days of
the receipt of the Goods by the Consumer. The Supplier reserves the right not to
deal with any complaint made more than 14 days from the day of receipt.
4.4. Complaint lodged with Supplier must be documented in writing supported
by colour photograph showing the defect in detail.
<PAGE>
4.5. The Supplier reserves the right to determine if a complaint is proved
or not,
4.6. The Supplier may reject any complaint which is not substantiated.
4.7. In any event the compensation shall not exceed the price of Goods at
which the same were supplied to the Distributor.
4.8. The Supplier may elect at its discretion to compensate the Consumer by
replacing the Goods in question with another one in lieu of payment as
aforesaid.
4.9. The Supplier shall not be responsible for the cost delivery of the
replaced Goods to the Customer.
5. Delivery of Goods
5.1.Goods ordered shall be available for collection by the Distributor or
its agent at 10:00am the next working day after the order is placed.
5.2. The Distributor or its agent shall collect the Goods for the sale
latest by 5:00pm between Monday and Friday and 12:30pm on Saturday.
Unless otherwise agreed the Goods shall be collected from the Supplier at
4/F, Loc On Industrial Building, 70 Hung To Road, Kwun Tong, Kowloon.
5.3. In the event of typhoon signal number 8 or above or black rainstorm
signal being hoisted the Distributor shall collect the Goods on the next working
day instead.
5.4. In case of enquiry about the collection of Goods, calls to __________
may be made with the Supplier's staff.
5.5. Unless otherwise notified in writing 7 days in advance, the
Distributor's agent for delivery authorized to collect from the Supplier shall
be Contral Delivery Services (HK) Ltd.
5.6. The Supplier shall not be responsible for the delivery of the Goods to
and from the Customer.
5.7. The Supplier shall not be responsible for any loss of or damage to the
Goods while in transit.
5.8. For the avoidance or doubt the property and risk in the Goods pass
when the Distributor or its agent collects the Goods.
6. Daily Maximum Sale
6.1. The total value of all the orders in a day the Distributor may place
the with the Supplier for the supplier of goods shall not exceed the maximum of
HK$ 30,000.00
6.2. The Supplier reserves the right to determine any varies the daily
maximum sale to the Distributor as and when it thinks fit.
7. Payment for the Goods
7.1. The Distributor shall be liable to pay the Supplier for the Goods
ordered.
7.2.The Distributor shall pay for the Goods ordered within 7 days from the
day of ordered, including the day of order.
7.3.The Distributor shall pay the Supplier by depositing the money due to
the Supplier into its Current Account Number 511-762254-001 kept (Bank Name)
Hong Kong Bank (HSBC).
8. Termination
8.1. Either party may terminate this Agreement at any time by giving 30
days written notice.
<PAGE>
8.2. Upon termination of this Agreement the Distributor shall return to the
Supplier all such properties belonging to the Supplier including but not limited
to diskettes containing graphic and such other information.
9. Service of Notice
All such services of notices herein provided for, save where it is
excepted, shall be effected by depositing the written notice to party's address
herein stated or to its last known address.
10. Choice
This Agreement shall be governed by and constructed in accordance with laws
of Hong Kong Special Administrative Region and the parties hereby irrevocably
submit to the non-exclusive jurisdiction of Hong Kong courts.
AGREED BY:
Asia4Sale.com Ltd. Karrex (Hong Kong) Ltd.
Distributor Supplier (HONG KONG) LIMITED
/S/ Kevin Choi /S/ Chris Lok
----------------------- ----------------------------
Authorized Signature Authorized Signature
Kevin Choi Chris Lok
----------------------- ----------------------------
Printed Name Printed Name
June 26, 1999 12 July 1999
----------------------- ----------------------------
Date Date
MOMENTUM INTERNET INC.
and
UNITED MOK YING KIE LIMITED
------------------------------
AGREEMENT
------------------------------
Richards Butler
20th Floor
Alexander House
Chater Road
Hong Kong
<PAGE>
THIS AGREEMENT is made the day of 1999
BETWEEN:
MOMENTUM INTERNET INCORPORATED whose registered office is situated at PO Box 71,
Craigmuir Chambers, Road Town, Tortola, British Virgin Islands ("Momentum"); and
UNITED MOK YING KIE LIMITED whose registered office is situated at 2102, 21/F,
Nine Queen's Road, Central, Hong Kong ("UMYK").
WHEREAS:
(A) Momentum, is engaged. in the business of providing websites and technical
support for Internet connectivity.
(B) UMYK is a broker and registered dealer licensed under the Securities
Ordinance Cap. 333 to deal in Securities (as defined in the Securities
Ordinance) and wishes to obtain the benefit of the knowledge, skill and
experience of Momentum in developing Internet trading in Securities on the
terms and conditions hereinafter appearing.
NOW IT IS HEREBY AGREED as follows:
1. DEFINITION
(A) The Service
The provision by Momentum of internet technical support, design and
construction of UMYK's webpages on the Momentum's Swiftrade Website as well
as the hosting of UMYK's web pages on the internet. The provision by
Momentum of an on-line system for stock trading on The Stock Exchange of
Hong Kong Limited by clients of UMYK through the website located at
www.swiftrade.com together with all the services available on such website.
The provision of a section within Swiftrade specifically for clients and
potential clients of UMYK. Trades from UMYK's clients will be made
available to UMYK's office Internet trading desk for execution. Momentum's
internet service will include all programming design, construction, hosting
marketing and local technical support.
(B) The Business
The trading of Securities listed on The Stock Exchange of Hong Kong Limited
and in case of Hong Kong Securities having a dual listing, on that other
recognized exchange.
1
<PAGE>
(C) The Business System
The method of utilizing Momentum's methods, techniques and knowledge in
relation to the provision of the Service in connection with the Business.
(D) The Operation
The operation by UMYK of the Business through the Service using the
Business System.
2. THE GRANT
(A) Momentum hereby grants to UMYK the non-exclusive right to the Service.
(B) UMYK hereby acknowledges that it is shall use the Service through
Momentum. Fro the avoidance of doubt, Momentum hereby acknowledges
that UMYK shall be permitted in its sole discretion to use such other
internet support, design and construction services of other internet
services providers provided that such services do not entail the use
of Momentum's Swiftrade Website.
3. MOMENTUM'S OBLIGATION
Momentum will provide or procure the provision of the Service and all
advice and assistance in relation to the Services to UMYK upon request.
4. UMYK'S OBLIGATIONS
(A) The Operation will be provided by UMYK in its capacity as a registered
dealer of securities in the Hong Kong Special Administrative Region of
the People's Republic of China.
(B) UMYK will arrange for the transmission of detailed account opening
documents to its clients by automated electronic mail or such other
medium as may be decided by UMYK in its sole discretion, the obtaining
completed application forms and receiving of funds in relation
thereto.
5. THE TERM
This agreement shall commence on the date hereof and will continue for a
period of 5 years subject to a review at the end of the third year unless
terminated earlier in accordance with the provisions contained in Clause 11
hereof. Thereafter, the parties may extend this Agreement upon such terms
to be mutually agreed between them.
2
<PAGE>
6. EXCLUSIVITY
(A) The Services provided to UMYK herein shall extend only to Hong Kong
and UMYK agrees unless with the prior written consent of Momentum that
it will not make use nor will it permit or authorize any use of the
Business System nor will it knowingly offer or provide any information
or assistance to any person, firm, company or undertaking which
intends or may seek to use such information other than to a
wholly-owned subsidiary of the ultimate holding company of UMYK.
7. REMUNERATION
(A) UMYK agrees to pay 40% of the Gross Turnover of the Operation to
Momentum. The parties hereto acknowledge and agree that the amount to
be paid pursuant to this Clause shall be subject to review
semi-annually with any amendments and/or changes to take effect from
such review.
(B) "Gross Turnover" for the purpose of calculation, payments to be made
by UMYK to Momentum are the gross commissions earnt by Operation
arising directly or indirectly from the utilization of the Business
System during each month of the term of this Agreement and for any
period less than a complete calendar month prior to the payment date.
(C) The gross commissions will consist of the payments received by UMYK in
respect of the Operation in each complete calendar month.
(D) The payment date will not be later that three weeks from the end of
each calendar month such payments to be made by cheque/telegraphic
transfer/banker's draft to a specified bank account of Momentum.
(E) UMYK will open a separate bank account for all payments received from
the Operation.
(F) In the event that any sums due to Momentum are not paid by UMYK on the
due date, such sums shall bear interest from day to day at the annual
rate of 12%.
8. ACCOUNTS AND RECORDS
(A) UMYK will maintain or procure the maintaining of an accurate account
and record of the trading Securities carried out each month and
payments received using the Business System and shall send to Momentum
a monthly statement thereof prior to the payment date each month.
(B) Momentum or through its duly appointed agent shall be permitted to
request UMYK to provide separate books and accounts kept by UMYK in
connection with the Operation and, to the extent that the request is
reasonable in the sole opinion of UMYK, be supplied with all relative
information including invoices, contract notes, operating statistics
and other such financial information in such form as Momentum may
reasonably require to be kept properly informed about the Operation.
3
<PAGE>
9. REPRESENTATIONS AND WARRANTIES AND UNDERTAKINGS
Momentum hereby represents, warrants and undertakes to UMYK that:-
(i) it has the right and authority to use the Swiftrade Website for the
provision of the Services to UMYK and such website will be fit for its
purpose;
(ii) all Services, computer equipment used by or for the benefit of
Momentum in relation to the Services are Year 2000 Compliant;
Year 2000 Compliant means the abliity to provide all the following
functions:
(a) accurate processing of all date information whether before,
during or after 01 January 2000, including, without limitation,
accepting date input, providing accurate date output and
performing accurate calculations involving dates or portions of
dates;
(b) performing all processing accurately, efficiently and without
interruption before, during and after 01 January 2000 without any
change in operations, or in any input or output procedures;
(c) processing date input accurately in a way that does not create
any ambiguity as to century;
(d) storing, retrieving and processing date information accurately in
a manner that does not create any ambiguity as to century; and
(e) presenting all date output information accurately and in a manner
that does not create any ambiguity as to century;
(iii) it will keep UMYK fully indemnified for any damages, losses, costs
and expenses which UMYK may incur as a result of a breach of the
Momentum's internet/computer systems by third parties or otherwise
including, inter alia, computer hacking; and
(iv) all information provided on the UMYK Website shall be kept
confidential by Momentum and Momentum shall ensure that UMYK is
consulted and its consent obtained prior to providing any information,
details etc. of such on the UMYK Website.
10. CONFIDENTIALITY
(A) UMYK hereby acknowledges that the Business System and all other
information and knowledge relating thereto are a strictly confidential
nature and accordingly, UMYK covenants that no other person (save as
expressly provided by this Agreement) shall at any time without the
prior written consent of Momentum whether before or after termination
of this Agreement divulge or use whether directly or indirectly for
its own benefit or that of any other person, company firm or
organization any of such information or knowledge relating to the
Service or the Business System which may be communicated to or
otherwise acquired by UMYK its directors, agents or employees.
4
<PAGE>
(B) Momentum hereby acknowledges that all information provided by UMYK to
it hereunder including, but not limited to, the accounts and records
referred to in Clause 8 are of a strictly confidential nature and
accordingly, Momentum covenants that it will not at any time divulge
or use any of such information directly or indirectly whether on its
own or with any other person, company, firm or organization.
11. TERMINATION
(A) Momentum may terminate this Agreement immediately forthwith by giving
notice in writing to UMYK in any of the following events:
(i) if UMYK shall at any time fail to pay any amounts due and payable
to Momentum hereunder within ten days of a notice in writing
requesting such payments;
(ii) if UMYK shall fail to submit to Momentum in a timely manner any
of the accounting, financial or record information required to be
so submitted; and
(iii) if UMYK shall fail to commence operations within 90 days from
the signing of this Agreement.
(B) UMYK may terminate this Agreement immediately forthwith by giving
notice in writing to Momentum in any of the following events:
(i) if Momentum shall fail to provide the Service in accordance with
the terms of this Agreement;
(ii) if Momentum is in breach of any of the terms herein contained;
and
(iii) if a petition is presented or a proceeding is commenced or an
order is made on an effective resolution is passed for the
winding-up, insolvency , administration, reorganization,
reconstruction or dissolution of Momentum or for the appointment
of a liquidator, receive, administrator, trustee or similar
officer of Momentum or any of all or any part of its business or
assets; and
(iv) if Momentum ceases or threatens to cease to carry on its business
or any substantial part thereof or changes or threatens to change
the nature or scope of its business.
(C) UMYK may at any time terminate this Agreement by giving not less than
one month's notice in writing to Momentum.
5
<PAGE>
12. CONSEQUENCES OF TERMINATION
(A) Upon the termination or expiration of this Agreement for any UMYK
shall:
(i) within seven (7) business days pay to Momentum the full amount of
all monies then due;
(ii) immediately cease the Operation and to use the Business System or
authorize any other person so to do and shall not thereafter hold
itself out in any way as the operator of the Business System in
Hong Kong and refrain from any action that would or may indicate
any relationship between it and Momentum; and
(iii) otherwise perform its obligations and observe the covenants set
out in Clauses 9 and 10 thereof.
(B) Upon the termination or expiration of the Agreement, Momentum shall,
within 7 calendar days, return to UMYK all documents, information,
etc. which have been provided by UMYK to Momentum.
(C) For the avoidance of doubt, Momentum agrees and confirms that upon the
termination of this Agreement, no other monies, fees or expenses other
than for Services already rendered, shall be payable by UMYK to
Momentum.
(D) The expiration or termination of this Agreement shall be without
prejudice to the accrued rights of the parties and any provision
hereof which relates to at governs the acts of the parties hereto
subsequent to such expiry or termination hereof shall remain in full
force and effect and shall be enforceable notwithstanding such expiry
or termination.
13. FORCE MAJEURE
Neither of the parties of this Agreement shall be responsible to the other
party for any delay in performance or non-performance therein due to any
causes beyond the reasonable control of the parties hereto, but the
affected party shall promptly upon the occurrence of any such cause so
inform the other party in writing, stating that such cause has delayed or
prevented its performance hereunder and thereafter such party shall take
all action within its power to comply with the terms of this Agreement as
fully and promptly as possible.
14. NOTICES
(A) Each notice, demand or other communication given or made under this
Agreement shall be in writing and delivered or sent to the relevant
party at its address or fax number set out below (or such other
address or fax number as the addressee has by two (2) business days'
prior written notice specified to the other parties):-
6
<PAGE>
To Momentum:
Address: 12A First Pacific Bank Centre
56 Gloucester Road
Wanchai, Hong Kong
Fax Number: 2866 8137
Attention: Anthony L. Tobin
To UMYK:
Address: 2102, 21/F.,
Nine Queen's Road Central
Hong Kong
Fax Number: 2537 3681
Attention: Mr. Richard Witts
Any such notice or other document shall be deemed to have been duly
given upon receipt if delivered by hand or if sent by facsimile
transmission upon the receipt of machine printed confirmation and in
the case of a notice sent by post it shall be deemed to have been
given on the second business day after posting if the address is in
Hong Kong and on the fifth business day after posting if the address
is outside Hong Kong. In proving the giving of a notice it shall be
sufficient to prove that the notice was left or the the envelope
containing such notice was properly addressed and posted or that the
applicable means of telecommunication was properly received (as the
case may be).
(B) Such notice shall be sent if by post or by hand to the last known
address of either party or in the case of electronic transmission to
the last known fax number or electronic mail number or either party.
15. GOVERNING LAW
This Agreement and all right and obligations of the parties hereto shall be
governed and construed in accordance with the Laws of Hong Kong and the
parties hereto hereby submit to the jurisdiction of the Hong Kong Courts.
IN WITNESS whereof this Agreement has been executed on the day and year first
above written.
7
<PAGE>
SIGNED by )
)
for and on behalf of )
MOMENTUM INTERNET ) /s/ Anthony Tobin
INCORPORATED ) ----------------------------
in the presence of: ) Anthony Tobin
SIGNED by )
)
for and on behalf of ) /s/ Richard Witts
UNITED MOK YING KIE LIMITED ) ----------------------------
in the presence of: ) Richard Witts
Contract No. 129044
Client No. HK29487
REUTERS SERVICES CONTRACT
(1) We, Reuters Hong Kong Limited located at 10th Floor, Cityplaza 3, 14
Taikoo Wan Road, Quarry Bay, Hong Kong, and
(2) You MOMENTUM INTERNET INCORPORATED.................................
located at 12a, First Pacific Bank Centre, 56 Gloucester Road, Wanchai,
Hong Kong.
agree:
GLOSSARY
- --------
All defined terms in this Contract are in italics for your convenience. The
terms used in the Contract are defined below:
Agreement - this Contract, the Reuters Business Principles, any applicable Order
Form and any other schedules or declarations referred to in these documents.
Agreed Level - the percentage change in the most recently published consumer
price index issued by the Hong Kong Census and Statistics Department compared
with that index published 12 months earlier.
Charges - the Service Fees and any related charges specified in clause 3. 1.
Contract - this document as amended or supplemented by us from time to time.
Information - the information (in whatever form including images, still and
moving, and sound recordings) contained in the Services.
Information Provider - a client of ours or other third party including any
stock, futures or commodities exchange whose Information is contained in the
Services.
Maintenance - a sub-set of Support which includes the use of reasonable efforts
by us or our nominee to maintain the Materials in good operating condition
and/or to restore the Service by repairing, correcting or replacing the
Materials.
Materials - hardware and/or Software and related documentation supplied by the
Reuters Group.
Order Form - our standard form (whether in written or electronic form) listing
the Services ordered by you and accepted by us.
Recipient Location - any of your offices, other than the Site, or any of the
offices of any Subsidiary of yours.
Reference Date - the date on which we make the first Service available to you
under the Agreement. If you are an existing client of ours at the date of the
Contract you will not have or need a Reference Date.
Reuters Business Information Products - Reuters Business Briefing Products,
Reuters Insurance Briefing, Reuters Business Alert and any other product which
we notify you is a Reuters Business Information Product.
Reuters Business Principles - the document called the Reuters Business
Principles as amended or supplemented by us from time to time.
Reuters Group - Reuters Group PLC and its Subsidiaries.
Reuters News Bulletins Products - the bulletin and/or newsletter of China
Securities, Finance and Bullion, General Metals, Gold, New York Stocks,
Shipping, Sugar, U.S. Commodity Futures and any other product which we notify
you is a Reuters News Bulletin Product.
1
<PAGE>
Reuters Stock Market Channel Products - Reuters Stock Market PRO and any other
product which we notify you is a Reuters Stock Market Channel Product.
Service/Services - the service(s) supplied by us under the Agreement, which
include(s) the provision of Information and/or Materials and Support.
Service Fees - the fees charged by us for the supply of the Services as
specified in the relevant Order Form(s) and/or related schedules, including
fees for specialist data Services.
Site - any location of yours to which the Services are supplied directly by us,
as specified in any Order Form.
Software - software or any part of it and related documentation, whether it is
an ancillary part of a Service and enables such Service to be used, or whether
the rental of such software itself constitutes the Service.
Software also includes upgrades and enhancements.
Subsidiary - a company in which another company owns directly or indirectly more
than 50% of the issued share capital and over which it exercises effective
control.
Support - Maintenance and other support provided by us or our nominee as
specified in the Support section of the Reuters Business Principles.
1. SCOPE OF THE AGREEMENT
We will supply the Services to you at the Site and you will pay the Charges and
use the Services in accordance with the Agreement.
2. COMMENCEMENT AND DURATION
2.1 The Agreement will take effect from the date of signature of the Contract by
both you and us and will continue for as long as you receive Services.
2.2 Subject to clauses 2.3 and 2.4 either of us may cancel any Service or any
access to a Service by giving prior written notice to the other of not less
than:
(a) 3 months in the case of Reuters Business Information Products, Reuters
News Bulletins Products and Reuters Stock Market Channel Products;
(b) 6 months in the case of other Services when indicated in the Order
Form; and
(c) 12 months in the case of all other Services.
2.3 Any cancellation following a notice given under.
(a) clause 2.2(a) or (b) cannot take effect earlier than the first
anniversary of the Reference Date; or
(b) clause 2.2(c) cannot take effect earlier than the second anniversary of
the Reference Date.
2.4 Where any Service consists of the rental of certain Materials, any
cancellation following the notice referred to in clause 2.2 cannot take
effect earlier than the end of the period specified in the Order Form which
period begins from the date of installation of such Materials.
2.5 In addition, we may give you increased cancellation flexibility in the
Reuters Business Principles in respect of certain Services.
3. CHARGES
3.1 You will pay the Service Fees and the following related charges (where
applicable):
2
<PAGE>
(a) installation, relocation and removal charges;
(b) charges for certain items of Support;
(c) charges for communications facilities;
(d) charges for Information, Software and/or other services provided by
certain Information Providers and other third parties; and
(e) all applicable taxes and duties (including withholding tax but
excluding income taxes imposed on the income of the Reuters Group) payable in
respect of the Services, so that after payment of such taxes and duties the
amount received by us is not less than the Service Fees.
3.2 We will endeavour to provide reasonable notice of any change to such related
charges, but you agree that they may change without notice if a change is
imposed on us by any third party.
3.3 The Service Fees for each Service are payable from the date that Service is
first made available to you. We will invoice you for the Charges. You will
pay the
Charges in full within the time specified on the invoice. Unless otherwise
specified in the Order Form, Charges are payable quarterly in advance.
3.4
(a) We may adjust or change the basis of calculation of the Service Fees
for each Service on not less than 3 months' prior notice.
(b) You may cancel any Service whose aggregate Service Fees taken over the
12 months preceding the date of our notice referred to in clause 3.4(a) are to
be increased by a percentage above the Agreed Level.
(c) If you choose to exercise the above right to cancel, you must give us
written notice within 30 days of the date of our notice referred to in clause
3.4(a) and the relevant Service will he cancelled from the date on which the
Service Fees would have increased.
3.5 As a condition to your receipt of the Services we may require a security
deposit or irrevocable bank guarantee from you. We may use the security
deposit or invoke the bank guarantee to recover any overdue Charges and/or
any liquidated damages payable under clause 4.7.
4. TERMINATION
4.1 Either of us may terminate the Agreement in whole or in part by written
notice if the other is in breach of any of its material obligations under
the Agreement and fails to remedy such breach (if capable of remedy) within,
in the case of a breach by you of your obligations under paragraph 4.2 of
the Reuters Business Principles, 72 hours and, in the case of any other
breach by either of us, 30 days of written request.
4.2 Either of us may terminate the Agreement immediately and without notice if.
(a) the other enters into a composition with its creditors;
(b) an order is made for the winding up of the other;
(c) an effective resolution is passed for the winding up of the other
(other than for the purposes of amalgamation or reconstruction on terms approved
by the first party (such approval not to be unreasonably withheld)); or
(d) the other has a receiver, manager, administrative receiver or
administrator appointed in respect of it.
4.3 In addition to the above, if you materially breach the Agreement, we may
immediately suspend the Services in whole or in part without penalty until
the breach is remedied.
4.4We may cancel a Service or a part of a Service, as the case may be, by
written notice if the provision of all or part of that Service:
3
<PAGE>
(a) depends on an agreement between a Reuters Group member and a third
party, and that agreement is modified or terminated for any reason or breached
by the third party and as a result we arc unable to continue to provide all or
part of that Service upon terms reasonably acceptable to us; or
(b) becomes illegal or contrary to any rule, regulation, guideline or
request of any exchange or regulatory authority.
4.5 We may, on 6 months' written notice, cease providing a Service if we
withdraw it from the country where the Site is located.
4.6 If clause 3.4(c), 4.4 , 4.5 or 8.4(b) applies, our only obligation to you
will be to refund the part of the Service Fees paid in advance for the
cancelled part of the Service.
4.7 If.
(a) you cancel any Service or any access to a Service other than when
permitted by the Agreement; or
(b) you are in breach of any payment obligation under the Agreement
entitling us to terminate the Agreement, we will be entitled to recover from you
as liquidated damages an amount equal to 75% of the relevant Service Fees which
would have been payable until the end of the applicable notice period in clause
2. We both agree that this constitutes a realistic pre-estimate of our loss and
is not intended to be a penalty.
4.8 Upon expiration or termination of the Agreement in whole or in part, unless
otherwise specifically agreed between you and us, you must delete any
Software and Information contained in the terminated Services, and, if
requested by us, certify the deletion in writing.
4.9 The following will continue to apply after termination of the Agreement:
(a) all disclaimers, indemnities and restrictions relating to the Services;
(b) our rights of access to the Site or Recipient Locations to remove the
Materials and to confirm deletion of any Software and Information; and
(c) the confidentiality undertaking in clause 6.
5. LIABILITY
5.1 Although we will use all reasonable endeavours to ensure the accuracy and
reliability of the Services, neither we nor any other member of the Reuters
Group, nor any Information Provider, nor any third party supplier will be
liable for any loss or damage in connection with the provision of or failure
to provide the Services except as set out in clause 5.2.
5.2 The Reuters Group accepts liability only for
(a) death or personal injury caused by our negligence;
(b) physical loss or damage to the Site caused by our negligence; and
(c) any other direct loss or damage caused by our gross negligence or
willful misconduct.
5.3 EXCEPT AS EXPRESSLY STATED IN THE AGREEMENT, ALL EXPRESS OR IMPLIED
CONDITIONS, WARRANTIES OR UNDERTAKINGS, WHETHER ORAL OR IN WRITING, IN LAW
OR IN FACT, INCLUDING WARRANTIES AS TO SATISFACTORY QUALITY AND FITNESS FOR
A PARTICULAR PURPOSE. ARE EXCLUDED.
5.4 Neither we nor any member of the Reuters Group, nor any Information
Provider, nor any other third party supplier will be liable to you or to any
third party for any indirect, special or consequential loss or damage
arising out of the Agreement or the Services.
5.5 You will indemnify us for any loss or damage caused to the Materials,
except to the extent such loss, damage or cost is caused by our negligence
or willful misconduct.
4
<PAGE>
5.6 You will indemnify us against any loss, damage or cost in connection with
any claim or action which may be brought by any third party against us
relating to any use of or access to the Information contributed by you to
the Services.
5.7 You will indemnify us for any loss or damage or cost in connection with a
claim or action resulting from:
a) any failure to supply Access Declarations (as defined in the Reuters
Business Principles),
b) any inaccurate Access Declaration (as defined in the Reuters Business
Principles).
c) you permitting access or redistributing Information inside or outside
the Site (including, without limitation, over the public internet and/or your
intranets) beyond the rights which we have specifically granted to you in the
Reuters Business Principles.
5.8 To the extent permitted by law and except for clause 5.2(a), under no
circumstances will our liability under the Agreement exceed 1 year's Service
Fees, regardless of the cause or form of action.
5.9 You agree that this clause 5 is enforceable by and to the benefit of members
of the Reuters Group, Information Providers and other third party suppliers.
CONFIDENTIALITY
6.1 Each of us acknowledges that information of a confidential nature relating
to the business of the other may be disclosed to it or otherwise come to its
attention. Each of us undertakes to hold such information in confidence and
not, without the consent of the other, disclose it to any third party nor to
use it for any purpose other than in the performance of the Agreement.
6.2 This obligation of confidentiality will not apply to information that is
generally available to the public through no act or omission of the
receiving party, or becomes known to the receiving party through a third
party with no obligation of confidentiality, or is required to be disclosed
by law, court order or request by any government or regulatory authority.
6.3 This undertaking will be binding for as long as such information retains
commercial value.
6.4 No public announcement, press release, communication or circular (other than
to the extent required by law or regulation) concerning the Agreement will
be made or sent by either of us without the prior consent of the other. This
consent will not be unreasonably withheld.
7. GENERAL
7.1
(a) All notices under the Contract will be sent by registered mail or by
fax or delivered in person:
(i) from us to you at the Site;
(ii) from you to us at the address stated in the most recent Order Form.
(b) Notices will be deemed to be received 3 business days after being sent
or on proof of delivery, if earlier.
7.2 Neither of us may assign any right or obligation of the Agreement or any
part of it without the prior written consent of the other. This consent may
not be unreasonably withheld. However, you agree that we may assign any of
our rights or obligations to a member of the Reuters Group.
5
<PAGE>
7.3 The Agreement is governed by the laws of Hong Kong. Both of us submit to the
non-exclusive jurisdiction of the Hong Kong Courts.
7.4 If any part of the Agreement that is not fundamental is found to be illegal
or unenforceable, this will not affect the validity and enforceability of
the remainder of the Agreement.
7.5 If either of us delays or fails to exercise any right or remedy under the
Agreement, that party will not have waived that right or remedy.
7.6 Neither of us will be held liable for any loss or failure to perform an
obligation due to circumstances beyond its reasonable control. Should such
circumstances continue for more than 3 months, either of us may cancel any
affected Service immediately on notice.
7.7 You agree that we, certain Information Providers and our agents will be
entitled to have access to the Site and Recipient Locations at any time
during business hours to verify your compliance with the Agreement. During
the verification, we and our agents will comply with your reasonable
requirements relating to security and confidentiality.
7.8 If there is any conflict between the terms of the Contract and the terms of
the Reuters Business Principles. the terms of the Contract will prevail.
8. ENTIRE AGREEMENT
8.1 You acknowledge that:
(a) you have been provided with a copy of the Reuters Business Principles;
(b) you have read the Reuters Business Principles and agree with its
contents; and
(c) the Reuters Business Principles and any Order Form are an integral part
of the Agreement.
8.2 The Agreement replaces any previous agreement between us in respect of the
Services and applies to any Services already supplied by us to you.
8.3 The Agreement contains our and your entire understanding regarding the
Services. In entering into the Agreement, you have not relied on any
warranty or representation (except in the case of fraud) made by us other
than those mentioned in the Agreement.
8.4 (a) In order to take account of new policies, we may amend the Reuters
Business Principles at any time by giving you 3 months' notice.
(b) If you can show that any amendment will result in an increase in your
costs of receiving the Services in excess of the Agreed Level or in a material
reduction of your rights to use the information, you may cancel the Service
affected.
(c) If you choose to exercise the above right to cancel you must give us
written notice within 60 days of the date of our notice referred to in clause
8.4(a) and the Service will be cancelled from the date on which the amended
Reuters Business Principles come into effect.
(d) In the case of a new Service requiring specific provisions. we will
notify you of the necessary amendments to the Reuters Business Principles, which
will take effect immediately to the extent that they apply only to the new
Service.
(e) As an exception to clause 7.1(a), we may send you our notices referred
to in clauses 8.4(a) and (d) electronically.
8.5 Except as set out in clause 8.4, the Agreement may only be varied by an
amendment signed by both of us.
6
<PAGE>
For and on behalf of For and on behalf of
REUTERS HONG KONG LIMITED MOMENTUM INTERNET INCORPORATED
Signed /s/ Harry Hg Signed /s/ Anthony Tobin
Name Harry Hg Name Anthony Tobin
Position Business Administration Position Director
Manager
Date 5 July 1999 Date June 30, 1999
ONLINE STOCK TRADING AGREEMENT
This ONLINE STOCK TRADING AGREEMENT (the "Agreement") is entered into as of
this 1st day of July, 1999, by and between Swiftrade Inc. ("Swiftrade"), a
British Virgin Islands corporation with a registered office at P.O. Box 957,
Offshore Incorporations Centre, Roadtown, Tortola, British Virgin Islands, which
is a subsidiary of Momentum Asia Inc., a subsidiary of ZiaSun Technologies Inc,
and WdoT.rade Inc. ("WdoT.rade"), a California corporation with offices at 4510
E. Thousand Oaks Boulevard, Westlake Village, California, which is a division of
West America Securities Corporation ("West America"), a broker-dealer registered
with the Securities and Exchange Commission ("SEC") and a member of the National
Association of Securities Dealers, Inc. ("NASD").
WHEREAS, Swiftrade is an online portal for international investor to trade
on the major international securities markets; and
WHEREAS, WdoT.rade desires to offer international investors access to
securities markets in the United States;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and for other good and valuable consideration, the receipt and legal sufficiency
of which are hereby acknowledged, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Swiftrade shall design, host and manage a Web site for WdoT.rade as an
online trading portal to provide international investors with 24-hour direct
access to United States securities markets through the facilities of West
America.
2. Swiftrade shall provide direct links from its Web site to the Web sites
of WdoT.rade/ West America and/or Emmett A. Larkin Company, Inc., West America's
clearing agent. During the term of this Agreement, Swiftrade shall not provide
links from its Web site to other sites on the World Wide Web of broker-dealers
or investment advisers offering or making available similar investment products,
services and information.
3. Swiftrade shall provide direct links to WdoT.rade/West America to make
available services and facilities to allow international investors to open and
maintain accounts with West America and to enter and execute trades in the
accounts, to obtain confirmations and monthly account statements from West
America, and to ask questions and obtain answers about particular securities and
general market information.
4. All services to be provided by Swiftrade hereunder shall be in
accordance with the requirements of the federal securities laws of the United
States administered by the SEC,. shall comply with the rules and regulations of
the NASD and shall be subject to review and approval by West America and its
counsel.
<PAGE>
5. WdoT.rade/West America shall pay Swiftrade a referral fee of $40 per
account opened through the services and facilities provided by Swiftrade
hereunder. Swiftrade shall receive no other compensation for designing, hosting
and managing the Web site for WdoT.rade/West America hereunder.
6. This Agreement will take effect immediately and continue for an initial
term of two years unless it is earlier terminated by either party for any reason
at any time upon 60 days written or electronic notice to the other party. This
Agreement will terminate automatically and without notice if either party
violates any regulatory requirement of the SEC or the NASD with respect to the
maintenance or operation of online stock trading or stock trading in general or
if a civil, criminal or administrative proceeding is instituted against either
party by a federal or state law enforcement agency or commission.. If this
Agreement is terminated, WdoT.rade/West America will cease using the
SwiftradeWeb site, all products and services obtained through the Web site will
be promptly returned by Swiftrade to WdoT.rade/West America, together with all
materials associated with the Web site, including any and all customer account
information; Swiftrade shall maintain the confidentiality of any and all
customer account information, including user IDs, sign-on passwords and any
other security codes used by international investors who accessed their accounts
at West America through the direct link on the Swiftrade Web site, or other
information relating to such investors; all customer account information is
proprietary and confidential.
7. Swiftrade's designing, hosting and managing the WdoT.rade/West America
Web site shall not constitute the providing of any investment, tax or legal
advice; any investment advisory products or services by WdoT.rade/West America
shall be the responsibility of WdoT.rade/West America and not Swiftrade, which
disclaims any responsibility for any particular securities, securities
transaction or investment strategy.
8. Use of the Internet for online stock trading is solely at the user's own
risk and is subject to all applicable local, state, national and international
laws and regulations. While Swiftrade will endeavor to create a secure and
reliable link to WdoT.rade/West America for use by its international customers,
Swiftrade and its affiliates will not be responsible for the security or
accuracy of information transmitted by the Internet, nor will they be liable for
any loss resulting from a cause over which they have no direct control,
including but not limited to failure of electronic or mechanical equipment or
communication lines, telephone or other interconnect problems, interruption of
communication or data processing services, unauthorized access or theft,
operator errors, news or analyst reports, market volatility, natural disasters,
strikes, wars or other factors. Neither Swiftrade nor its affiliates will be
responsible for the availability, accuracy or content of the consequences of
reliance on any information contained in, available through or on the Web site
designed, hosted and managed and the risk of loss from these matters rests
entirely with WdoT.rade/West America.
9. Each party to this Agreement agrees to indemnify and hold the other
party harmless, as well as each party's officers, directors, employees,
representatives, agents, members and partners, attorneys, predecessors and
assigns, from and against any and all claims, proceedings, damages, injuries,
2
<PAGE>
liabilities, losses, costs and expenses (including reasonable attorneys' fees
and litigation expenses), relating to or arising from this Agreement. It is
understood and agreement that the parties hereto are independent contractors and
that this Agreement in no way creates any joint venture or partnership between
the parties, nor is either party the agent of the other.
10. This Agreement shall inure to the benefit of and be binding upon the
parties hereto, their respective legal representatives and successors. This
Agreement may not be assigned.
11. This Agreement constitutes the entire agreement between the parties
hereto and supersedes all prior arrangements, understandings and agreements,
oral or written, between the parties hereto with respect to the subject matter
hereof. This Agreement may not be modified or amended except by an instrument or
instruments in writing signed by the party against whom enforcement of any such
modification or amendment is sought.
12. The parties hereto agree to cooperate and use their respective best
efforts to consummate the transactions contemplated by this Agreement.
13. This Agreement may be executed in counterparts, each of which shall be
deemed an original and all of which shall be deemed to be one and the same
instrument.
14. All notices and communications hereunder shall be in writing and shall
be deemed to have been duly given when delivered in person, by email, telegram,
telex, facsimile transmission or by mail to the respective parties at the
following addresses or such other address as any party hereto shall specify in a
notice to the other party in accordance with the terms hereof.
If toWdoT.rade or West America WdoT.rade Inc., a division of
West America Securities Corporation
4510 Thousand Oaks Boulevard, Suite 100
Westlake Village, California 91362
Fax: 805-777-1744
Attention: Robert Kay
If to Swiftrade Swiftrade Inc.
P.O. Box 957
Offshore Incorporations Centre
Roadtown, Tortolla
British Virgin Islands
Fax:_________________________
Attention:______________________
3
<PAGE>
With a copy (which shall not constitute notice) to
McGuire, Woods, Battle & Boothe LLP
1050 Connecticut Avenue, NW
Washington DC 20036
Fax: 202-857-1757
Attention: David J. Levenson
15. This Agreement shall be construed (both as to validity and performance)
and enforced in accordance with and governed by the laws of the State of
California applicable to agreements made and to be performed wholly within such
jurisdiction and without regard to conflicts of laws. If any portion of this
Agreement is adjudged invalid or unenforceable by a court of competent
jurisdiction, the remaining portions will remain valid, enforceable and carried
into effect.
16. Any controversy, claim or dispute between the parties hereto, or any of
their respective officers, directors, employees, representatives, agents or
other affiliates, arising out of or relating to this Agreement, shall be settled
by binding arbitration in Los Angeles, California. Such arbitration shall be
conducted by and in accordance with the rules and regulations then in effect of
the American Arbitration Association. Any award the arbitrator makes will be
final and binding and judgment on it may be entered in any court having
jurisdiction. The parties hereto consent and submit to the personal jurisdiction
of the courts of the State of California to interpret or enforce any or all of
the arbitration provisions of this Agreement.. The parties hereto consent and
submit to the personal jurisdiction of the courts of the State of California to
interpret or enforce any or all of the arbitration provisions of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written.
SWIFTRADE INC.
By: /S/ Anthony Tobin
---------------------------------------
Anthony L. Tobin
WDOT.RADE INC., a division of
WEST AMERICA SECURITIES CORPORATION
By
---------------------------------------
4
LOMAS SANTA FE CORPORATE CENTER II
OFFICE LEASE
between
PROPCO, LP,
a California limited partnership
(LANDLORD)
and
BestWay USA,
a Nevada corporation
(TENANT)
Date: October 20, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1 - FUNDAMENTAL LEASE PROVISIONS ...................................1
ARTICLE 2 - LEASE ..........................................................2
ARTICLE 3 - RENT ...........................................................3
ARTICLE 4 - OTHER CHARGES PAYABLE BY TENANT (ADDITIONAL RENT) ..............4
ARTICLE 5 - USE OF PREMISES.................................................7
ARTICLE 6 - ACCEPTANCE OF PREMISES .........................................8
ARTICLE 7 - INDEMNIFICATION ................................................8
ARTICLE 8 - MAINTENANCE, REPAIRS AND ALTERATIONS ...........................8
ARTICLE 9 - PERFORMANCE BY TENANT .........................................10
ARTICLE 10 - DAMAGE OR DESTRUCTION OF LEASEHOLD ...........................11
ARTICLE 11 - CONDEMNATION .................................................12
ARTICLE 12 - INSURANCE ....................................................13
ARTICLE 13 - LANDLORD'S ENTRY ON PREMISES .................................15
ARTICLE 14 - RULES AND REGULATIONS ........................................15
ARTICLE 15 - RESTRICTIONS ON TRANSFER .....................................15
ARTICLE 16 - DEFAULT ......................................................17
ARTICLE 17 - REMEDIES UPON DEFAULT ........................................18
ARTICLE 18 - PROTECTION OF LENDERS AND TRANSFEREES ........................19
ARTICLE 19 - COMMON AREAS .................................................20
ARTICLE 20 - PROFESSIONAL COSTS; CONSENTS .................................21
ARTICLE 21 - SIGNS ........................................................21
ARTICLE 22 - LANDLORD'S BREACH -NOTICE ....................................22
ARTICLE 23 - LATE CHARGES .................................................22
ARTICLE 24 - INTEREST ON PAST-DUE OBLIGATIONS .............................22
ARTICLE 25 - BUILDING PLANNING ............................................22
ARTICLE 26 - NOTICES ......................................................23
ARTICLE 27 - MODIFICATION FOR LENDER ......................................23
ARTICLE 28 - CORPORATE AUTHORITY; PARTNERSHIP AUTHORITY ...................23
ARTICLE 29 - FORCE MAJEURE ................................................23
ARTICLE 30 - BROKERS.......................................................23
ARTICLE 31 - SECURITY MEASURES ............................................23
ARTICLE 32 - LANDLORD'S RESERVATIONS ......................................23
ARTICLE 33 - MISCELLANEOUS PROVISIONS......................................24
Exhibit A - Site Plan Exhibit B - Floor Plan of the Premises Exhibit C - Tenant
Improvement Agreement Exhibit D - Guaranty of Lease Exhibit E - Rules and
Regulations Exhibit F - Sign Criteria Exhibit G - Letter of Credit Exhibit H -
Preliminary Floor Plan
<PAGE>
LOMAS SANTA FE CORPORATE CENTER II
OFFICE LEASE
This Lease is subject to the terms, covenants and conditions herein set
forth, and Tenant (as defined below) covenants as a material part of the
consideration for this Lease to keep and perform each and all of the terms,
covenants and conditions by Tenant to be kept and performed, and that this Lease
is made upon the condition of such performance.
Article 1 - FUNDAMENTAL LEASE PROVISIONS
Each of the Fundamental Lease Provisions set forth below is a summary of
the terms contained elsewhere in this Lease which relate to each such
Fundamental Lease Provision. If there is any conflict between any Fundamental
Lease Provision and any specific clause of the Lease, the more specific clause
of the Lease shall control.
1.1 Date of Lease: For reference purposes only October 20, 1997
LeaseExecution Date: The date upon which the last of the signatories
executes this Lease.
1.2 Landlord: PROPCO, LP, a California limited partnership ,
1.3 Tenant: BestWay USA, a Nevada corporation
1.4 Building: General site plan of the Building and/or the Project in which
the Premises are located (See Exhibit A).
1.5 Premises: (See Exhibit B)
Suite No.: 106
Approximate Square Feet of Rentable and Usable Floor Area
Within Premises: 4,658 rentable square feet and 4,405 usable
square feet which area has been determined by Landlord's
representative by using the standard method for floor
measurement of office buildings, as determined by BOMA
[Building Owners and Managers Association International],
which determination is conclusive and binding upon Tenant.
Tenant's Percentage of Direct Expenses: Tenant's percentage
of expenses to be paid by the tenants in the Building shall
be established by Landlord based upon Tenant's pro rata
share of expenses described under Articles 4, 8 and 12 of
this Lease, which are shared in common with other tenants in
the Building ("Tenant's Percentage Share"). Tenant's
Percentage Share shall be a fraction, the numerator of which
is the rentable floor area of the Premises, and the
denominator of which shall be the rentable floor area of the
Building occupied by Tenant and occupied by and/or available
for occupancy by other tenants in the Building who share
such expenses in common with Tenant. The Tenant's Percentage
Share is subject to change with changes in the size of the
Premises and/or the Building. Tenant's Percentage Share on
the Commencement Date is 9.25%. For purposes of computing
Tenant's Percentage Share, the "Base Year" will be calendar
year 1998.
1.6 Term: The Term shall be months beginning on the first to
occur of the following ("Commencement Date"): (i) the date
of Substantial Completion of the Tenant Improvements
described in the Tenant Improvement Agreement and tender of
possession of the Premises to Tenant; or (ii) the date
Substantial Completion of the Tenant Improvements would have
occurred except for Tenant Delays, or (iii) the date Tenant
commences business in the -- Premises. Should the
Commencement Date not occur on the first day of a calendar
month, the Term shall begin on the first day of the next
succeeding calendar month. In that event, however, Tenant
shall pay Rent for the fractional month on a per diem basis
(calculated on the basis of a thirty day month) until the
1
<PAGE>
first day of the month when the Term commences. The date
which corresponds to the Commencement Date shall be known as
the "Anniversary Date" of this Lease, unless the
Commencement Date does not occur on the first day of a
calendar month in which event the Anniversary Date shall be
the date which corresponds to the first day of the next
succeeding calendar month following the Commencement Date.
Any provisions of this Lease to the contrary
notwithstanding, the effective date of this Lease, and the
commencement of both parties' rights and obligations
hereunder, shall be the date upon which this Lease is
executed by Landlord. Following the Commencement Date,
Landlord and Tenant shall execute a letter agreement
confirming the Commencement Date, the rentable and usable
square footage of the Premises, and Tenant's acceptance of
the Premises. *SEE ADDENDUM
The anticipated Commencement Date is January 1, 1998
1.7 Permitted Uses: (See Section 5.1) General office use and for no other
use or purpose.
1.8 Tenant's Guarantor: (See Exhibit D) (If none, so state) None
1.9 Address for Notices:
To Landlord: PROPCO, LP
c/o Asset Management Group
11750 Sorrento Valley Road
San Diego, CA 92121
To Tenant: BestWay USA
462 Stevens Avenue, Suite 106
Solana Beach, CA 92075
1.10 Security Deposit: (See Section 3.3) *SEE ADDENDUM
1.11 Rent and Other Charges Payable by Tenant:
1.11.1 Minimum Monthly Rent. Minimum Monthly Rent shall
begin on the Commencement Date.
1.11.2 Initial Minimum Monthly Rent: (See Article 3) per
rentable square foot, payable in twelve (12) equal monthly
installments of $ thereafter adjusted in accordance with
Section 3.2 of this Lease. *SEE ADDENDUM
1.11.3 Other Charges Payable by Tenant ("Additional Rent"):
(i) Increases in Direct Expenses (See Section 4.2); (ii)
Taxes on Tenant's property (See Section 4.4); (iii) Building
Services and Utilities (See Section 4.5); (iv) Insurance
premiums required to be paid by Tenant (See Article 12); and
(v) Maintenance, Repair and Alterations (See Article 8).
1.12 Exhibits: The exhibits referenced in the Table of Contents are
each attached to this Lease and are made a part of this Lease
by this reference.
1.13 Brokers: The brokers who negotiated this Lease are CB
Commercial (Yolanda Aiello) , representing Landlord, and John
Burnham & Company (Michael R. Dyer) , representing
Tenant.
1.14 Vehicle Parking Privileges Allocated To Tenant: Eighteen (18)
unreserved parking spaces subject to the terms and conditions
set forth in Section 19.3 of this Lease.
2
<PAGE>
ARTICLE 2 - LEASE
2.1 Lease of Property for Term. Landlord hereby leases the Premises to
Tenant and Tenant hereby leases the Premises from Landlord for the Term. The
Term is for the period stated in Section 1.6 above and shall begin on the
Commencement Date.
2.2 Delay in Commencement. Landlord shall not be liable to Tenant if,
for reasons beyond the reasonable control of Landlord, Landlord is delayed in
delivery of possession of the Premises to Tenant. Landlord's delay in delivery
of the Premises to Tenant shall not affect this Lease or the obligations of
Tenant under this Lease, except in the determination of the Commencement Date.
2.3 Early Occupancy. Tenant shall have no right to occupy the Premises
prior to the Commencement Date without the prior written consent of Landlord. If
Tenant occupies the Premises prior to the Commencement Date with the prior
written consent of Landlord, Tenant's occupancy of the Premises shall be subject
to all of the provisions of this Lease. Early occupancy of the Premises shall
not advance the expiration date of this Lease. Unless otherwise provided for in
this Lease, Tenant shall pay Minimum Monthly Rent and all other charges
specified in this Lease for the early occupancy period. *SEE ADDENDUM
2.4 Holding Over. Tenant shall vacate the Premises upon the expiration
of the Term or earlier termination of this Lease. If Tenant does not vacate the
Premises upon the expiration of the Term or earlier termination of this Lease,
and Landlord thereafter accepts Rent from Tenant, Tenant's occupancy of the
Premises shall be a "month-to-month" tenancy, subject to all of the terms of
this Lease applicable to a month-to-month tenancy, terminable on thirty (30)
days' written notice given at any time by either party. In no event shall
Landlord's acceptance of Rent after such expiration or earlier termination be
construed or result in a renewal of this Lease. During any such month-to-month
tenancy, Tenant shall pay all Rent and other charges required by this Lease,
except that the Minimum Monthly Rent then in effect under the provisions of
Section 3.1 and 3.2 hereof shall be increased by one hundred percent (100%). If
Tenant fails to surrender the Premises upon the expiration of the Term or
earlier termination of this Lease, despite demand to do so by Landlord, Tenant
shall indemnify, defend and hold Landlord harmless from all of Landlord's
damages or liability, including, but not limited to, any claim made by any
succeeding tenant founded on or resulting from such failure to surrender, and
any attorneys' fees and costs. During such hold-over period, all options, if
any, granted under this Lease, shall be deemed terminated and be of no further
effect. The provisions of this Section 2.4 are in addition to and do not affect
Landlord's right of reentry or any rights of Landlord hereunder, or as otherwise
provided by law. It is acknowledged by Tenant that this Section 2.4 shall confer
upon Tenant no occupancy rights beyond the expiration of the Term or earlier
termination of this Lease.
2.5 Failure to Take Possession. Tenant's inability or failure to take
possession of the Premises on the Commencement Date shall not delay the
Commencement Date or Tenant's obligation to pay Rent. Tenant acknowledges that
even if Tenant never takes possession of the Premises, Landlord shall incur
significant expenses in reliance upon Tenant's execution of this Lease,
including, without limitation, brokerage commissions and fees, legal and other
professional fees, the costs of space planning, financing costs, lost income
from not seeking other tenants, and the cost of construction of tenant
improvements in the Premises. Tenant acknowledges that all of said expenses
shall be included in measuring Landlord's damages should Tenant fail to comply
with its obligations under this Section 2.5.
ARTICLE 3 - RENT
3.1 Minimum Monthly Rent. The Minimum Monthly Rent shall be payable
beginning on the Commencement Date. Tenant shall pay Minimum Monthly Rent to
Landlord, at the address set forth in Section 1.9 above, or such other place as
Landlord shall designate. Minimum Monthly Rent shall be paid in advance on the
first day of each month, without deduction, offset, prior notice or demand, in
the sum specified in Section 1.11 of the Fundamental Lease Provisions and shall
be subject to upward adjustment as herein stated. Tenant shall pay the first
installment of Minimum Monthly Rent to Landlord concurrently with Tenant's
execution of this Lease. Rent for any period during the Term hereof which is for
less than one month shall be a pro rata portion of the monthly installment
determined on the basis of a thirty (30) day month. Rent shall be paid in lawful
money of the United States of America.
3
<PAGE>
3.2 Adjustment to Minimum Monthly Rent. Minimum Monthly Rent shall be
adjusted upward on each Anniversary Date of this Lease (each such date
hereinafter referred to as an "Adjustment Date") for the purpose of reflecting
the increase, if any, of the cost of living, in the following manner:
3.2.1 The base for computing the increase in Minimum Monthly
Rent shall be the United States Department of Labor, Bureau of Labor Statistics
Consumer Price Index for Urban Consumers, Subgroup "All Items" (Base Year
1982/84 = 100) for Los Angeles-Anaheim-Riverside ("Index"), which is published
and in effect for the ninetieth (90th) day preceding the Commencement Date
("Beginning Index"). The Index published and in effect on the ninetieth (90th)
day preceding each Adjustment Date ("Comparison Index"), shall be used in
computing the amount of the increase. On each Adjustment Date, the Minimum
Monthly Rent then in effect shall be increased to equal the product achieved by
multiplying the initial Minimum Monthly Rent specified in Section 1.11.2 by a
fraction, the numerator of which is the Comparison Index and the denominator of
which is the Beginning Index. If the Comparison Index declines, the Minimum
Monthly Rent due during the twelve (12) month period following the Adjustment
Date in question shall be the same amount as the Minimum Monthly Rent due
immediately before the Adjustment Date in question.
3.2.2 As soon as the Minimum Monthly Rent for the next
succeeding twelve (12) months is set, Landlord shall give Tenant notice of the
amount of Minimum Monthly Rent for that succeeding twelve (12) months indicating
how the new Minimum Monthly Rent was computed. Upon the adjustment of the
Minimum Monthly Rent, Tenant shall, upon the request and at the option of
Landlord, promptly execute an amendment to this Lease setting forth the adjusted
Minimum Monthly Rent. In no event shall Minimum Monthly Rent be reduced below
the Minimum Monthly Rent in effect immediately preceding such Adjustment Date.
3.2.3 The delay or failure of Landlord to demand any
adjustment to Minimum Monthly Rent shall not constitute a waiver of Landlord's
right to adjust and collect the Minimum Monthly Rent in accordance with the
provisions of this Section 3.2 as to future adjustments to Minimum Monthly Rent
or for prior periods for which Landlord is entitled to increased Minimum Monthly
Rent under this Section 3.2. If the new Minimum Monthly Rent cannot be
determined on the Adjustment Date in question, Tenant shall continue paying the
Minimum Monthly Rent payable immediately preceding the Adjustment Date in
question until such time as the new Minimum Monthly Rent is or can be
determined. When the new Minimum Monthly Rent is determined, Tenant shall pay
the new Minimum Monthly Rent retroactive to the applicable Adjustment Date.
3.2.4 If the format of the components of the Index is
materially changed, Landlord shall substitute an index which is published by the
Bureau of Labor Statistics, or similar agency, which is most nearly equivalent
to the Index in effect on the Commencement Date. Landlord shall notify Tenant of
the substituted index, which shall be used to calculate the subsequent increases
in the Minimum Monthly Rent. *SEE ADDENDUM
3.3 Security Deposit. Landlord hereby acknowledges receipt of the
Security Deposit from Tenant in the amount identified in Section 1.10 to secure
the faithful performance of the Tenant of all of the terms, covenants and
conditions of this Lease by the Tenant to be kept and performed. Tenant agrees
that if the Tenant shall fail to make any payments required under this Lease
when due, the Security Deposit may, at the option of the Landlord, be applied to
any Rent due and unpaid, and if the Tenant violates any of the other terms,
covenants and conditions of this Lease, the Security Deposit may be applied to
any damages suffered by Landlord as a result of Tenant's default. Under no
circumstances shall Tenant have the right to apply the Security Deposit against
all or a portion of Tenant's payment obligations under any of the provisions of
this Lease. *SEE ADDENDUM
3.3.1 Nothing contained in this Section shall in any way
diminish or be construed as waiving any of Landlord's other remedies provided in
Article 17 hereof, or at law or in equity. Should the entire Security Deposit,
or any portion thereof be appropriated and applied by Landlord for the payment
of overdue Rent or other sums due and payable to Landlord by Tenant hereunder,
then Tenant shall, on the written demand of Landlord, remit to Landlord a
sufficient amount in cash to restore the Security Deposit to its original
amount, and Tenant's failure to do so within five (5) days after receipt of such
demand shall constitute an Event of Default. Should Tenant comply with all of
the terms, covenants and conditions of this Lease and promptly pay all of the
Rent and other sums payable by Tenant to Landlord when due hereunder, the
Security Deposit (or any remaining portion thereof) shall be returned to Tenant
at the end of the Term or sooner termination of this Lease. Landlord shall have
the right to commingle the Security Deposit with other funds of Landlord.
Landlord shall not be required to pay Tenant interest on the Security Deposit.
4
<PAGE>
ARTICLE 4 - OTHER CHARGES PAYABLE BY TENANT (ADDITIONAL RENT)
4.1 Definitions. For the purposes of this Section, the following terms
are defined as follows:
4.1.1 Base Year: Shall mean the calendar year specified in Section 1.5
of the Fundamental Lease Provisions.
4.1.2 Comparison Year: Shall mean each calendar year following the
Base Year.
4.1.3 Direct Expenses: All costs of operation and maintenance of the
Building, or the Project, determined by (i) the average percent of actual
occupancy of the Building for the entire calendar year if such average is
greater than ninety percent (90%), or (ii) as if the Building were not less than
ninety-five percent (95%) occupied for an entire calendar year if the average
percent of actual occupancy of the Building for the entire calendar year is less
than ninety percent (90%). Direct Expenses shall include, but not be limited to,
the following:
4.1.3.1 Real property taxes and assessments (collectively "Real Property
Taxes") upon the improvements to the Building, the Building, the Common Areas
serving the Building (as "Common Areas" are defined in Article 19 hereof), and
the land upon which they are located, imposed by any governmental authority or
agency. "Real Property Taxes" means and shall include without limitation any
form of real estate tax, assessment, special assessment, license fee, license
tax, special tax, business license fee, commercial rental tax, levy, charge,
penalty (not resulting from failure of the Landlord to pay any Real Property
Tax), tax or similar imposition, now or hereafter imposed, or imposed in
substitution or addition, partial or total, to or regarding any such tax,
assessment, special assessment license fee, license tax, special tax, business
license fee, commercial rental tax, levy, charge or penalty previously included
or not included within the definition of Real Property Taxes, by any authority
having the power to tax, including any city, county, state or federal
government, or any school, agricultural, lighting, drainage or other improvement
assessment or special district thereof, as against the Premises, the Building or
the Common Areas or any portion thereof or against any legal or equitable
interest of Landlord in the Premises, the Building or the Common Areas and any
reasonable costs incurred by Landlord in any proceeding for abatement or
reduction thereof, such as attorneys' and consultants' fees. Real Property Taxes
shall also include any increase in Real Property Taxes due to a "change in
ownership" (as that phrase is defined from time-to-time in the California
Revenue and Taxation Code or any successor statute) of the Premises.
Notwithstanding any provision of this Section 4.1.3.1, express or implied to the
contrary, "Real Property Taxes" shall not include Landlord's federal or state
income, franchise, inheritance or estate taxes.
4.1.3.2 All expenses incurred in connection with the operation, repair,
cleaning, maintenance and insuring of the Building and the Common Areas
(collectively "Building Costs"). Building Costs include, without limitation, all
sums expended in connection with the Building and Common Areas for: general
maintenance and repairs; resurfacing; painting; restriping; cleaning; trash
removal (including trash deposited in common receptacles by the individual
tenants); sweeping and janitorial services; lighting and operation and
maintenance of air conditioning and heating equipment and other utility
expenses; maintenance, repair, cleaning and replacement of public toilets, music
program equipment and loudspeakers, sidewalks, curbs and Building signs,
sprinkler systems, planting and landscaping, floors, ceilings, skylights,
windows, directional signs, markers and bumpers, any fire protection systems
(including fire sprinklers), lighting systems and fixtures (including
replacement of tubes and bulbs), storm drainage systems and other utility
systems, all mechanical equipment, automatic door openers, escalators,
elevators, roofs, exterior walls, air conditioning and heating equipment and
security alarm systems; personnel to implement the foregoing services,
including, if Landlord deems necessary, the cost of security guards; all on-site
costs and personnel expenses of Landlord incurred in connection with the
maintenance of the Building and the Common Areas; all personal property taxes
assessed against any personalty (not belonging to any tenant of the Building) in
use in the Building or the Common Areas; any governmental imposition or
surcharge imposed upon Landlord or assessed against any portion of the Building
or the Common Areas; depreciation on maintenance and operating machinery and
equipment (if owned) and rental paid for such machinery and equipment (if
5
<PAGE>
rented); premiums for all insurance carried by Landlord pursuant to this Lease,
including without limitation, adequate comprehensive public liability and
property damage insurance covering Landlord's ownership and operation of the
Building and the Common Areas, fire and extended coverage insurance on the
Building and the Common Areas (which may include earthquake and flood damage
endorsements), vandalism and plate glass insurance covering the Building and the
Common Areas and rent loss insurance; and the costs of all capital improvements
and replacements to the Building or the Common Areas, its contents or any
portion thereof which are made to (i) comply with any present or future law,
ordinance, rule or regulation including without limitation the Americans With
Disabilities Act of 1990 and similar laws, ordinances, rules or regulations; or
(ii) improve or add Building life-safety or security systems; or (iii) reduce
other Building Costs, such costs to be amortized over the applicable recovery
period for federal tax purposes or the estimated useful life as determined by
Landlord and utilized by Landlord in its financial and tax reporting, and to
include a return on capital at such rate as Landlord pays on funds borrowed for
the purpose of constructing such improvements or replacements. In addition,
Building Costs shall include a sum to be payable to Landlord for supervision of
the Building and the Common Areas and for accounting, bookkeeping and collection
of the Building Costs, in an amount equal to fifteen percent (15%) of the total
of all of the foregoing Building Costs incurred in each calendar year. Landlord
may have any or all services performed in connection with such Building and
Common Area maintenance provided by an independent contractor(s). If Landlord
acquires, constructs or makes available for Common Area purposes land or
improvements not shown as part of Exhibit A, then Building Costs shall also
include all of the expenses itemized above incurred and paid in connection with
such additional land or improvements.
4.1.3.3 Direct Expenses shall not include (i) mortgage and debt service on
any debt instrument which encumbers the Building; (ii) ground lease payments;
(iii) Landlord's general overhead and general administrative expenses not
related to management or operation of the Building; (iv) depreciation (except as
described above); (v) any and all costs of selling, exchanging or refinancing
the Building including any escrow charges, transfer taxes, loan fees and points;
(vi) extraordinary real estate taxes or insurance premiums related to the tenant
improvements of other tenants in the Building which are in excess of building
standard as may be defined by Landlord from time to time; (vii) costs incurred
by Landlord for the repair of damage to the Building or the Common Areas to the
extent Landlord is reimbursed by insurance proceeds from policies paid for in
total or in part by Tenant; (viii) capital expenditures required by Landlord's
failure to comply with laws enacted on or before the date of issuance of a
certificate of occupancy or an equivalent governmental permit for the initial
occupancy of the Building; (ix) costs incurred with respect to the installation
of tenant improvements made for tenants in the Building or incurred in
renovating or otherwise decorating, painting or redecorating vacant space for
tenants of the Building; (x) leasing commissions, attorneys' fees, and other
costs and expenses incurred in connection with negotiations or disputes with
present or prospective tenants or other occupants of the Building, (xi) costs
incurred by Landlord to enforce the provisions of any lease of space in the
Building due to the violation by any tenant of the Building of the terms and
conditions of any lease; (xii) cost of services paid to Landlord or to
subsidiaries or affiliates of Landlord for services in the Building to the
extent the same exceeds the cost of such services rendered by unaffiliated
qualified third parties on a comparable competitive basis; (xiii) any
compensation (including wages and fringe benefits) paid to clerks, attendants or
other persons in commercial concessions operated by Landlord in the Building
lobby; (xiv) all items and services for which Tenant or any other tenant of the
Building reimburses Landlord (other than the pass-through of Building Costs) and
which Landlord provides selectively to one or more tenants (other than Tenant)
without reimbursement; (xv) the cost of purchase and installation of signs in or
on the Building which identify the owner of the Building or any tenant of the
Building; (xvi) tax penalties incurred as a result of Landlord's negligence or
inability or unwillingness to make payments when due; (xvii) electrical power
costs for which Tenant or any other tenant directly contracts with the public
utility.
4.2 Increases in Direct Expenses/Additional Rent. If the Direct Expenses
paid or incurred by the Landlord for the Comparison Year are in excess of the
Direct Expenses paid or incurred for the Base Year, then Tenant shall pay
Tenant's Percentage Share of the increase as Additional Rent. Notwithstanding
the preceding sentence, Tenant shall not be required to pay any Direct Expenses
in excess of Direct Expenses paid or incurred for the Base Year, until after the
first Anniversary Date of this Lease. Landlord shall endeavor to give to Tenant,
6
<PAGE>
on or before the first day of March of each year following the respective
Comparison Year, a statement of the increase in Direct Expenses payable by
Tenant hereunder, but failure by Landlord to give such statement by March 1
shall not constitute a waiver by Landlord of its right to require payment of the
increase in Direct Expenses. Upon receipt of the statement for the first
Comparison Year, Tenant shall pay in full the total amount of increase due for
the first Comparison Year. In addition for the then current year, the amount
which Landlord estimates, at Landlord's sole determination, for the increase in
Direct Expenses between the Base Year and the said current year, shall be
divided into twelve (12) equal monthly installments, and Tenant shall pay to
Landlord, concurrently with the Minimum Monthly Rent payment next due following
the receipt of such statement, an amount equal to one (1) monthly installment
multiplied by the number of months from January in the calendar year in which
said statement is submitted to the month of such payment, both months inclusive.
Subsequent installments shall be payable concurrently with the Minimum Monthly
Rent payments for the balance of that calendar year. If the next or any
succeeding Comparison Year results in a greater increase in Direct Expenses than
that previously estimated by the Landlord, then, not later than twenty (20) days
following receipt of a statement from Landlord, Tenant shall pay a lump sum
equal to such total increase in Direct Expenses over the Comparison Year, less
the total of the monthly installments of estimated increases paid in the
previous year for which comparison is then being made; and the estimated monthly
installments to be paid for the next year, following said Comparison Year, shall
be adjusted to reflect Landlord's estimate of such increase in Direct Expenses
for that current year. If, in any Comparison Year, the Tenant's share of Direct
Expenses is less than the preceding year, then upon receipt of Landlord's
statement, any overpayment made by Tenant on the monthly installment basis
provided above shall be credited towards the next installment of Minimum Monthly
Rent falling due.
4.2.1 Not more frequently than once per calendar year, within sixty (60)
days after receipt of Landlord's statement comparing Tenant's payment of Direct
Expenses during that calendar year against Tenant's Percentage Share of such
expenses, Tenant may request in writing to audit Landlord's books and records
pertaining to such expenses. Tenant shall have no right to request to audit
Landlord's books and records pertaining to such expenses, except during such
sixty (60) day period. If no such written request is made within the sixty (60)
day period, Tenant stipulates and agrees that said figures are for all purposes
correct and accurate, and the amount of the billing is proper. In the event
Tenant requests copies of any portion of Landlord's books and records pertaining
to such expenses, such copies shall be provided by Landlord to Tenant at
Tenant's expense.
4.3 Final Determination of Tenant's Share of Direct Expenses. Even
though the Term has expired and Tenant has vacated the Premises, when the final
determination is made of Tenant's Percentage Share for the year in which this
Lease terminates, Tenant shall immediately pay any increase due over the
estimated Direct Expenses paid, and conversely, any overpayment made by Tenant
in the event Direct Expenses decrease shall be rebated by Landlord to Tenant.
4.4 Taxes on Tenant's Property. Tenant shall pay, before delinquency,
all taxes, assessments, license fees and public charges levied, assessed or
imposed upon or measured by the value of its business operation, including but
not limited to the furniture, trade and other fixtures, equipment and other
property of Tenant at any time situated on or installed in the Premises by
Tenant. If at any time during the Term any of the foregoing are assessed as a
part of the real property of which the Premises are a part, Tenant shall pay to
Landlord upon demand the amount of such additional taxes as may be levied
against said real property by reason thereof. For the purpose of determining
said amount, figures supplied by the County Assessor as to the amount so
assessed shall be conclusive.
4.5 Building Services and Utilities. Landlord shall furnish to the
Premises during the normal business hours of the Building, which are 8:00 a.m.
to 6:00 p.m. Monday through Friday and 8:00 a.m. to 12:00 noon on Saturdays
("Business Hours"), except for those holidays designated annually by Landlord,
heating, ventilating and air conditioning ("HVAC Service") as required for the
comfortable occupancy of the Premises as reasonably determined by Landlord.
Landlord shall also furnish to the Premises (i) sewer and domestic water service
and (ii) facilities for the delivery and distribution within the Premises of
electricity and telephone (the foregoing utility facilities and the HVAC Service
7
<PAGE>
are hereinafter collectively referred to as "Utilities"). Tenant shall pay for
all Utilities used by Tenant within the Premises. If a separate meter is
required by Tenant for any Utilities, such meter shall be installed and
maintained at Tenant's expense.
4.5.1 If Tenant's electrical consumption is separately
metered, Tenant shall pay for such costs directly to the public utility company
or to Landlord as Landlord directs (and if such payment is made to Landlord,
Landlord shall be responsible for payment to the public utility). If Tenant's
electrical consumption is not separately metered, Tenant shall pay Tenant's
Percentage Share of the electrical consumption of the Building as a part of
Direct Expenses; provided however, if Tenant's electrical consumption was not
initially separately metered and if a separate meter is subsequently installed
to monitor Tenant's electrical consumption, Landlord shall make an appropriate
adjustment to Minimum Monthly Rent and Direct Expenses to account for the fact
that Tenant is directly paying such separately metered charges to the public
utility (or to Landlord as the case may be) and not as a part of Tenant's
Minimum Monthly Rent or Tenant's Percentage Share of Direct Expenses. If
Tenant's electrical consumption is not separately metered and is in excess of
the quantity provided by Landlord or extends beyond Business Hours, Landlord may
install a separate switch, meter or metering system to be installed at Tenant's
expense to measure the amount of electrical consumption by Tenant and charge
Tenant for such excess consumption at the rates charged by the local public
utility providing the same plus any additional expense incurred in keeping
account of the electricity so consumed.
4.5.2 Landlord shall provide customary and routine cleaning
and janitorial service for the Premises not less than five (5) days per week,
during non Business Hours; provided however, if Tenant is a health care
provider, Tenant shall, at Tenant's sole cost and expense, (i) make arrangements
for such cleaning and janitorial services for the Premises with a contractor
which shall be subject to the reasonable prior approval of Landlord and (ii)
satisfy all laws and regulations governing the disposal of medical waste and to
arrange for the proper disposal of such waste. The disposal of medical waste is
not part of the ordinary services provided by Landlord, and Landlord is not
required to provide such services pursuant to this Lease. Tenant agrees to
indemnify, defend and hold Landlord harmless from and against any and all
claims, costs, loss or liability arising out of or in any connected to Tenant's
disposal of such waste.
4.5.3 Tenant shall not install or use machinery or equipment
that use excess water, lighting or power, nor shall Tenant permit any act that
causes extra burden upon the Utilities, or Building services. Tenant agrees to
pay to Landlord within ten (10) working days after Tenant's receipt of an
invoice from Landlord, all reasonable charges imposed by Landlord from time to
time for all such excess Utilities and/or additional services consumed by Tenant
or used in the Premises.
4.5.4 Landlord reserves the right to interrupt, curtail, stop
or suspend Utilities when necessary, in Landlord's reasonable discretion by
reason of accident or emergency, or for repairs, alterations, replacements or
improvements or because of difficulty or inability in securing supplies or
labor, or because of strikes, or for any other cause beyond the reasonable
control of Landlord, whether such cause be similar or dissimilar to those
hereinabove specifically mentioned, until such cause has been removed. Except as
specifically provided in Section 4.7 below, there shall be no diminution or
abatement of Rent or other charges due under this Lease as a result of said
interruption, curtailment or suspension of Utilities and/or other Building
services, nor shall this Lease be affected or any of the Tenant's obligations
hereunder be reduced. Landlord shall have no responsibility or liability for any
such interruption, curtailment, stoppage or suspension of services or systems as
provided for in this Section 4.5, except that Landlord shall exercise reasonable
diligence to eliminate the cause of same.
4.5.5 Landlord reserves the right to install new or additional
utility facilities throughout the Building and the Common Areas for the benefit
of the Landlord or Tenant, or any other tenants of the Building, including, but
not by way of limitation, such Utilities as plumbing, electrical systems, HVAC
systems, communication systems and fire protection and detection systems,
including entry into the Premises for such purposes, so long as such
installations do not unreasonably interfere with Tenant's use of the Premises.
8
<PAGE>
4.6 Additional Rent. All charges payable by Tenant other than Minimum
Monthly Rent are called "Additional Rent". Unless this Lease provides otherwise,
all Additional Rent shall be paid with the next monthly installment of Minimum
Monthly Rent. The term "Rent" shall mean Minimum Monthly Rent and Additional
Rent. Tenant's failure to pay any Additional Rent due hereunder shall constitute
an Event of Default under this Lease.
4.7 Abatement of Rent When Tenant is Prevented From Using Premises.
Notwithstanding any provision in this Lease to the contrary, in the event that
Tenant is prevented from using, and does not use, the Premises or any portion
thereof, for ten (10) consecutive business days (the "Eligibility Period") as a
result of any damage or destruction to the Premises or any repair, maintenance
or alteration performed by Landlord at any time after Tenant commences business
from any portion of the Premises, which interferes with Tenant's use of the
Premises, or any failure to provide utilities, services or access to the
Premises or because of an eminent domain proceeding, then Tenant's Rent shall be
abated or reduced, as the case may be, after expiration of the Eligibility
Period for such time that Tenant continues to be so prevented from using, and
does not use, the Premises or a portion thereof, in the proportion that the
rentable area of the portion of the Premises that Tenant is prevented from
using, and does not use, bears to the total rentable area of the Premises.
However, in the event that Tenant is prevented from conducting, and does not
conduct, its business in any portion of the Premises for a period of time in
excess of the Eligibility Period, and the remaining portion of the Premises is
not sufficient to allow Tenant to effectively conduct its business therein, and
if Tenant does not conduct its business from such remaining portion, then for
such time after expiration of the Eligibility Period during which Tenant is so
prevented from effectively conducting its business therein, the Rent for the
entire Premises shall be abated; provided, however, if Tenant reoccupies and
conducts its business from any portion of the Premises during such period, the
Rent allocable to such reoccupied portion, based on the proportion that the
rentable area of such reoccupied portion of the Premises bears to the total
rentable area of the Premises, shall be payable by Tenant from the date such
business operations commence. If Tenant's right to abatement occurs because of
damage or destruction to the Premises or Tenant's property, Tenant's abatement
period shall continue until Tenant has been given sufficient time, and
sufficient access to the Premises. to rebuild the portion of the Premises it is
required to rebuild, to install its property, furniture, fixtures, and equipment
and to move in over one (1) weekend. To the extent Tenant is entitled to
abatement because of an event covered by Article 10 (Damage or Destruction) or
Article 11 (Eminent Domain) of this Lease, then the Eligibility Period shall not
be applicable.
ARTICLE 5 - USE OF PREMISES
---------------------------
5.1 Use. Tenant acknowledges that Tenant's use of the Premises shall be
subject to any matters or documents of record, including the effect of any
covenants, conditions, restrictions, easements, mortgages or deeds of trust,
ground leases, rights-of-way, or any construction, operation and reciprocal
easement agreement, and the effect of any zoning laws of the city, county and
state where the Building is located. Tenant shall use the Premises only for the
Permitted Uses identified in Section 1.7 above and shall not use or permit the
Premises to be used for any other purpose without the prior written consent of
Landlord. In determining whether to grant consent to Tenant for any proposed use
other than the Permitted Use, Landlord may consider factors including, but not
limited to, tenant mix, Building image, need for alteration of the Premises
and/or the Building, the impact upon the Common Areas of the Building or the
parking facilities, the impact upon Utilities and services, effect on fire or
other insurance covering the Building, avoidance of nuisance to other tenants,
and violation of Landlord's third-party agreements, including loan documents and
non-competition covenants with other tenants. Tenant shall not use or permit
anything to be done in or about the Premises, nor bring or keep anything therein
which will in any way increase the existing rate of or affect any fire or other
insurance upon the Building or any of its contents, or cause cancellation of any
insurance policy covering the Building or any part thereof or any of its
contents. Tenant shall not do or permit anything to be done in or about the
Premises which will in any way obstruct or interfere with the rights of other
tenants or occupants of the Building or injure or annoy them or use or allow the
Premises to be used for any improper, immoral, unlawful or objectionable
purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about
the Premises. Tenant shall not commit or suffer to be committed any waste in or
9
<PAGE>
upon the Premises, and Tenant shall conduct itself and cause its employees,
agents and invites to conduct themselves, with full regard to the rights,
convenience and welfare of all other tenants in the Building. Tenant, its agents
and employees, shall at all times comply with the rules and regulations set
forth in Exhibit E.
5.2 Compliance with Law. Tenant shall not use the Premises or permit
its employees, agents or invites to do anything in or about the Premises which
will in any way conflict with any law, statute, ordinance or governmental rule
or regulation now in force or which may hereafter be enacted or promulgated.
Tenant shall, at its sole cost and expense, promptly comply with all laws,
statutes, ordinances and governmental rules, regulations or requirements of any
board of fire insurance underwriters or other similar bodies now or hereafter
constituted, relating to, or affecting the condition, use or occupancy of the
Premises, excluding structural changes not related to or affected by Tenant's
use and occupancy of the Premises and/or Tenant's improvements or acts. The
judgment of any court of competent jurisdiction or the admission of Tenant in
any action against Tenant, whether Landlord be a party thereto or not, that
Tenant has violated any law, statute, ordinance or governmental rule, regulation
or requirement, shall be conclusive of that fact as between the Landlord and
Tenant.
5.3 Hazardous Substances. Tenant shall not (either with or without
negligence) cause or permit the escape, disposal, or release of any biologically
or chemically active or other hazardous substances or materials (collectively
"Hazardous Substances"). Tenant shall not allow the storage or use of such
Hazardous Substances in any manner not sanctioned by law or by the highest
standards prevailing in the industry for the storage and use of such Hazardous
Substances, nor allow any Hazardous Substances to be brought into the Project
and such Hazardous Substances, except to use in the ordinary course of Tenant's
business, and then only after written notice is given to Landlord of the
identity of such Hazardous Substances. Without limitation, "Hazardous
Substances" shall include those substances and materials described in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601, et seq., and applicable state or local laws and
the regulations adopted under these acts. If any lender or governmental agency
shall ever require testing to ascertain whether or not there has been any
release of Hazardous Substances, then the reasonable costs thereof shall be
reimbursed by Tenant to Landlord upon demand as Additional Rent. In addition,
Tenant shall execute affidavits, representations and the like from time to time
at Landlord's request concerning Tenant's best knowledge and belief regarding
the presence of Hazardous Substances on the Premises. In all events, Tenant
shall indemnify Landlord in the manner elsewhere provided in this Lease from any
release of Hazardous Substances on the Premises or Project, if caused by Tenant
or persons acting under Tenant, and Tenant shall be fully and completely liable
to Landlord for any and all cleanup costs and any and all other charges, fees or
penalties relating to the use, disposal, transportation, generation or sale of
hazardous substances on the Premises or Project which were brought onto the
Premises or Project by Tenant, or Tenant's agents, employees, invitees,
contractors or subcontractors. The obligations of Tenant pursuant to this
Section 5.4 shall survive the expiration or earlier termination of this Lease.
Notwithstanding the foregoing, Tenant shall be permitted to use and store within
the Premises, reasonable quantities of those substances and materials which are
typically found in general office use (i.e. copy toner and cleaning fluids)
despite the fact that such substances and materials may be classified as
Hazardous Substances.
ARTICLE 6 - ACCEPTANCE OF PREMISES
----------------------------------
Tenant acknowledges that its acceptance of possession of the Premises
constitutes a conclusive admission that Tenant has inspected the Premises and
has found them to be in good condition and repair and in all respects in
accordance with the obligations of Landlord under this Lease. Tenant's
acceptance of possession shall also constitute its acknowledgment of and
agreement to be bound by all recorded matters, laws, ordinances and governmental
regulations and orders in effect at the time of such possession. Tenant
acknowledges that neither Landlord nor any agent of Landlord has made any
representation or warranty with respect to the condition of the Premises or the
suitability of the Premises for Tenant's intended use.
10
<PAGE>
ARTICLE 7 - INDEMNIFICATION
---------------------------
7.1 Tenant's Indemnity. Tenant shall defend, indemnify and hold
Landlord harmless against and from any and all liabilities and claims arising
from Tenant's use of the Premises for the conduct of its business or from any
activity, work or other thing done, permitted or suffered by the Tenant, its
agents or employees, in or about the Building or the Common Areas and shall
further indemnify and hold harmless Landlord against and from any and all
liabilities and claims arising from any breach or default in the performance of
any obligation on Tenant's part to be performed under the terms of this Lease,
or arising from any act or negligence of the Tenant, or any officer, agent,
employee, guest or invitee of Tenant, and from and against all costs, attorneys'
fees, expenses and liabilities incurred in or about any such claim or any action
or proceeding brought thereon, and, if any case, action, claim or proceeding be
brought or asserted against Landlord by reason of any such claim, Tenant, upon
notice from Landlord, shall defend the same at Tenant's expense by counsel
reasonably satisfactory to Landlord. Tenant, as a material part of the
consideration to Landlord, hereby assumes all risk of damage to property or
injury to persons in, upon or about the Premises from any cause other than the
negligence of Landlord, or its designated agents, servants or employees, unless
covered by insurance which Tenant is required to provide, and Tenant hereby
waives all claims in respect thereof against Landlord. Tenant's obligation to
indemnify Landlord shall include reasonable attorneys' fees and investigation
costs, and all other reasonable costs, expenses and liabilities from the first
notice that any claim or demand is to be made or may be made.
7.2 Landlord's Indemnity. Notwithstanding the provisions of Section 7.1
above, Tenant shall not be required to indemnify, defend, and hold Landlord
harmless from any such loss, cost, liability, damage and expense resulting from
the negligent acts or omissions or the willful misconduct of Landlord or those
of its agents, contractors, servants, employees or licensees, in connection with
Landlord's activities on the Premises or the Building or the Project, and
Landlord hereby agrees to indemnify, defend, and hold Tenant harmless from any
such loss, costs, liability, damage and expense arising directly out of such
negligent acts or omissions or such willful misconduct. Further, Tenant's
agreement to indemnify and hold Landlord harmless pursuant to Section 7.1 and
the exclusion from Tenant's indemnity and the agreement by Landlord to indemnify
and hold Tenant harmless pursuant to this Section 7.2 are not intended to and
shall not relieve any insurance carrier of its obligations under polices
required to be carried by Landlord or Tenant, respectively, pursuant to the
provisions of this Lease to the extent that such policies cover the results of
such negligence or omissions or such willful misconduct. If either party
breaches this Lease by its failure to carry required insurance, such failure
shall automatically be deemed to be the covenant and agreement by Landlord or
Tenant, respectively, to self-insure such required coverage, with full waiver of
subrogation.
7.3 Damage To Tenant's Property. Landlord, its employees and its
agents, shall not be liable for any damage to property entrusted by Tenant to
employees of the Building, nor for loss or damage to any property by theft or
otherwise, nor for any injury to or damage to persons or property resulting from
fire, explosion, falling plaster, steam, gas, electricity, water or rain which
may leak from any part of the Premises or the Building, or from the pipes,
appliances or plumbing works therein or from the roof, street or subsurface or
from any other place resulting from dampness or any other cause whatsoever, or
by the entry of Landlord or its agents or employees into the Premises as
permitted under this Lease, unless, and to the extent, caused by or due to the
negligence of Landlord, or its agents, servants or employees, unless and to the
extent such damage is covered by insurance required to be carried by Tenant
pursuant to this Lease. Landlord, or its agent, shall not be liable for
interference with or loss of business by Tenant. Tenant shall give prompt notice
to Landlord in case of fire or accidents in the Premises or in the Building, or
of defects therein, or in the fixtures or equipment. Neither party shall be
liable to the other for any unauthorized or criminal entry of third parties into
the Premises, Building, or Common Areas, or for any damage to person or
property, or loss of property, in and about the Premises, Building, or Common
Areas, and the approaches, entrances, streets, sidewalks or corridors thereto,
by or from any unauthorized or criminal acts of third parties, regardless of any
breakdown, malfunction or insufficiency of any security measures, practices or
equipment provided by Landlord or Tenant. Tenant shall immediately notify
Landlord in writing of any breakdown or malfunction of any security measures,
practices or equipment provided by Landlord which are known to Tenant. Tenant
hereby agrees that in no event shall Landlord or its agents or employees be
11
<PAGE>
liable for consequential damages, including injury to Tenant's business or any
loss of income therefrom, nor shall Landlord or its agents or employees be
liable to Tenant for any damages caused by the act or neglect of any other
tenant in the Building.
ARTICLE 8 - MAINTENANCE, REPAIRS AND ALTERATIONS
8.1 Landlord's Obligations. Subject to Tenant's obligations under
Section 8.2, Landlord shall repair and maintain in good and tenantable condition
the Common Areas, the roof, exterior walls, structural parts of the Premises
(including the structural floor), utility meters, pipes and conduits outside the
Premises used to furnish utilities to the Premises on a nonexclusive basis
(except for repairs assumed by the appropriate public utility company), and
those portions of any variable air volume or central HVAC system serving the
Building which is located outside the Premises. In addition, Landlord shall keep
the foundations, exterior walls and exterior roof of the Building in good order,
condition and repair. Landlord's costs of meeting its obligations under this
Section 8.1 shall be chargeable to Tenant as a part of Building Costs. Tenant
shall not have the right to make repairs at Landlord's expense or to terminate
this Lease due to Landlord's failure to keep the Common Areas, or the Building
in good order, condition and repair. Tenant agrees that the under no
circumstances will Tenant use the roof areas for any purpose. Except as
specifically provided in Section 4.7 above, there shall be no abatement of Rent
and no liability of Landlord by reason of any injury to or interference with
Tenant's business arising from the making of any repairs, alterations or
improvements in or to any portion of the Building, Common Areas or the Premises
or in or to fixtures, appurtenances and equipment therein. If any part of the
Premises, Common Areas or the Building is damaged by any act or omission of
Tenant, its customers, invites or employees, Tenant shall pay Landlord the cost
of repairing or replacing such damaged property, whether or not Landlord would
otherwise be obligated to pay the cost of maintaining or repairing such
property, except and to the extent the cost of such repairs or replacements are
covered by insurance carried by Landlord and paid for by Tenant as part of
Building Costs. Tenant acknowledges that neither Landlord nor any agent of
Landlord has made any representation that Landlord shall undertake any
modification, alteration or improvement to the Premises, except as may be
specifically provided for in this Lease.
8.2 Tenant's Obligations. Subject to Landlord's maintenance obligations
pursuant to Section 8.1, Tenant shall keep the Premises in an attractive,
first-class and fully operative condition. Landlord shall not be obligated to
make repairs, replacements or improvements of any kind upon or in the Premises,
or upon or to any equipment, Utility Installation (as defined in Section 8.4),
fixtures or furnishings therein contained during the Term. Tenant, at Tenant's
sole expense, shall keep and maintain the Premises and every part thereof, and
any and all appurtenances thereto wherever located, in first-class condition and
in good order and repair, in accordance with all applicable laws, ordinances and
regulations of any governmental authority having jurisdiction, including
replacement of parts and equipment, if necessary, including, but without
limitation, all utility facilities, including plumbing, heating, electrical
ventilation, heating and air conditioning systems (except Landlord shall
maintain the HVAC System serving the Premises, with the cost of such maintenance
chargeable to the tenants of the Building), sprinkler systems, walls, floors and
ceilings, and all other repairs, replacements, renewals and restorations,
ordinary and extraordinary, foreseen and unforeseen, and all other work or
leasehold improvements, subject to reasonable wear and tear. In addition,
Tenant, at its sole cost and expense, shall install and maintain fire
extinguishers and other fire protection devices as may be required from time to
time by any agency having jurisdiction thereof and/or by the insurance
underwriters insuring the Building or Project in which the Premises are located.
In no event shall Tenant make or cause to be made any penetration into or
through the roof or floor of the Premises without the prior written approval of
Landlord. Tenant shall be directly responsible for any and all damages resulting
from any violation of the provisions of this Section 8.2. Any contractors
retained by Tenant for the purpose of complying with Tenant's obligations under
this Section 8.2 shall have received the prior written approval of Landlord.
8.2.1 If Tenant refuses or neglects to commence repairs within
ten (10) days after Landlord's written demand, or adequately to complete such
repairs within a reasonable time thereafter, Landlord may make the repairs
without liability to Tenant for any loss or damage that may occur to Tenant's
personal property or business by reason thereof, and if Landlord makes such
repairs, Tenant shall pay to Landlord on demand, as Additional Rent, the cost
12
<PAGE>
thereof, with interest at the Interest Rate (as defined in Article 29) from the
date of payment by Landlord until repaid by Tenant.
8.2.2 Without any liability for failure to do so, Tenant shall
promptly notify Landlord in writing if Tenant observes that any part of the
Premises, or of the Building, including the fixtures and facilities, is or
appears to be defective, damaged or in a state of disrepair, regardless of the
nature of the cause or of the identity of the party responsible for the repair
thereof.
8.3 Condition upon Termination. Upon termination of this Lease, Tenant
shall remove all of Tenant's personal property, trade fixtures and equipment
from the Premises and shall surrender the Premises to Landlord, broom clean and
in the same condition as received except for ordinary wear and tear which Tenant
was not otherwise obligated to remedy under any provision of this Lease.
Landlord may require Tenant to remove any alterations, additions or improvements
other than the initial Tenant Improvements to be constructed by Landlord
pursuant to the Tenant Improvement Agreement attached hereto as Exhibit C
(whether or not made with Landlord's consent) by no later than the termination
of the Lease and to restore the Premises to the condition specified by Landlord
including, without limitation, sign removal and repair and all patching and
plastering required by Landlord, all at Tenant's expense. All alterations,
additions and improvements which Landlord has not required Tenant to remove
shall become Landlord's property and shall be surrendered to Landlord upon the
termination of the Lease. Tenant shall repair, at Tenant's expense, any damage
to the Premises caused by the removal of such improvements and trade fixtures.
In no event, however, shall Tenant remove any of the following without
Landlord's prior written consent: any power wiring or power panels; wall
coverings; drapes, blinds or other window coverings; carpets or other floor
coverings; heaters, air conditioners or any heating or air conditioning
equipment; fencing or security gates; or other similar Building operating
equipment and decorations.
8.4 Alterations, Additions and Improvements. Tenant shall not make any
alterations, additions, improvements, structural changes or Utility
Installations in or to the Premises (collectively "Alterations") without
Landlord's prior written consent. Tenant shall submit to Landlord, at the time
of seeking such prior written consent, detailed copies of all plans and
specifications for all Alterations to the Premises. As used in this Section 8.4,
the term "Utility Installation" shall mean power panels, electrical distribution
systems, security systems, lighting fixtures, air conditioning, plumbing and
telephone and telecommunication wiring and equipment. No Alterations shall be
undertaken without first providing Landlord with a copy of the signed permit(s)
issued by the appropriate governmental agency or agencies, if a permit(s) is
required. All Alterations made by Tenant, except light fixtures, cases, counters
and other removable trade fixtures shall, upon installation, be deemed to have
become part of the freehold and the property of Landlord. Landlord may require
Tenant to provide demolition and/or lien and completion bonds in form and amount
satisfactory to Landlord. Tenant shall promptly remove any Alterations
constructed in violation of this Section 8.4 upon Landlord's written request.
All Alterations shall be accomplished in a good and workmanlike manner, in
conformity with all applicable laws and regulations, and diligently completed by
a licensed contractor approved by Landlord. Upon completion of any Alterations,
Tenant shall provide Landlord with copies of all construction contracts, and
proof of payment (including unconditional lien waivers) for all labor and
materials. Tenant shall reimburse Landlord for all costs incurred by Landlord
(including architects' and/or engineers' fees) in approving Tenant's plans for
Alterations.
8.4.1 In connection with the construction of any Alterations
by Tenant, Tenant shall provide its own trash containers for construction debris
and use service entrances to the Premises, if any. In addition, Tenant shall
conduct such construction activities during such hours and in such a manner as
to not interfere with the quiet enjoyment or business operations of other
tenants in the Building. Tenant shall not conduct any core drilling during
business hours.
8.4.2 Tenant shall pay when due all claims for labor and
material furnished to the Premises. Tenant shall give Landlord at least ten (10)
days' prior written notice of the commencement of any Alterations on the
Premises. Before commencing any Alterations, Tenant shall permit Landlord to
post and maintain notices of non-responsibility and other notices that are
provided for under the Mechanics' Lien Law of California and other applicable
13
<PAGE>
laws. Tenant shall keep the Premises free and clear of all mechanics' liens
resulting from Alterations done by or for Tenant. Tenant shall have the right to
contest the correctness or the validity of any such lien if, immediately on
demand by Landlord, Tenant procures and records a lien release bond issued by a
corporation authorized to issue surety bonds in California in an amount equal to
one and one-half (1-1/2) times the amount of the claim of lien. The bond shall
meet the requirements of Civil Code Section 3143 and shall provide for the
payment of any sum that the claimant may recover on the claim (together with
costs of suit, if it recovers in the action). Furthermore, at all times when
Tenant or its agents, contractors or employees are performing Alterations,
Tenant or Tenant's contractor shall maintain public liability and property
damage insurance on such activities with a single combined limit of One Million
Dollars ($1,000,000), naming the Landlord as an additional insured. Furthermore,
Tenant or Tenant's contractor shall procure workmen's compensation insurance to
cover the activities of all persons engaged in such Alterations.
Tenant shall pay all taxes and license fees imposed by reason of any
Alterations made by Tenant to the Premises, or imposed upon any personal
property of Tenant located within the Premises. Tenant agrees that its interior
decorating, including color scheme, shall be subject to the prior approval of
Landlord and Landlord's architect which approval shall not be unreasonably
withheld. Tenant shall make no changes to any entry locks or locks installed on
any other doors located in the Premises without first obtaining Landlord's prior
written approval. It is acknowledged by Tenant that a master key system has been
employed by Landlord, and that any such lock change could hinder access to the
Premises for such purposes as security and fire fighting. In the event that
during the Term hereof any Alteration is mandated by law, regulation, rule or
the requirement of any insurance company (as a condition to the issuance or
continuation of insurance coverage) to be made to the Premises, or any portion
thereof, because of Tenant's use of the Premises, then, and in that event, such
Alteration shall be made and paid for by Tenant.
8.5 Installation of Fixtures. Landlord may, but shall not be obligated
to, grant Tenant written permission to enter upon the Premises prior to the
Commencement Date for the purpose of installing trade fixtures and furnishings
upon the furnishing to Landlord of written evidence satisfactory to Landlord
that Tenant has obtained and put into effect the insurance coverage described in
Article 12. Landlord shall not be liable to Tenant for damage to or loss of such
fixtures, equipment or furnishings, Tenant accepting the full risk for such
damage or loss, if any. Tenant shall pay for all utilities consumed by Tenant or
its contractors in preparing the Premises for opening of Tenant's business.
8.6 Landlord's Right to Remodel Building. Landlord shall have the
right, at any time, to remodel, expand, change or refurbish all or any part of
the Building, Common Areas or the surrounding property, including the right (but
not the obligation) to enclose or otherwise cover all or part of the Common
Areas, to landscape or re-landscape portions of the Building or Common Areas, to
reconstruct, remodel or refurbish any portion of the exterior of the Building,
and/or to change, modify or alter parking, access or other traffic matters. In
connection with the exercise of Landlord's rights as set forth in this Section
8.6, Landlord, its agents and employees, shall have the right of reasonable
entry and to conduct work within the Premises. Tenant hereby releases Landlord
from any and all liability arising from (i) any interference or diminution in
access to the Premises; (ii) noise or dust resulting from Landlord's work; and
(iii) reduction or limitation of available parking spaces for Tenant's employees
and invitees, so long as such activity does not unreasonably interfere with the
operation of Tenant's business. This Lease is not intended to nor shall it
confer upon Tenant any view corridors. The obstruction of Tenant's view, air or
light by any structure erected in the vicinity of the Building, whether by
Landlord or third parties, shall not in any way affect this Lease or impose any
liability upon Landlord, nor shall Landlord be liable for interference with any
other incorporeal hereditament.
ARTICLE 9 - PERFORMANCE BY TENANT
---------------------------------
All covenants and agreements to be performed by Tenant under any of the
terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of Rent except as specifically provided in
Section 4.7 above. If Tenant shall fail to pay any sum of money owed to any
party other than Landlord, or perform any act for any party other than Landlord,
for which Tenant is liable hereunder, and such failure or violation shall
14
<PAGE>
continue for fifteen (15) days after written notice thereof by Landlord, and a
reasonable additional period of time thereafter to perform any such act if such
additional time is required, Landlord may, without waiving or releasing Tenant
from its obligations, make any such payment or perform any such other act to be
made or performed by Tenant. All sums so paid by Landlord and all necessary
incidental costs, together with interest thereon at the Interest Rate from the
date of such payment by Landlord, shall be payable to Landlord on demand, and
shall be deemed Additional Rent.
ARTICLE 10 - DAMAGE OR DESTRUCTION OF LEASEHOLD
10.1 Destruction Covered by Insurance. In the event the Premises or the
Building are damaged by fire or other perils which are fully covered by fire and
extended coverage insurance, Landlord agrees to forthwith repair the same, and
this Lease shall remain in full force and effect. Landlord may elect, by written
notice to Tenant within sixty (60) days after such casualty, to terminate this
Lease in lieu of restoring the Premises if either (i) the Building or Premises
are damaged or destroyed to the extent of more than twenty-five percent (25%) of
their replacement cost, or (ii) the damage is such that the Building or the
Premises cannot be repaired and restored within one hundred eighty (180) days
after the casualty.
10.2 Destruction Not Covered by Insurance. In the event the Premises or
the Building are damaged as a result of any cause other than the perils covered
by fire and extended coverage insurance, Landlord shall have the option to: (i)
repair or restore such damage, this Lease continuing in full force and effect;
or (ii) give notice to Tenant at any time within sixty (60) days after such
damage, terminating this Lease as of the date specified in such notice, which
date shall be no less than thirty (30) days and no more than sixty (60) days
after the giving of such notice. In the event Landlord gives notice of its
election to terminate this Lease, as is provided for in this Section 10.2, the
Lease shall terminate, and all interest of the Tenant in the Premises shall
terminate on the date so specified in such notice and the Rent shall be paid up
to date of termination.
10.3 Repair Costs Exceeding Insurance Coverage. If the cost of the
restoration of the Premises or the Building exceeds the amount of proceeds
received from insurance, Landlord may elect to terminate this Lease by giving
notice to Tenant within thirty (30) days after determining that the restoration
cost will exceed the insurance proceeds. If Landlord elects to terminate this
Lease and Tenant does not elect to contribute toward the cost of restoration as
provided in this Section 10.3, this Lease shall terminate, and all interest of
the Tenant in the Premises shall terminate on the date so specified in such
notice and the Rent shall be paid up to date of termination. If the destruction
was caused by an act or omission of Tenant, or its agents or employees, Tenant
shall immediately pay Landlord, upon Landlord's demand, the difference between
the actual cost of restoration and any insurance proceeds received by Landlord.
10.4 Repairs That Cannot Be Completed Within One Hundred Eighty Days.
Within sixty (60) days after the date of Tenant's notice to Landlord of such
damage or destruction ("Damage Notice Date"), Landlord shall give Tenant notice
of Landlord's good faith determination of whether or not the damage or
destruction can be repaired under applicable laws, within one hundred eighty
(180) days after the Damage Notice Date. In the event Landlord determines that
such repairs to the Building and/or the Premises and/or the Common Areas cannot,
in Landlord's good faith judgment, be substantially completed under applicable
laws within one hundred and eighty (180) days after the Damage Notice Date, then
Landlord shall notify Tenant of such determination. In such notice Landlord
shall either agree to undertake such repairs (in which event the notice shall
include Landlord's estimate of the time required to complete the same) or elect
to terminate this Lease. If Landlord agrees to undertake the repairs, but states
that the required repairs will not be substantially completed within one hundred
and eighty (180) days of the Damage Notice Date, Tenant shall have an option,
exercisable by written notice thereof delivered to Landlord not later than the
thirtieth (30th) day after Landlord's delivery of Landlord's notice that the
repairs will not be completed within such one hundred and eighty (180) day
period, to terminate this Lease. If neither Landlord nor Tenant exercise a right
of termination following Landlord's determination that the repairs will take
more than one hundred and eighty (180) days, then Landlord shall diligently
undertake to repair such damage or destruction.
15
<PAGE>
10.5 Abatement of Rent. In the event of reconstruction of the Premises
under this Article 10, the Rent otherwise payable under this Lease shall be
abated proportionately with the degree to which Tenant's use of the Premises is
impaired. Such abatement shall commence on the date of such damage or
destruction and continue during the period while Landlord is completing the
repairs required of it under this Article 10. Tenant shall continue to operate
its business on the Premises during any such abatement period to the extent
reasonably practicable from the standpoint of prudent business management.
Tenant shall not be entitled to any compensation or damages from Landlord for
loss of the use of the whole or any part of the Premises, Building or Tenant's
personal property, or for any inconvenience or annoyance suffered by reason of
damage or destruction thereto, or the reconstruction or replacement thereof.
10.6 Restrictions on Restoration. If the existing laws do not permit
the restoration of the Premises to substantially the condition existing at the
time of such damage or destruction, either party may terminate this Lease
immediately following receipt of notice that restoration is forbidden, by giving
written notice to the other party.
10.7 Destruction Within Last Year of Term. Notwithstanding anything to
the contrary contained in this Article, Landlord shall have no obligation
whatsoever to repair, reconstruct or restore any portion of the Premises or any
portion of the Building the damage occurs during the last twelve (12) months of
the Term or any extension thereof. In the event Landlord elects not to repair,
reconstruct or restore the Premises during the last twelve (12) months of the
Term, or any extension thereof, Landlord shall give Tenant written notice of
Landlord's election to terminate the Lease within thirty (30) days after the
date of occurrence of such damage.
10.8 Destruction of Tenant's Personal Property, Tenant Improvements or
Property of Tenant's Employees. It is hereby expressly agreed that Landlord will
not be obligated to carry insurance of any kind on Tenant's furniture,
furnishings, fixtures, equipment or other personal property (collectively
"Personal Property") and in the event of damage or destruction to the Premises
or the Building, under no circumstances shall Landlord be required to repair any
injury or damage by fire or other cause, or to make any repairs to, or
replacements of, Tenant's Personal Property. However, as a part of Direct
Expenses, Landlord shall cause to be insured the Tenant Improvements and
Alterations which do not constitute Tenant's Personal Property and shall cause
such Tenant Improvements and Alterations to be repaired and restored at
Landlord's sole cost and expense except that Tenant shall pay for such portion
which is covered by the deductible. Landlord shall have no responsibility for
any contents placed or kept in or on the Premises or the Building by Tenant or
Tenant's employees.
10.9 Exclusive Remedies. Notwithstanding any destruction or damage to
the Premises, the Building, and/or the Common Areas, Tenant shall not be
released from any of its obligations under this Lease, except to the extent and
upon the conditions expressly stated in this Article 10. Tenant hereby expressly
waives the provisions of California Civil Code Sections 1932(2) and 1933(4) with
respect to any damage or destruction to the Building and/or the Premises and
agrees that its rights shall be exclusively governed by the provisions of this
Article 10.
10.10 Termination - Advance Payments and Insurance Proceeds. Upon
termination of this Lease pursuant to this Article 10, an equitable adjustment
shall be made concerning advance Rent and any advance payments made by Tenant to
Landlord. Landlord shall, in addition, return to Tenant so much of Tenant's
Security Deposit as has not been applied by Landlord, as provided for under the
terms of this Lease. In the event of termination of this Lease, all proceeds
from Tenant's fire and extended coverage insurance under Section 12.1.2 covering
the Tenant's Personal Property shall be paid to Tenant.
10.11 Termination. Upon any termination of this Lease under any of the
provisions of this Article, the parties shall be released thereby, without
further obligation to the other, from the date possession of the Premises is
surrendered to the Landlord, except for items which have theretofore accrued and
are then unpaid, and those obligations, if any, which by the terms of this
Lease, survive such termination.
16
<PAGE>
ARTICLE 11 - CONDEMNATION
11.1 Definitions. (i) "Condemnation" or "Taking" means (a) the exercise
of any governmental power, whether by legal proceedings or otherwise, by a
condemnor, and (b) a voluntary sale or transfer by Landlord to any condemnor,
either under the threat of condemnation or while legal proceedings for
condemnation are pending; (ii) "Date of Taking" means the date the Condemnor has
the right to the possession of the property being condemned; (iii) "Award" means
all compensation, sums or anything of value awarded, paid or received on a total
or partial Condemnation; and (iv) "Condemnor" means any public or quasi-public
authority, or private corporation or individual, having the power of
condemnation.
11.2 Parties' Rights and Obligations to be Governed by Lease. If,
during the period between the execution of this Lease and Commencement Date,
there is any Taking of all or any part of the Building or Common Areas, or any
interest in this Lease by Condemnation, the rights and obligations of the
parties shall be determined pursuant to this Article.
11.3 Total Taking. If the Premises are totally taken by
Condemnation during the Term, the Lease shall terminate on the Date of Taking.
11.4 Partial Taking.
11.4.1 Partial Taking of Premises. If any portion of the
Premises is taken by Condemnation, this Lease shall remain in effect, except
that Landlord or Tenant may elect to terminate this Lease if twenty-five percent
(25%) or more of the total number of square feet of the floor area in the
Premises is taken, and the remainder of the Premises is rendered economically
unusable by Tenant. If either party elects to terminate this Lease, that party
must exercise its right to terminate pursuant to this Section by giving notice
to the other party within thirty (30) days after the nature and the extent of
the Taking have been fully determined. If either party elects to terminate this
Lease, they shall notify the other party of the date of termination, which date
shall not be earlier than thirty (30) days nor later than ninety (90) days after
the other party has been notified of the terminating party's election to
terminate; except that this Lease shall terminate on the Date of Taking if the
Date terminates this Lease within the thirty (30) day period, this Lease shall
continue in full force and effect, except that Rent shall be reduced as provided
below. Furthermore, at Landlord's cost and expense, and as soon as reasonably
possible, Landlord will restore the remaining portion of the Premises to a
complete unit of like quality and character as existed prior to such Taking.
11.4.2 Partial Taking of Building. If more than twenty percent
(20%) of the floor area of the Building in which the Premises is located is
taken, Landlord may terminate this Lease, at Landlord's option, as of the date
the condemning authority takes title or possession by delivering written notice
to Tenant within thirty (30) days after receipt of written notice of such Taking
(or in the absence of such notice, within thirty (30) days after the Condemnor
takes possession).
11.4.3 Partial Taking of Common Areas. If any portion of the
Common Areas is taken by Condemnation, this Lease shall remain in full force and
effect so long as there is no material interference with access to the Premises
and/or Tenant's parking facilities. If such a Taking materially interferes with
access to the Premises and/or Tenant's rights to parking within the parking
facilities within the Project, and comparable substitute parking is not made
available to Tenant, then either party shall have the election to terminate this
Lease pursuant to this Article 11. For purposes of this Section 11.4.3, such a
partial Taking of the Common Areas shall be deemed to materially interfere with
access to the Premises and/or Tenant's rights to parking within the parking
facilities within the Project only if twenty five percent (25%) or more of the
Common Areas is taken and comparable substitute parking or access to the
Premises is not made available to Tenant.
11.4.4 Effect on Rent. If any portion of the Premises is taken
by Condemnation and this Lease remains in full force and effect, on the Date of
Taking, the Minimum Monthly Rent shall be reduced by an amount which is in the
same ratio to Minimum Monthly Rent as the total number of square feet in the
Premises taken bears to the total number of square feet in the Premises
immediately before the Date of Taking.
17
<PAGE>
11.5 Restoration. If there is a partial Taking of the Premises and this
Lease shall remain in full force and effect pursuant to this Article 11,
Landlord, at its cost, shall accomplish all necessary restoration so that the
Premises are returned as near as practical to their condition immediately prior
to the Date of Taking.
11.6 Condemnation Award - Distribution. Any Awards paid on account of
any Condemnation or Taking of the Building or the Common Area, or any portion or
portions thereof, shall belong to and shall be the sole property of Landlord,
except that Tenant shall be entitled to receive any Award or portion thereof
attributable to the taking of personal property, good will, relocation expenses
and/or interests in other than the real property taken, provided the same does
not in any way diminish the Award to Landlord.
11.7 Effect of Termination. In the event this Lease is canceled or
terminated pursuant to any of the provisions of this Article 11, all Rent and
other charges payable on the part of Tenant to Landlord hereunder shall be paid
either as of the date upon which actual physical possession shall be taken by
the Condemnor, or as of the date upon which Tenant ceases doing business in,
upon or from the Premises, whichever last occurs; and the parties shall
thereupon be released from all further liability hereunder, except that Landlord
shall make an equitable refund to Tenant of any unearned, unused or
unappropriated advance Rent or Security Deposit theretofore paid by Tenant to
Landlord and except for items which have heretofore accrued and are then unpaid,
and those obligations, if any, which by the terms of this Lease, survive such
termination.
11.8 Right to Terminate this Lease for Taking. Neither party shall have
the right to terminate this Lease in the event of a partial Taking of the
Premises, other than as is specifically provided for in this Article 11. Both
parties agree that the provisions of this Article 11 shall govern the rights and
obligations of the parties in the event of any condemnation of the Premises or
the Building, and specifically waive the provisions of California Code of Civil
Procedure Section 1265.130 (and any successor provision).
ARTICLE 12 - INSURANCE
----------------------
12.1 Insurance Maintained and Paid by Tenant. Tenant covenants and
agrees that from and after the date of delivery of the Premises from Landlord to
Tenant, Tenant will carry and maintain, at its sole cost and expense, in the
amounts specified and in the form hereinafter provided for, each of the
following types of insurance:
12.1.1 Liability Insurance. A Commercial General Liability
insurance policy (with coverage which shall be as least as broad as the most
recent edition of Insurance Services Office Commercial General Liability
coverage ["Occurrence form CG 0001] or Insurance Services Office form number GL
0002 covering Comprehensive General Liability and Insurance Offices Form number
GL 0404 covering Broad Form Comprehensive General Liability) with a combined
single limit of not less than Two Million Dollars ($2,000,000) insuring Tenant
on an occurrence basis against all liability of Tenant and Landlord and their
authorized representatives, agents and employees arising out of and in
connection with Tenant's use or occupancy of the Premises. All such bodily
injury liability insurance and property damage liability insurance shall
specifically insure the performance by Tenant of the indemnity agreement as to
liability for injury to or death of persons and injury or damage to property
contained in Section 7.1 of this Lease; however, the limits of said insurance
shall not limit the liability of Tenant hereunder. Not more frequently than each
two (2) years, if, in the opinion of Landlord's lender or of the insurance
broker retained by Landlord, the amount of Commercial General Liability
insurance coverage at that time is not adequate, Tenant shall increase the
insurance coverage as required by either Landlord's lender or Landlord's
insurance broker.
12.1.2 Tenant's Property Insurance. "All Risk" insurance
covering Tenant's personal property, fixtures and equipment from time to time
in, on or upon the Premises, in an amount not less than one hundred percent
(100%) of their full replacement cost from time to time during the Term,
together with insurance against sprinkler damage. Any policy proceeds shall be
used for the repair or replacement of the property damaged or destroyed unless
this Lease shall cease and terminate under the provisions of Article 10.
18
<PAGE>
12.1.3 Workers' Compensation and Employer's Liability
Insurance. Workers' Compensation Insurance in such amounts as required by
applicable California law and Employer's Liability insurance with limits of One
Million Dollars ($1,000,000.00) per accident.
12.1.4 Business Interruption/Extra Expense Insurance. Loss of
income, business interruption and extra expense insurance in such amounts as
will reimburse Tenant for direct and indirect loss of earnings and incurred
costs attributable to the perils commonly covered by Tenant's property insurance
described above for a period of not less than one (1) year. Such insurance shall
be carried with the same insurer that issues the insurance for the personal
property.
12.1.5 Policy Form. All policies of insurance required to be
maintained by Tenant under the terms of this Section 12.1 shall be issued by
insurance companies, with general policyholder's rating of not less than A and a
financial rating of VII rated in the most current available "Best's" Insurance
Reports, and admitted to do business in the State of California, and shall (with
the exception of Workers' Compensation Insurance) name Landlord, its officers,
employees, partners and agents and such other parties (including lenders) as
Landlord may reasonably require as additional insured, which policies shall be
for the mutual and joint benefit and protection of Landlord, Tenant and such
other parties designated by Landlord. Any deductibles or self-insured retentions
must be declared to and approved by Landlord. If Landlord disapproves of the
amount of any such deductible or self-insured retention, Landlord may either (i)
require Tenant's insurer to reduce or eliminate such deductibles or self-insured
retentions with respect to Landlord, its officers, employees, partners and
agents or (ii) require Tenant to procure a bond guaranteeing payment of losses
and related investigations, claim administration and defense expenses to the
extent of any such deductible or self-insured retention. Copies of such policies
of insurance or certificates thereof together with original endorsements showing
the coverage required herein shall be delivered to Landlord prior to the
delivery of possession of the Premises to Tenant and thereafter prior to the
expiration of the term of each such policy. All liability policies shall contain
a provision that Landlord, although named an additional insured, shall
nevertheless be entitled to recover under said policies for any loss occasioned
to it, its servants, agents and employees by reason of the negligence of Tenant.
As often as any such policy shall expire or terminate, renewal or additional
policies shall be procured and maintained by Tenant in like manner and to like
extent. All policies of insurance delivered to Landlord must contain a provision
that the company writing said policy will give Landlord thirty (30) days notice
in writing (by certified mail, return receipt requested) in advance of any
cancellation or lapse or the effective date of any reduction in the amounts of
insurance. All liability policies to be maintained by Tenant shall be written as
primary policies, not contributing with and in excess of coverage which Landlord
may carry. In addition, such policies shall include a waiver by the insurer of
any right of subrogation against Landlord, its agents, employees and
representatives, which arises or might arise by reason of any payment under such
policy or by reason of any act or omission of Landlord, its agents, employees or
representatives. No later than ten (10) days prior to the Commencement Date,
Tenant shall deliver to Landlord, copies of all policies or certificates
(together with any required endorsements) evidencing the existence of the
amounts and forms of coverage satisfactory to Landlord.
12.1.6 Blanket Policies. Notwithstanding anything to the
contrary contained within this Section, Tenant's obligations to carry the
insurance provided for herein may be brought within the coverage of a so-called
blanket policy or policies of property insurance carried and maintained by
Tenant, provided, however, that Landlord, its officers, employees, partners and
agents, and Landlord's mortgagee(s) or beneficiary(ies) shall be named as an
additional insured thereunder as their interest may appear, and that the
coverage afforded Landlord and Landlord's mortgagee(s) or beneficiary(ies) will
not be reduced or diminished by reason of the use of such blanket policy of
insurance, and provided further that the requirements set forth herein are
otherwise satisfied. Tenant agrees to permit Landlord at all reasonable times to
inspect the policies of insurance of Tenant covering risks upon the Premises for
which policies or copies thereof are not delivered to Landlord.
12.1.7 Tenant's Failure to Procure Insurance. Tenant agrees
that if Tenant does not carry and maintain any such insurance required to be
carried pursuant to this Lease, Landlord may (but shall not be required to)
procure such insurance on Tenant's behalf and charge Tenant the premiums,
together with a ten percent (10%) handling charge, payable upon demand as
Additional Rent.
19
<PAGE>
12.2 Insurance Maintained by Landlord and Paid by Building Tenants.
12.2.1 Liability Insurance. Landlord shall obtain and keep in
force during the Term, a policy of combined single limit bodily injury and broad
form property damage insurance, plus coverage against such other risks Landlord
deems advisable from time to time, insuring Landlord, but not Tenant, against
liability arising out of the ownership, use, occupancy or maintenance of the
Building or the Project, if any, in an amount not less than Two Million Dollars
($2,000,000) per occurrence.
12.2.2 Property Insurance. Landlord shall obtain and keep in
force, during the Term, a policy or policies of property insurance covering loss
or damage to the Building, the Project, the Tenant Improvements and the
Alterations but not Tenant's Personal Property, in an amount determined by
Landlord or as required by Landlord's lenders. Such policy or policies of
insurance shall provide protection against any and all perils generally included
in the "All Risk" classification with earthquake coverage insurance, if required
by the first mortgagee, deed of trust trustee or deed of trust beneficiary of
Landlord, or by any federal, state, county, city or local authority, together
with insurance against sprinkler damage, vandalism, malicious mischief, plate
glass, and such other perils as Landlord deems advisable or may be required by a
lender having a lien on the Building or the Project, if any. In addition,
Landlord shall obtain and keep in force, during the Term, a policy of loss of
rents insurance, covering Tenant's tenancy, providing for insurance proceeds for
a period of one (1) year of Tenant's tenancy, with loss payable to Landlord,
which insurance shall also cover all Direct Expenses for said period. Tenant
shall not be named in any such policies carried by Landlord and shall have no
right to any proceeds therefrom.
12.2.3 Costs/Deductibles. The policies required by Sections
12.2.1 and 12.2.2 shall contain such deductibles as Landlord or Landlord's
lenders may determine. The cost of all such policies shall be chargeable to
Tenant as a Building Cost. In the event that the Premises shall suffer an
insured loss, as defined in Article 10, the deductible amounts under the
applicable insurance policies shall also be deemed Building Costs. Tenant shall
not do or permit to be done anything which shall invalidate the insurance
policies carried by Landlord. Tenant shall pay the entirety of any increase in
the property insurance premium for the Building or the Project, if any, over
what it was immediately prior to the Commencement Date, if the increase is
specified by Landlord's insurance carrier as being caused by the nature of
Tenant's occupancy or any act or omission of Tenant. Landlord's obligation to
carry the insurance provided for herein may be brought within the coverage of
any so-called blanket policy or policies of property insurance carried and
maintained by Landlord, provided that the coverage afforded will not be reduced
or diminished by reason of the use of such blanket policy of property insurance.
12.3 Waiver of Subrogation. Tenant and Landlord (for themselves and
their insurers) each hereby releases and relieves the other, and waives its
right of recovery against the other, and against the officers, partners,
employees, agents and representatives of the other, and against other tenants of
the Building (provided such parties and other tenants have waived such rights
against Landlord and Tenant), for direct or consequential loss or damage arising
out of or incident to the perils covered by property insurance carried by such
party, whether due to the negligence of Landlord or Tenant, or their agents,
employees, contractors and/or invitees, to the extent of such insurance
coverage. If necessary, all property insurance policies required under this
Lease shall be endorsed to contain this waiver of subrogation provision.
12.4 No Representations of Adequate Coverage. Landlord makes no
representation that the limits or forms of coverage of insurance specified in
this Article 12 are adequate to cover Tenant's property or obligations under
this Lease.
ARTICLE 13 - LANDLORD'S ENTRY ON PREMISES
-----------------------------------------
13.1 Entry By Landlord. Landlord and its authorized representatives
shall have the right to enter the Premises at all reasonable times for any of
the following purposes: (i) to determine whether the Premises are in good
condition and whether Tenant is complying with its obligations under this Lease;
(ii) in case of emergency or to do any necessary maintenance, restoration,
repairs or improvements to the Premises, the Building, Common Areas, the
Project, or other leasehold premises in the Building that Landlord has the right
20
<PAGE>
or obligation to perform; (iii) to serve, post or keep posted any notices
required or allowed under the provisions of this Lease; (iv) to post "for rent"
or "for lease" signs during the last four (4) months of the Term, or during any
period while Tenant is in default; (v) with prior reasonable notice to Tenant,
to show the Premises to prospective brokers, agents, buyers, tenants or persons
interested in an exchange, mortgagees, workmen or contractors, at any time
during the Term; (vi) to shore the foundations, footings and walls of the
Premises or the Building in which the Premises are located and to erect
scaffolding and protective barricades around and about the Premises, but not so
as to prevent entry to the Premises, and to do any other act or thing necessary
for the safety or preservation of the Premises or the Building and other
improvements in which the Premises are located; and (vii) to remodel the
Building.
13.1.1 Landlord and its authorized representatives shall at
all times have and retain a key with which to unlock all of the doors in, upon
and about the Premises, excluding Tenant's vaults, safes and files, and Landlord
shall have the right to use any and all means which Landlord may deem proper to
open said doors in an emergency, in order to obtain entry to the Premises,
without liability to Tenant. Any entry to the Premises obtained by Landlord by
any of said means, or otherwise, shall not, under any circumstances, be
construed or deemed to be a forcible or unlawful entry to, or a detainer of, the
Premises, or an eviction of Tenant from the Premises or any portion thereof.
Landlord shall conduct its activities on the Premises as allowed in this Section
in a manner that will cause the least possible inconvenience, annoyance or
disturbance to Tenant. Except in cases of emergency, when the Tenant has
abandoned or surrendered the Premises, or if it is impracticable to do so, the
Landlord shall give the Tenant reasonable notice and enter only during normal
business hours. Tenant hereby grants to Landlord such licenses or easements in
and over the Premises or any portion thereof as shall be reasonably required for
the installation or maintenance of mains, conduits, pipes or other facilities to
serve the Building or any part thereof, including, but not by way of limitation,
the Premises of any occupant; provided, however, that Landlord shall pay for any
alteration required on the Premises as a result of any such exercise, occupancy
under, or enjoyment of any such license or easement.
13.2 No Abatement of Rent. Except as specifically provided in Section
4.7 above, Landlord shall not be liable in any manner for any inconvenience,
disturbance, loss of business, nuisance or other damage arising out of
Landlord's entry on the Premises as provided in this Section, except damage
resulting from the negligence or willful misconduct of Landlord or its
authorized representatives, but only to the extent such damage is not covered by
insurance required to be carried by Tenant pursuant to this Lease. Tenant shall
not be entitled to an abatement or reduction of Rent if Landlord exercises any
rights reserved in this Section, so long as such activity does not unreasonably
interfere with the operation of Tenant's business in the Premises.
ARTICLE 14 - RULES AND REGULATIONS
----------------------------------
Tenant shall faithfully observe and comply with the "Rules and
Regulations," attached hereto as Exhibit E and all reasonable and
nondiscriminatory modifications and additions thereto. However, Landlord shall
not be responsible to Tenant for the violation or nonperformance by any other
tenant or occupant of the Building of any of the Rules and Regulations, but
shall use commercially reasonable efforts to enforce the Rules and Regulations
in a nondiscriminatory manner. The Rules and Regulations are in addition to, and
shall not be construed to in any way modify or amend, in whole or in part, the
terms, covenants, agreements and conditions of this Lease. Tenant shall be
responsible for the observance of all of the Rules and Regulations by Tenant's
employees, agents, clients, customers, invitees and guests.
ARTICLE 15 - RESTRICTIONS ON TRANSFER
-------------------------------------
15.1 Landlord's Consent Required. Tenant shall not, voluntarily or
involuntarily, because of death, divorce, disability, or by operation of law or
otherwise, assign, pledge, hypothecate or encumber its interest in this Lease or
the Premises or sublease all or any portion of the Premises, or allow any other
person or entity to occupy or use all or any part of the Premises (collectively
"Transfer"), without first obtaining Landlord's prior written consent. Any
Transfer without such consent, shall be void and, at the option of Landlord,
shall terminate this Lease. Any consent to any Transfer which may be given by
21
<PAGE>
Landlord shall not constitute a waiver by Landlord of the provisions of this
Article 15 or a release of Tenant from the full performance by it of the
covenants herein contained. If Tenant is a partnership, a transfer of any
interest of a general partner, a deemed to be a Transfer. If Tenant is a
corporation, unless Tenant is a public corporation whose stock is regularly
traded on a national stock exchange, or is regularly traded in the
over-the-counter market and quoted on NASDAQ, any dissolution, merger,
consolidation or other reorganization of Tenant or sale or other transfer of a
percentage of capital stock of Tenant which results in a change of controlling
persons, or the sale or other transfer of all or substantially all of the assets
of Tenant, shall be deemed to be a Transfer. For purposes of this Article 15,
the term "Transferee" includes without limitation, assignees, subtenants, or any
other party who acquires an interest in the Premises or this Lease by way of
pledge, hypothecation or encumbrance.
15.2 Transfer Notice. Tenant shall give Landlord at least sixty (60)
days advance written notice ("Transfer Notice"), of its desire to proceed with a
Transfer and shall submit in writing to Landlord (i) the name of the proposed
transferee, (ii) in detail, the nature of the proposed transferee's business to
be carried on in the Premises, (iii) whether Tenant proposes to assign the
Lease, sublet the Premises or change ownership, (iv) the proposed effective date
of the Transfer, (v) all the material terms and conditions of the Transfer, (vi)
financial statements, income statements and balance sheets for the two (2) most
recent completed fiscal or calendar years of the proposed transferee, and (vii)
a bank reference. The Transfer Notice shall be accompanied by a copy of the
proposed agreement documenting the Transfer, or if none, a copy of any offers,
draft agreements, letters of commitment or intent, and other documents
pertaining to the proposed Transfer. Thereafter, Tenant shall furnish such
supplemental information as Landlord may reasonably request concerning the
proposed transferee.
15.3 Landlord's Election. At any time within fifteen (15) working days
after Landlord's receipt of the information specified above, Landlord may, by
written notice to Tenant, elect to (i) terminate this Lease not less than
forty-five (45) nor more than ninety (90) days after the end of said fifteen
(15) working day period as to the portion (including all) of the Premises so
proposed to be transferred, with a proportionate abatement in Rent payable
hereunder, (ii) consent to the Transfer, or (iii) reasonably disapprove of the
Transfer, setting forth in writing Landlord's grounds for doing so. Such grounds
for disapproval may include, without limitation, nonsuitability of the proposed
use for the Premises and/or the Building, violation of Landlord's third-party
agreements, including loan documents and non-competition covenants of Landlord
respecting radius, locations, use or exclusivity in any other lease, financing
agreement or other agreement relating to the Building or Landlord's other
buildings in the immediate area, need for alteration of the Premises, an
inappropriate use in light of the Building's existing tenant mix, a material
increase in the impact upon the Common Areas or the parking facilities, a
material increase in the demands upon utilities and services, the proposed use
of the Premises conflicts with Tenant's use clause, a possible material adverse
effect upon the reputation of the Premises or the Building from the nature of
the business to be conducted, or a reputation for financial reliability on the
part of the proposed transferee which is unsatisfactory in the reasonable
judgment of Landlord, that Tenant is in default of its obligations under this
Lease or that Landlord has not received assurances acceptable to Landlord that
all past due amounts owing from Tenant to Landlord will be paid and all other
defaults by Tenant will be cured prior to the effective date of the proposed
Transfer. If Landlord consents to the Transfer within the fifteen (15) day
period, Tenant may thereafter enter into such Transfer agreement upon the terms
and conditions and as of the effective date set forth in the information
furnished by Tenant to Landlord. If Landlord consents to the Transfer and Tenant
does not consummate the Transfer within fifteen (15) days after receipt of
Landlord's decision, the provisions of this Article 15 shall once again apply.
15.4 Assumption of Lease Obligations. Each permitted transferee, other
than Landlord, shall assume and be deemed to have assumed this Lease and shall
be and remain liable jointly and severally with Tenant for the payment of Rent
and for the due performance or satisfaction of all of the provisions, covenants,
conditions and agreements herein contained on Tenant's part to be performed or
satisfied. No Transfer shall be binding on Landlord unless such transferee or
Tenant shall deliver to Landlord a counterpart original of the instrument
evidencing such Transfer which contains a covenant of assumption by the
transferee, but the failure or refusal of the transferee to execute such
22
<PAGE>
instrument of assumption shall not release or discharge the transferee or the
Tenant from its liability as set forth herein. Any permitted Transfer shall not,
in any way, affect or limit the liability of Tenant under the terms of this
Lease, even if after such Transfer the terms of this Lease are materially
changed or altered without the consent of Tenant, the consent of whom shall not
be necessary.
15.5 Additional Provisions Regarding Transfers. Landlord may accept
Rent from any person other than Tenant, pending approval or disapproval of a
Transfer. Neither a delay in the approval or disapproval of such Transfer, nor
the acceptance of Rent, shall constitute a waiver or estoppel of Landlord's
right to exercise its remedies for the breach of any of the terms or conditions
of this Article 15 or this Lease. If Tenant's obligations under this Lease have
been guaranteed by third parties, then any Transfer, and Landlord's consent
thereto, shall not be effective unless said guarantors give their written
consent to such Transfer. Furthermore, Landlord may consent to subsequent
Transfers or any amendments or modifications thereto without notifying Tenant or
anyone else liable on the Lease, and without obtaining their consent, and such
action shall not release such persons from liability under this Lease; however,
such persons shall not be responsible to the extent any such amendment or
modification enlarges or increases the obligations of the Tenant or transferee
under this Lease. Upon the occurrence of any Event of Default under this Lease,
Landlord may proceed directly against Tenant, any guarantors or anyone else
responsible for the performance of this Lease, including the transferee, without
first exhausting Landlord's remedies against any other person or entity
responsible therefor to Landlord, or any security held by Landlord or Tenant.
Landlord's written consent to any Transfer by Tenant shall not constitute an
acknowledgment that no Event of Default then exists under this Lease, nor shall
such consent be deemed a waiver of any then existing Event of Default, except as
may be otherwise acknowledged by Landlord at that time. The discovery of the
fact that any financial statement relied upon by Landlord in giving its consent
to a Transfer was materially false shall, at Landlord's election, render
Landlord's consent null and void. Any sums or other economic consideration
received by Tenant as a result of a Transfer, however denominated, which exceed,
in the aggregate, (i) the total sums which Tenant is obligated to pay Landlord
under this Lease (prorated to reflect obligations allocable to any portion of
the Premises subleased), plus (ii) the unamortized value of leasehold
improvements to the Premises paid for by Tenant, depreciated on a straight-line
basis over the Term, shall be paid to Landlord as Additional Rent under this
Lease without affecting or reducing any other obligations of Tenant hereunder.
In the event of any approved Transfer of this Lease in connection with the sale
of all or substantially all of the assets of Tenant used in connection with the
conduct of Tenant's business on the Premises, the amount of consideration
attributable to the Transfer of the Lease shall be reasonably determined by
Landlord.
15.5.1 Tenant shall only use such form of assignment as is
provided by Landlord, and once the completed assignment form has been approved
by Landlord, such assignment shall not be changed or modified without Landlord's
prior written consent.
15.6 Special Provisions Regarding Subletting. Regardless of Landlord's
consent, the following terms and conditions shall apply to any subletting by
Tenant of all or any part of the Premises, and shall be deemed included in all
subleases under this Lease, whether or not expressly incorporated therein:
15.6.1 Tenant immediately and irrevocably assigns to Landlord,
as security for Tenant's obligations under this Lease, all Rent from any
subletting of all or a part of the Premises as permitted by this Lease, and
Landlord, as assignee and as attorney-in-fact for Tenant, or a receiver for
Tenant appointed on Landlord's application, may collect such Rent and apply it
toward Tenant's obligations under this Lease; except that, until the occurrence
of an Event of Default by Tenant, Tenant shall have the right to collect such
Rent. Tenant hereby irrevocably authorizes and directs any such sublessee, upon
receipt of written notice from Landlord stating that an Event of Default exists,
to pay to Landlord the Rents due and to become due under the sublease. Tenant
agrees that such sublessee shall have the right to rely upon any such statement
and request from Landlord, and that such sublessee shall pay such Rents to
Landlord without any obligation or right to inquire as to whether such default
23
<PAGE>
exists, and notwithstanding any notice from or claim from Tenant to the
contrary. Tenant shall have no right or claim against said sublessee or Landlord
for any such Rents so paid by said sublessee to Landlord.
15.6.2 Tenant shall use only such form of sublease as is
provided by Landlord, and once the completed sublease form has been approved by
Landlord, the sublease shall not be changed or modified without Landlord's prior
written consent.
15.6.3 Upon the occurrence of an Event of Default by Tenant
under this Lease, Landlord, at its option and without any obligation to do so,
may require any sublessee to attorn to Landlord, in which event Landlord shall
undertake the obligations of Tenant under such sublease from the time of the
exercise of said option to the termination of such sublease; provided, however,
Landlord shall not be liable for any prepaid Rent or Security Deposit paid by
such sublessee to Tenant, or for any other prior defaults of Tenant under such
sublease.
15.6.4 With respect to any subletting to which Landlord has
consented, Landlord agrees to deliver a copy of any notice of default by Tenant
to the sublessee.
15.7 No Merger. No merger shall result from Tenant's sublease of the
Premises under this Article 15, Tenant's surrender of this Lease, or the
termination of this Lease in any other manner. In any such event, Landlord may
terminate any or all subtenancies or succeed to the interest of Tenant as
sublandlord thereunder.
15.8 Conditions Deemed Reasonable. Tenant acknowledges and agrees that
each of the rights of Landlord set forth in this Article 15 above in the event
of a proposed Transfer is a reasonable restriction on Transfer for purposes of
California Civil Code Section 1951.4.
15.9 Tenant's Remedy. Landlord shall have no liability to Tenant or to
any proposed transferee in damages if it is adjudicated that Landlord's consent
has been unreasonably withheld and such withholding of consent constitutes a
breach of this Lease or other duty to Tenant, the proposed transferee or any
other person on the part of Landlord. In such event, Tenant's sole remedy shall
be to have the proposed Transfer declared valid as if Landlord's consent had
been duly and timely given (although Tenant shall be entitled to reasonable
attorneys' fees if it is determined to be the prevailing party in such
litigation. Tenant hereby specifically waives its rights under California Civil
Code Section 1995.310 (and any successor provision) and agrees that the rights
of Tenant for failure of Landlord to consent to a Transfer shall be governed by
this Section 15.9.
15.10 Continuing Liability of Tenant. If Tenant's transferee defaults
pursuant to this Lease, Landlord may proceed directly against Tenant without
pursuing remedies against the transferee. Tenant agrees to defend, indemnify and
hold Landlord harmless with respect to all costs (including reasonable
attorneys' fees expended by Landlord in connection therewith) and liability for
compensation claimed by any broker or agent in connection therewith any Transfer
of Tenant's interest pursuant to this Lease.
ARTICLE 16 - DEFAULT
--------------------
16.1 Covenants and Conditions. Tenant's performance of each of Tenant's
obligations under this Lease is a condition as well as a covenant. Tenant's
right to continue in possession of the Premises is conditioned upon such
performance. Time is of the essence in the performance of all covenants and
conditions.
16.2 Defaults. The occurrence of any one or more of the following
events ("Event of Default") shall constitute a default and breach of this Lease
by Tenant: (i) use of the Premises for any purpose other than the Permitted Use;
(ii) the failure by Tenant to make any payment of Minimum Monthly Rent,
Additional Rent, or any other payment required to be made by Tenant hereunder,
as and when due, where such failure shall continue for a period of three (3)
days after written notice thereof from Landlord to Tenant; provided, however,
that any such notice shall be in lieu of, and not in addition to, any notice
24
<PAGE>
required under California Code of Civil Procedure Section 1161; (iii) Tenant's
abandonment of the Premises as defined in California Civil Code Section 1951.3;
(iv) Transfer of the Lease by Tenant, either voluntarily or by operation of law,
whether by judgment, execution, death or other means, without the prior written
consent of Landlord; (v) either (a) the making by Tenant of any general
arrangement or general assignment for the benefit of creditors; (b) the filing
by or against Tenant of a petition to have Tenant adjudged a bankrupt or a
petition for reorganization or arrangement under any law relating to bankruptcy
(unless, in the case of a petition filed against Tenant, the same is dismissed
within thirty (30) days); (c) the appointment of a trustee or receiver to take
possession of substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease, where possession is not restored to Tenant
within thirty (30) days; or (d) the attachment, execution or other judicial
seizure of substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease where such seizure is not discharged within
thirty (30) days. In the event that any provisions of this subparagraph (v) is
contrary to any applicable law, such provision shall be of no force or effect;
(vi) the failure by Tenant to observe or perform any of the express or implied
covenants or provisions of this Lease to be observed or performed by Tenant,
where such failure shall continue for a period of three (3) days after written
notice thereof from Landlord to Tenant; provided, however, that any such notice
shall be in lieu of, and not in addition to, any notice required under
California Code of Civil Procedure Section 1161; provided, further, that if the
nature of Tenant's default is such that more than three (3) days are reasonably
required for its cure, then Tenant shall not be deemed to be in default if
Tenant shall commence such cure within said three (3) day period and thereafter
diligently prosecute such cure to completion, which completion shall occur not
later than thirty (30) days from the date of such notice from Landlord; or (vii)
the discovery by Landlord that any financial statement given to Landlord by
Tenant, or its successors in interest, or by any guarantor of Tenant's
obligation hereunder, was materially false.
ARTICLE 17 - REMEDIES UPON DEFAULT
----------------------------------
17.1 Landlord Remedies. Landlord shall have the following remedies upon
the occurrence of any Event of Default. These remedies are not exclusive; they
are cumulative in addition to any remedies now or later allowed by law. Upon the
occurrence of an Event of Default, Landlord may at any time thereafter, with or
without notice or demand (except for any notice required by Article 16 above)
and without limiting Landlord in the exercise of any right or remedy which
Landlord may have by reason of such Event of Default, do any of the following:
17.1.1 Continue this Lease in effect so long as Landlord does
not terminate Tenant's right to possession and Landlord may enforce all of its
rights and remedies hereunder, including, at the option of Landlord: (i) the
right to declare the Term ended and with process of law to re-enter the Premises
and take possession thereof and remove all persons therefrom, and Tenant shall
have no further claim thereon or thereunder; or (ii) the right, without
declaring this Lease ended and with or without process of law, to re-enter the
Premises, take possession thereof, remove all persons therefrom and occupy or
lease the whole or any part thereof for and on account of Tenant and upon such
terms and conditions and for such Rent as Landlord may deem proper and to
collect said Rent or any other Rent that may thereafter become payable and apply
the same toward the amount due or thereafter to become due from Tenant and on
account of such expenses of such subletting and any other damages sustained by
Landlord; and should such Rent be less than that herein agreed to be paid by
Tenant, Tenant agrees to pay such deficiency to Landlord in advance on the day
of each month hereinabove specified for payment of Rent and to pay to Landlord
forthwith upon such reletting the costs and expenses Landlord may incur by
reason thereof; or (iii) the right, even though it may have relet said Premises
or brought an action to collect Rent and other charges without terminating this
Lease, to thereafter elect to terminate this Lease and all of the rights of
Tenant in or to the Premises; or (iv) the right, without terminating this Lease,
to bring an action or actions to collect Rent and other charges hereunder which
are from time to time past due and unpaid; it being understood that the bringing
of such an action or actions shall not terminate this Lease unless notice of
termination is given.
25
<PAGE>
17.1.2 Should Landlord relet the Premises under the provisions
of paragraph 17.1.1(ii) above, it may execute any such Lease in its own name or
in the name of Tenant, but Tenant hereunder shall have no right or authority
whatever to collect any Rent from such tenant. The proceeds of any such
reletting shall be first applied to the payment of the costs and expenses of
reletting the Premises, including alterations and repairs which Landlord, in its
sole discretion, deems reasonably necessary and advisable and reasonable
attorneys' fees incurred by Landlord in connection with the retaking of said
Premises and such reletting and, second, to the payment of any indebtedness,
other than Rent, due hereunder, including, without limitation, storage charges
or brokerage commissions owing from Tenant to Landlord. When such costs and
expenses of reletting have been paid, Tenant shall be entitled to a credit for
the net amount of Rent received from such reletting each month during such
unexpired balance of the Term and Tenant shall pay Landlord such sums as may be
required to make up the Rent provided for in this Lease. Landlord shall not be
deemed to have terminated this Lease, the Tenant's right to possession of the
leasehold or the liability of Tenant to pay Rent thereafter to accrue or its
liability for damages under any of the provisions hereof by any such reentry or
by any action in unlawful detainer or otherwise to obtain possession of the
Premises, unless Landlord shall have notified Tenant in writing that it has so
elected to terminate this Lease. Tenant covenants that the service by Landlord
of any notice pursuant to the unlawful detainer statutes of the State of
California and the surrender of possession pursuant to such notice shall not
(unless Landlord elects to the contrary at the time of or at any time subsequent
to the service of such notice and such election be evidenced by a written notice
to Tenant) be deemed to be a termination of this Lease or of Tenant's right to
possession thereof. Nothing herein contained shall be construed as obligating
Landlord to relet the whole or any part of the Premises.
17.1.3 Landlord can terminate Tenant's right to possession of
the Premises at any time. Acts of maintenance, efforts to relet the Premises, or
the appointment of a receiver on Landlord's initiative to protect Landlord's
interest under this Lease shall not constitute a termination of Tenant's right
to possession. On termination, Landlord has the right to recover from Tenant:
(i) the worth, at the time of the award, of the unpaid Rent that had been earned
at the time of termination of this Lease; (ii) the worth, at the time of the
award, of the amount by which the unpaid Rent that would have been earned after
the date of termination of this Lease until the time of award exceeds the amount
of the loss of Rent that Tenant proves could have been reasonably avoided; (iii)
the worth, at the time of the award, of the amount by which the unpaid Rent for
the balance of the Term after the time of award exceeds the amount of the loss
of Rent that Tenant proves could have been reasonably avoided; and (iv) any
other amount, including court costs and attorney's fees, necessary to compensate
Landlord for all detriment proximately caused by Tenant's default or defaults,
or which in the ordinary course of things would be likely to result therefrom,
including, but not limited to, any costs or expenses incurred by Landlord in (a)
retaking possession of the Premises, including reasonable attorneys' fees
therefore, (b) maintaining or preserving the Premises after such default, (c)
preparing the Premises for reletting to a new tenant, including repairs or
alterations to the Premises for such reletting, (d) leasing commissions, or (e)
any other costs necessary or appropriate to relet the Premises.
"The worth, at the time of award," as used in (i) and (ii) of this Section,
is to be computed by allowing interest at the maximum legal rate. "The worth, at
the time of the award," as referred to in (iii) of this Section, is to be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of the award, plus 1%.
17.1.4 Whenever Landlord shall re-enter the Premises as
provided in this Article, Landlord may remove any property of Tenant from the
Premises and store same elsewhere at the expense and for the account of Tenant,
and if Tenant shall fail to pay the cost of storing of such property after it
has been stored for a period of ninety (90) days or more, Landlord may sell any
or all of such property, in any lawful manner. In addition, upon the occurrence
of an Event of Default, all of Tenant's fixtures, furniture, equipment,
improvements, additions, alterations and other personal property shall remain on
the Premises, and in that event, and continuing during the length of said
default, Landlord shall have the right to take the exclusive possession of said
and to use same, Rent or charge free, until all defaults are cured or, at its
option, at any time during the Term, to require Tenant to forthwith remove same.
17.1.5 Upon the occurrence of an Event of Default, Landlord
shall have the right to have a receiver appointed to collect Rent and conduct
Tenant's business. Tenant also hereby agrees that Landlord shall have a lien for
payment for all Rent and Additional Rent called for under the terms of this
Lease upon all the furniture, furnishings, fixtures, supplies and all other
26
<PAGE>
personal property of Tenant which may be in or upon the Premises, Tenant hereby
specifically waiving any and all exemptions allowed by law. Such lien may be
enforced in any lawful manner, at the option of Landlord. Neither the filing of
a petition for the appointment of a receiver nor the appointment itself shall
constitute an election by Landlord to terminate this Lease.
17.1.6 Landlord, at any time after the occurrence of an Event
of Default, can cure the default at Tenant's cost. If Landlord at any time, by
reason of an Event of Default, pays any sum or does any act that requires the
payment of any sum, the sum paid by Landlord shall be due immediately from
Tenant to Landlord at the time the sum is paid, and if paid at a later date
shall bear interest at the Interest Rate from the date the sum is paid by
Landlord until Landlord is reimbursed by Tenant.
17.1.7 Nothing in this Article 17 affects the right of the
Landlord under this Lease to indemnification for liability arising prior to the
termination of the Lease for personal injuries or property damage, as set forth
under Article 7 hereof.
17.2 Jury Trial Waiver. Landlord and Tenant hereby waive their
respective right to trial by jury of any cause of action, claim, counterclaim or
cross-complaint in any action, proceeding and/or hearing brought by either
Landlord against Tenant or Tenant against Landlord on any matter whatsoever
arising out of, or in any way connected with, this Lease, the relationship of
Landlord and Tenant, Tenant's use and occupancy of the Premises or Common Areas,
or any claim of injury or damage, or the enforcement of any remedy under any
law, statute, or regulation, emergency or otherwise, now of hereafter in effect.
ARTICLE 18 - PROTECTION OF LENDERS AND TRANSFEREES
--------------------------------------------------
18.1 Subordination. Landlord shall have the right to subordinate this
Lease, and Tenant shall, at Landlord's request, subordinate its rights under
this Lease, to any existing or future ground lease, covenants, conditions and
restrictions, easements, rights of way or any construction, operation and
reciprocal easement agreements, deeds of trust or mortgages encumbering the
Premises, any advances made on the security thereof and any renewals,
modifications, consolidations, replacements or extensions thereof, whenever made
or recorded. However, Tenant's right to quiet possession of the Premises during
the Term shall not be disturbed if Tenant pays the Rent and performs all of
Tenant's obligations under this Lease and is not otherwise in default. If any
ground lessor, beneficiary or mortgagee elects to have this Lease prior to the
lien of its ground lease, deed of trust or mortgage, and gives written notice
thereof to Tenant, then this Lease shall be deemed prior to such ground lease,
deed of trust or mortgage, whether this Lease is dated prior or subsequent to
the date of said ground lease, deed of trust or mortgage or the date of
recording thereof.
18.2 Attornment. If Landlord's interest in the Premises is acquired by
any ground lessor, beneficiary under a deed of trust, mortgagee or purchaser at
a foreclosure sale, Tenant shall attorn to the transferee of or successor to
Landlord's interest in the Premises and recognize such transferee of or
successor as Landlord under this Lease, provided that the purchaser or lessor
shall acquire and accept the Premises subject to this Lease. Tenant waives the
protection of any statute or rule of law which gives or purports to give Tenant
any right to terminate this Lease or surrender possession of the Premises upon
the transfer of Landlord's interest.
18.3 Signing of Document. Tenant shall sign and deliver any instrument
or documents necessary or appropriate to evidence any such attornment or
subordination or agreement to do so provided that such interests or documents
recognize that Tenant's right to quiet possession of the Premises shall not be
disturbed so long as Tenant is not in default of its obligations pursuant to
this Lease beyond any applicable notice and cure period. If Tenant fails to do
so within ten (10) days after written request, Tenant hereby makes, constitutes
and irrevocably appoints Landlord, or any transferee or successor of Landlord,
the attorney-in-fact of Tenant to execute and deliver any such instrument or
document.
18.4 Estoppel Certificates. Upon Landlord's written request, Tenant
shall execute, acknowledge and deliver to Landlord a written statement
certifying: (i) that none of the terms or provisions of this Lease have been
changed (or if they have been changed, stating how they have been changed); (ii)
27
<PAGE>
that this Lease has not been canceled or terminated; (iii) the last date of
payment of the Minimum Monthly Rent and other charges and the time period
covered by such payment; (iv) the amount of any Minimum Monthly Rent or other
charges which have been paid in advance; (v) the commencement and termination
dates of the Term; (vi) that there has been no Transfer by Tenant of this Lease,
or any interest therein; and (vii) that there are not, to Tenant's knowledge,
any uncured defaults on the part of Landlord hereunder and that Tenant has no
right of offset, counterclaim or deduction against Rent, or specifying such
defaults, if any are claimed, together with the amount of any offset,
counterclaim or deduction alleged by Tenant. Tenant shall deliver such statement
to Landlord within ten (10) days after Landlord's written request. Any such
statement by Tenant may be given by Landlord to any prospective purchaser or
encumbrancer of the Premises. Such purchaser or encumbrancer may rely
conclusively upon such statement as true and correct.
If Tenant does not deliver such statement to Landlord within
such ten (10) day period, Landlord, and any prospective purchaser or
encumbrancer, may conclusively presume and rely upon the following facts: (i)
that the terms and provisions of this Lease have not been changed except as
otherwise represented by Landlord; (ii) that this Lease has not been canceled or
terminated except as otherwise represented by Landlord; (iii) Landlord's
statement of the last date of payment of the Minimum Monthly Rent and other
charges and the time period covered by such payment or payments; (iv) that not
more than one month's Minimum Monthly Rent or other charges have been paid in
advance; (v) the commencement and termination dates of the Term are as
represented by Landlord; (vi) that there is no Transfer by Tenant of this Lease
or any interest therein; and (vii) that Landlord is not in default under the
Lease. In such event, Tenant shall be estopped from denying the truth of such
facts.
18.5 Tenant's Financial Condition. Within ten (10) days after written
request from Landlord, Tenant shall deliver to Landlord such financial
statements as are reasonably required by Landlord to verify the net worth of
Tenant, or any assignee, subtenant, or guarantor of Tenant. In addition, Tenant
shall deliver to any lender designated by Landlord any financial statements
required by such lender to facilitate the financing or refinancing of the
Premises. Tenant represents and warrants to Landlord that each such financial
statement is a true and accurate statement as of the date of such statement. All
financial statements shall be confidential and shall be used only for the
purposes set forth herein.
ARTICLE 19 - COMMON AREAS
-------------------------
19.1 Common Areas. "Common Areas" shall mean all areas within and
around the Building, and the Project, if any, which are available for the common
use of tenants of the Building and which are not leased or held for the
exclusive use of Tenant or other tenants, including, but not limited to, parking
areas, driveways, sidewalks, loading areas, access roads, corridors, landscaping
and planted areas, stairways, arcades, elevators, escalators, directory
equipment, restrooms, common entrances, lobbies, passageways and serviceways
therefor, and the common pipes, conduits, wires and appurtenant equipment
serving the Building. Landlord may from time to time change the size, location,
nature and use of any of the Common Areas, including, but not limited to, the
relocation of driveways, entrances, exits, automobile parking spaces, the
direction and flow of traffic, installation of prohibited areas, landscaped
areas, converting Common Areas into leasable areas, constructing additional
parking facilities (including parking structures) in the Common Areas, and
increasing or decreasing Common Area land and/or facilities. Tenant acknowledges
that such activities may result in decreasing Common Area land and/or
facilities, and that such activities may result in occasional inconvenience to
Tenant. Landlord shall be responsible for keeping the Common Areas in a neat,
clean and orderly condition, properly lighted and landscaped, and shall repair
any damage to Common Area facilities. Notwithstanding Landlord's responsibility
for such Common Area maintenance, all expenses incurred in connection with the
operation, repair, cleaning and maintenance of the Common Areas shall be
included in Direct Expenses and charged and prorated in the manner set forth in
Article 4 of this Lease.
28
<PAGE>
19.2 Use of Common Areas. Landlord or such other person(s) as Landlord
may appoint shall have the exclusive control and management of the Common Areas.
Tenant, and its employees and invites, shall have the nonexclusive right (in
common with other tenants and all others to whom Landlord has granted or may
grant such rights) to use the Common Areas for the purposes intended, subject to
such reasonable rules and regulations as Landlord may establish from time to
time. Tenant shall abide by such rules and regulations and shall use its best
efforts to cause others who use the Common Areas with Tenant's express or
implied permission to abide by Landlord's rules and regulations. Notice of such
rules and regulations will be posted or given to Tenant. Tenant shall pay for
any increase in the property insurance premiums for the Common Areas caused by
Tenant's acts, omissions, use or occupancy of the Premises. Tenant shall not, at
any time, interfere with the rights of Landlord, other tenants or any other
person entitled to use the Common Areas. Landlord shall not be responsible to
Tenant or Tenant's employees, agents or invites, for the noncompliance of other
tenants with Landlord's rules and regulations or the interference with the
rights of Tenant by other tenants, their agents, employees or invites. Landlord
reserves the right from time to time without unreasonable interference with
Tenant's use: (i) to install, use, maintain, repair and replace pipes, ducts,
conduits, wires and appurtenant meters and equipment for service to other parts
of the Building or Common Areas above the ceiling surfaces, below the floor
surfaces, within the walls and in the central core areas, and to relocate any
pipes, ducts, conduits, wires and appurtenant meters and equipment included in
the Premises which are located in the Premises or located elsewhere outside the
Premises, and to expand the Building; To make changes to the Common Areas,
including, without limitation, changes in the location, size, shape and number
of driveways, entrances, parking spaces, parking areas, loading and unloading
areas, ingress, egress, direction of traffic, landscaped areas and walkways;
provided, however, Landlord shall at all times provide the parking facilities
required by applicable law. Landlord also reserves the right to modify the
lobbies, windows, stairways, air shafts, elevators and restrooms; (ii) to close
temporarily any of the Common Areas for maintenance purposes so long as
reasonable access to the Premises remains available; (iii) to designate other
land and improvements outside the boundaries of the Building or the Project, if
any, to be part of the Common Areas, provided that such other land and
improvements have a reasonable and functional relationship to the Building or
the Project; (iv) to use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Building, or any portion thereof;
and (v) to do and perform such other acts and make such other changes in, to or
with respect to the Common Areas and Building as Landlord may, in the exercise
of sound business judgment, deem to be appropriate.
19.3 Vehicle Parking. Tenant, its employees and concessionaires shall
not park in the areas which the Landlord may designate or redesignate as parking
for patrons of the Building. Landlord shall provide either within the Building
parking area or reasonably close thereto, space for employee parking, if such
parking space is available, as reasonably determined by Landlord. Landlord shall
have the right, but not the obligation, to designate parking areas for use by
Tenant's employees and concessionaires and such designation may be changed from
time to time. Tenant, its employees and concessionaires shall park their cars
only in such designated areas, if any are so designated. Said parking spaces
shall be used only for parking by vehicles no larger than normal size passenger
automobiles or pick-up trucks, or if so designated, for smaller vehicles. There
shall be no overnight parking in parking areas provided by Landlord without
Landlord's prior written consent. If Tenant permits or allows any of the
prohibited activities described in Section 19.3 of this Lease, then Landlord
shall have the right, without notice, in addition to such other rights and
remedies that it may have, to remove or tow away the vehicle involved and charge
the cost to Tenant, which cost shall be immediately payable upon demand by
Landlord. Landlord reserves the right at any time to substitute an equivalent
number of parking spaces in a parking structure or subterranean parking facility
or in a surface parking area within a reasonable distance of the Premises.
19.3.1 Tenant shall be entitled to the use of the number of
vehicle parking spaces set forth in Section 1.14 of the Fundamental Lease
Provisions, subject to monthly parking fees at a rate set by Landlord. Landlord
reserves the right to increase monthly parking rates from time to time in the
Landlord's sole discretion to such rates as Landlord determines. If the parking
facilities provide for automated card key access, Landlord shall have the right
to charge Tenant a security deposit in the amount of $25.00 for each parking
card key requested by Tenant. Landlord may assign any unreserved and unassigned
parking spaces and/or make all or a portion of such spaces reserved, if it
determines in its sole discretion that is necessary for orderly and efficient
parking. Tenant shall not use more parking spaces than the number set forth in
the Fundamental Lease Provisions. Tenant shall not permit or allow any vehicles
29
<PAGE>
that belong to or are controlled by Tenant or Tenant's employees, suppliers,
shippers, customers or invites to be loaded, unloaded or parked in areas other
than those designated by Landlord for such activities. Tenant agrees that
Landlord assumes no responsibility of any kind whatsoever in reference to said
automobile parking facilities or the use thereof by Tenant, its employees,
agents or surface, underground, multideck, and where they shall be located.
Landlord may, at any time, and from time to time, limit access to the parking
facilities by means of attendants and/or other devices, and make other changes
in the layout and operation of the parking facilities, including, without
limiting the generality of the foregoing, changes in locations of entrances,
exits and parking spaces. No delay or failure by Landlord to enforce its parking
rules and regulations or its other rights hereunder, and no waiver by Landlord
of any breach thereof, shall be deemed to be a waiver of any succeeding breach,
or prevent any subsequent or other enforcement thereof by Landlord. *SEE
ADDENDUM
ARTICLE 20 - PROFESSIONAL COSTS; CONSENTS
-----------------------------------------
20.1 Legal Costs. If either party incurs any costs or expenses in
connection with any action instituted by either party by reason of any dispute
pursuant to this Lease or for the recovery of any sum due under this Lease, or
because of the breach of any provisions of this Lease by either party, or for
any other relief pursuant to this Lease, or in the event of any other litigation
between the parties with respect to this Lease, then all costs and expenses,
including without limitation, its actual professional fees such as appraisers',
accountants, and attorneys' fees, incurred by the prevailing party therein shall
be paid by the other party, which obligation on the part of the other party
shall be deemed to have accrued on the date of the commencement of such action
or dispute and shall be enforceable whether or not the action is prosecuted to
judgment. Landlord and Tenant each agree to, and they hereby do waive, trial by
jury in any action, proceeding or counterclaim brought by either of the parties
hereto against the other on any matters whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, Tenant's use
or occupancy of the Premises and/or any claim of injury or damage, and any
statutory remedy. The provisions contained in this Section 20.1 shall survive
the expiration or earlier termination of this Lease, and in the event any action
or proceeding is instituted to recover possession of the Premises following the
expiration or earlier termination of this Lease, the provisions contained in
this Section 20.1 shall be applicable.
20.2 Landlord's Consent. Tenant shall pay all attorneys' fees incurred
by Landlord in connection with Tenant's request for Landlord's consent under
Article 15 (Restrictions On Transfer), or in connection with any other act which
Tenant proposes to do and which requires Landlord's consent, whether or not such
consent is granted. Tenant shall also reimburse Landlord for all costs,
including, without limitation, engineering and architect fees it incurs in
reviewing any remodeling, tenant improvement plans or other requests submitted
by Tenant, whether or not consent or approval is granted.
ARTICLE 21 - SIGNS
------------------
Tenant shall not place, erect or maintain any sign in or upon the
Premises which is visible from the exterior thereof or in or upon the Building
or the Project without Landlord's prior written consent and without compliance
with the provisions of Exhibit F.
ARTICLE 22 - LANDLORD'S BREACH - NOTICE
---------------------------------------
If Landlord fails to perform any covenant, condition or agreement
contained in this Lease within thirty (30) days after receipt of written notice
from Tenant specifying such failure (or if such failure cannot reasonably be
cured within 30 days, if Landlord does not commence to cure the failure within
that 30-day period), then such failure shall constitute a default hereunder and
Landlord shall be liable to Tenant for any damages sustained by Tenant as a
result of Landlord's default; provided, however, it is expressly understood and
agreed that if Tenant obtains a money judgment against Landlord resulting from
any default or other claim arising under this Lease, judgment shall be satisfied
only out of the rents, issues, profits and other income actually received on
30
<PAGE>
account of Landlord's right, title and interest in the Premises or Building, and
no other real, personal or mixed property of Landlord (or of the officers,
shareholders, directors, partners or principals of Landlord, if any) wherever
situated, shall be subject to levy, attachment or execution, or otherwise used
to satisfy any such judgment. Tenant hereby waives any right to satisfy a
judgment against Landlord except from the rents, issues, profits and other
income actually received on account of Landlord's right, title and interest in
the Premises or Building. Tenant shall not have the right to terminate this
Lease or to withhold, reduce or offset any amount against any payments of Rent
or any other charges due and payable under this Lease, except as otherwise
specifically provided herein.
Tenant agrees to send, by certified or registered mail to any mortgagee
or deed of trust beneficiary of the Building whose address has been furnished to
Tenant, a copy of any notice of default served by Tenant on Landlord. If
Landlord fails to cure such default within the time provided for in this Lease,
such mortgagee or beneficiary shall have an additional thirty (30) days to cure
such default; provided that if such default cannot reasonably be cured within
that thirty (30) day period, then such mortgagee or beneficiary shall have such
additional time to cure the default as is reasonably necessary under the
circumstances.
ARTICLE 23 - LATE CHARGES
-------------------------
Tenant's failure to pay Rent promptly may cause Landlord to incur
unanticipated costs, the exact amount of which are impractical or extremely
difficult to ascertain. Such costs may include, but are not limited to,
processing and accounting charges and late charges which may be imposed on
Landlord by any ground lease, mortgage or trust deed encumbering the property.
Therefore, if Landlord does not receive any Rent payment when due, Tenant shall
pay Landlord a late charge equal to the greater of One Hundred Dollars ($100),
or ten percent (10%) of the overdue amount. The parties agree that such late
charge represents a fair and reasonable estimate at the date of this Lease of
the administrative costs Landlord shall incur by reason of such late payment. In
addition, Tenant shall pay to Landlord, upon written notice thereof, all costs
incurred by Landlord for attorneys' fees in connection with the collection of
such Minimum Monthly Rent or Additional Rent.
Anything to the contrary in this Lease notwithstanding, Tenant hereby
agrees that if it fails to pay Minimum Monthly Rent, Additional Rent or any
other monetary obligation which Tenant is required to pay under this Lease when
due, for any two (2) consecutive months, or for any three (3) months in a
calendar year, Minimum Monthly Rent for the remaining Term shall automatically
be adjusted to be quarterly Rent, payable in advance, by cashier's check,
commencing upon the first day of the month following such consecutive late
month, or the third late month in a calendar year, and continuing thereafter for
the remaining Term. Time is strictly of the essence with respect to the
provisions of this paragraph.
ARTICLE 24 - INTEREST ON PAST-DUE OBLIGATIONS
---------------------------------------------
Any and all amounts owed by Tenant to Landlord which are not paid when
due shall bear interest at the rate of ten percent (10%) per annum from the due
date of such amount ("Interest Rate"). However, interest shall not be payable on
late charges incurred by Tenant. The payment of interest on such amounts shall
not excuse or cure any default by Tenant under this Lease. If the Interest Rate
is higher than the rate permitted by law, the Interest Rate is hereby decreased
to the maximum legal interest rate an individual is permitted to charge by law.
ARTICLE 25 - BUILDING PLANNING
------------------------------
In the event Landlord requires the Premises for use in conjunction with
another suite or for other reasons connected with the Building planning program,
upon sixty (60) days notice to Tenant in writing, Landlord shall have the right
to move Tenant to another space in the Building of which the Premises forms a
part, at Landlord's sole cost and expense, including all of Tenant's moving
expenses, telephone installation and stationery reprinting charges, and the
31
<PAGE>
terms and conditions of the original Lease shall remain in full force and
effect, save and excepting that a revised Exhibit B shall become part of this
Lease and shall reflect the location of the new space, and the Fundamental Lease
Provisions shall be amended to include and state all correct data as to the new
space. However, if the new space does not meet with Tenant's approval, Tenant
shall have the right to cancel said Lease upon giving Landlord thirty (30) days'
notice within ten (10) days of receipt of Landlord's notification. *SEE ADDENDUM
Landlord reserves to itself the right, from time to time, to grant such
easements, rights and dedications that Landlord deems necessary or desirable,
and to cause the recordation of parcel maps and restrictions, so long as such
easements, rights, dedications, maps and restrictions do not unreasonably
interfere with the use of the Premises by the Tenant. Tenant shall sign any of
the aforementioned documents upon request of Landlord. If Tenant fails to do so
within ten (10) days after written request, Tenant hereby makes, constitutes and
irrevocably appoints Landlord, or any transferee or successor of Landlord, the
attorney-in-fact of Tenant to execute and deliver any such instrument or
document.
ARTICLE 26 - NOTICES
--------------------
All notices required or permitted under this Lease shall be in writing
and shall be personally delivered or sent by certified mail, return receipt
requested, postage prepaid, by nationally or locally recognized overnight or
same day delivery service which provides for acknowledgment of delivery (i.e.,
Federal Express) or by telefacsimile ("FAX") machine capable of confirming
transmission and receipt. Notices to Landlord and Tenant shall be delivered to
the address set forth in Section 1.9 above. Either party may change its notice
address upon written notice to the other party, except that Landlord may in any
event use the Premises as Tenant's address for notice purposes after the
Commencement Date. A copy of all notices required or permitted to be given to
Landlord hereunder shall be concurrently transmitted to such party or parties at
such addresses as Landlord may, from time to time, hereafter designate by notice
to Tenant.
ARTICLE 27 - MODIFICATION FOR LENDER
------------------------------------
If, in connection with obtaining construction, interim or permanent
financing or refinancing for the Building, Landlord's lender shall request
reasonable modifications in this Lease as a condition to such financing, Tenant
will not unreasonably withhold, delay or defer its consent thereto, provided
that such modifications do not increase the obligations of Tenant hereunder or
materially and adversely affect the leasehold interest hereby created or
Tenant's rights hereunder.
ARTICLE 28 - CORPORATE AUTHORITY; PARTNERSHIP AUTHORITY
-------------------------------------------------------
If Tenant is a corporation, each person signing this Lease on behalf of
Tenant represents and warrants that he has full authority to do so and that this
Lease binds the corporation. Concurrently with the signature of this Lease by
Tenant, Tenant shall deliver to Landlord a certified copy of a resolution of
Tenant's Board of Directors authorizing the execution of this Lease or other
evidence of such authority reasonably acceptable to Landlord. If Tenant is a
partnership, each person signing this Lease for Tenant represents and warrants
that he is a general partner of the partnership, that he has full authority to
sign for the partnership and that this Lease binds the partnership. Concurrently
with Tenant's signature of this Lease, Tenant shall deliver to Landlord a copy
of Tenant's recorded statement of partnership or certificate of limited
partnership.
ARTICLE 29 - FORCE MAJEURE
--------------------------
The period for performance of any obligation by either party shall be
extended (except for Tenant's obligations to pay Minimum Monthly Rent,
Additional Rent and other charges due pursuant to this Lease, which obligations
shall not be extended) by the period of any delay in performance caused by an
act of God, labor strike, adverse weather conditions, shortage of materials,
32
<PAGE>
war, invasion, acts of a public enemy, governmental preemption in connection
with a national emergency, riot, laws, rules, regulations or order of
governmental or military authorities, or failure or defect in the supply,
quantity or character of utilities furnished to the Building or Premises
(collectively "Force Majeure Event"), excluding from all the foregoing,
financial inability.
ARTICLE 30 - BROKERS
--------------------
The parties recognize that the brokers who negotiated this Lease are
the brokers whose names are stated in Section 1.13 of the Fundamental Lease
Provisions, and agree that Landlord shall be solely responsible for the payment
of brokerage commissions to said brokers, and that Tenant shall have no
responsibility therefor. Tenant represents and warrants to Landlord that to
Tenant's knowledge no other broker, agent or finder negotiated or was
instrumental in negotiating or consummating this Lease, and that Tenant knows of
no other real estate broker, agent or finder who is, or might be, entitled to a
commission or compensation in connection with this Lease. Any broker, agent or
finder of Tenant whom Tenant has failed to disclose herein shall be paid by
Tenant. Tenant shall hold Landlord harmless from all damages and indemnify
Landlord for all said damages paid or incurred by Landlord resulting from any
claims that may be asserted against Landlord by any broker, agent or finder
undisclosed by Tenant herein.
ARTICLE 31 - SECURITY MEASURES
------------------------------
Tenant hereby acknowledges that Landlord shall have no obligation
whatsoever to provide guard service or other security measures for the benefit
of the Premises, Building, Common Areas or the Project. Tenant assumes all
responsibility for the protection of Tenant, its agents, employees and invitees,
and the property of Tenant, of the Tenant's agents, employees and invitees from
the acts of third parties. However, nothing herein contained shall prevent
Landlord, at Landlord's option, from providing security protection for the
Building or the Project, or any part thereof, in which event the cost thereof
shall be included within the definition of Direct Expenses.
ARTICLE 32 - LANDLORD'S RESERVATIONS
------------------------------------
Landlord shall have the following rights: (i) to change the name,
address or title of the Building or the Project; (ii) to permit any tenant the
exclusive right to conduct any business, as long as such exclusive right does
not conflict with any rights expressly given to Tenant herein; and (iii) to
place such signs, notices or displays as Landlord reasonably deems necessary or
advisable upon the roof, exterior of the Building or the Project, if any, or on
pole signs in the Common Areas. Landlord further reserves the absolute right to
effect such other tenancies in the Building as Landlord, in its sole business
judgment, determines best promotes the interests of the Building. Landlord does
not represent, and Tenant does not rely on the possibility, that any specific
tenant or number of tenants will occupy space in the Building during the Term.
ARTICLE 33 - MISCELLANEOUS PROVISIONS
-------------------------------------
33.1 Waiver. No delay or omission in the exercise of any right or
remedy of Landlord or Tenant shall impair such a right or remedy or be construed
as a waiver. The receipt and acceptance by Landlord of delinquent Rent shall not
constitute a waiver of any other default. No act or conduct of Landlord,
including, without limitation, the acceptance of the keys to the Premises, shall
constitute an acceptance of the surrender of the Premises by Tenant before the
expiration of the Term. Only a written notice from Landlord to Tenant shall
constitute acceptance of the surrender of the Premises and accomplish a
termination of the Lease. Landlord's consent to or approval of any act by Tenant
requiring Landlord's consent or approval shall not be deemed to waive or render
unnecessary Landlord's consent to or approval of any subsequent act by Tenant.
Any waiver by Landlord of any default must be in writing and shall not be a
waiver of any other default concerning the same or any other provision of the
Lease.
33
<PAGE>
33.2 Identification of Tenant. If more than one person executes this
Lease as Tenant, (a) each of them is jointly and severally liable for the
keeping, observing and performing of all of the terms, covenants, conditions,
provisions and agreements of this Lease to be kept, observed and performed by
Tenant, and (b) the term "Tenant" as used in this Lease shall mean and include
each of them jointly and severally and the act of or notice from, or notice or
refund to, or the signature of, any one or more of them, with respect to the
tenancy of this Lease, including, but not limited to, any renewal, extension,
expiration, termination or modification of this Lease, shall be binding upon
each and all of the persons executing this Lease as Tenant with the same force
and effect as if each and all of them had so acted or so given or received such
notice or refund or so signed. The term "Tenant" shall include legal
representatives, successors and assigns.
33.3 Identification of Landlord. The term "Landlord" as used in this
Lease, so far as covenants or obligations on the part of Landlord are concerned,
shall be limited to mean and include only the owner or owners at the time in
question of the fee of the Premises, and in the event of any transfer,
assignment or other conveyance or transfers of any such title or leasehold, the
Landlord hereunder named (and in case of any subsequent transfer or conveyances,
the then grantor) shall be automatically freed and relieved from and after the
date of such transfer, assignment or conveyance of all liability as respect the
performance of any covenants or obligations on the part of Landlord contained in
this Lease thereafter to be performed and, without further agreement, the
transferee of such title shall be deemed to have assumed and agreed to observe
and perform any and all obligations of the Landlord hereunder, during its
ownership of the Premises. Landlord may transfer its interest in the Premises
without the consent of Tenant, and such transfer or subsequent transfer shall
not be deemed a violation on Landlord's part of any of the terms and conditions
of this Lease.
33.4 Binding Effect. Each and all of the covenants, conditions and
restrictions in this Lease shall inure to the benefit of and shall be binding
upon the successors in interest of Landlord, and subject to the provisions of
Article 15, authorized encumbrancers, assignees, transferees, subtenants,
licensees, and other successors in interest of Tenant.
33.5 Non-Discrimination. Tenant covenants and agrees, and it is a
condition to the continuance of this Lease, that there will be no discrimination
against, or segregation of, any person or group of persons on the basis of race,
color, sex, creed, national origin or ancestry, in the leasing, subleasing,
transferring, occupancy, tenure or use of the Premises or any portion thereof.
33.6 Conflict of Laws and Choice of Jurisdiction. This Lease shall be
governed by and construed pursuant to the laws of the State of California. Any
litigation concerning this Lease between the parties hereto shall be initiated
in the California court having jurisdiction over the area where the Building is
located.
33.7 Severability. A determination by a court of competent jurisdiction
that any provision of this Lease or any part thereof is illegal or unenforceable
shall not cancel or invalidate the remainder of such provision or this Lease,
which shall remain in full force and effect. It is the intention of the parties
hereto that if any provision of this Lease is capable of two constructions, one
of which would render the provision void and the other of which would render the
provision valid, then the provision shall have the meaning which renders it
valid.
33.8 Interpretation. The captions of the articles and sections of this
Lease are to assist the parties in reading this Lease and are not a part of the
terms or provisions of this Lease. Whenever required by the context of this
Lease, the singular shall include the plural, and the plural shall include the
singular. The masculine, feminine and neuter genders shall each include the
other. The word "person" shall include corporations, firms, partnerships or
associations. In any provision relating to the conduct, acts or omissions of
Tenant, the term "Tenant" shall include Tenant's agents, employees, contractors,
invites, successors or others using the Premises with Tenant's expressed or
implied permission. It is also agreed that no specific words, phrases, or
clauses herein used shall be taken or construed to control, limit or cut down
the scope or meaning of any general words, phrases or clauses used in connection
therewith. Although the printed provisions of this Lease were drawn by Landlord,
this Lease shall not be construed either for or against Landlord or Tenant, as
this Lease has been prepared with the participation of both parties and both
parties have either been represented by attorneys or have had the opportunity
for such representation in the negotiation of its contents.
34
<PAGE>
33.9 Incorporation of Prior Agreements; Modifications. This Lease
contains all agreements of the parties with respect to any matter mentioned
herein. No prior or contemporaneous agreement or understanding pertaining to any
such matter shall be effective. This Lease may be modified in writing only,
signed by the parties in interest at the time of the modification. Except as
otherwise stated in this Lease, Tenant hereby acknowledges that neither the real
estate brokers identified in Section 1.13 of the Fundamental Lease Provisions,
nor any cooperating broker on this transaction, nor the Landlord, or any
employee or agents of any of said persons, has made any oral or written
warranties or representations to Tenant relative to the condition or use by
Tenant of the Premises or the Building, and Tenant acknowledges that Tenant
assumes all responsibility regarding the legal use and adaptability of the
Premises and the compliance thereof with all applicable laws and regulations in
effect during the Term.
33.10 Examination of Lease. Submission of this Lease for examination or
signature by Tenant does not constitute a reservation of or option for Lease,
and it is not effective as a Lease or otherwise until signature by and delivery
to both Landlord and Tenant.
33.11 Time. Time is of the essence with respect to the performance of
every provision of this Lease in which time or performance is a factor.
33.12 Accord and Satisfaction. No payment by Tenant or receipt by
Landlord of a lesser amount than the Rent payment 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 provided in this Lease.
33.13 Nonrecordation of Lease. Tenant shall not record this Lease or a
short form memorandum thereof.
33.14 Covenants and Conditions. All of the provisions of this Lease
shall be deemed as running with the land, and construed to be "conditions," as
well as "covenants," as though the words specifically expressing or imparting
covenants and conditions were used in each separate provision.
33.15 Negation of Partnership. Landlord shall not become or be deemed a
partner or joint venturer with Tenant by reason of the provisions of this Lease.
33.16 Consent of Landlord and Tenant. Wherever in this Lease consent or
approval is required from either party to any action by the other, such consent
or approval shall be given in writing and shall not be unreasonably withheld,
unless expressly provided otherwise in this Lease. Landlord shall not be deemed
to have withheld its consent unreasonably where Landlord's right to give its
consent is conditioned on Landlord obtaining the consent of any other person,
agency or authority having the right to withhold its consent pursuant to any
agreement or law, and such person, agency or authority does withhold its
consent. If Landlord or Tenant unreasonably fails to give any such consent, the
other party shall be entitled to specific performance in equity and shall have
such other remedies as are reserved to it under this Lease, but in no event
shall Landlord or Tenant be responsible in monetary damages for failure to give
such consent.
33.17 Lease Execution Date. This Lease shall become effective and
binding upon both parties upon the last date set forth below signifying
execution by the parties to this Lease.
35
<PAGE>
LANDLORD
PROPCO, LP,
a California limited partnership
By: Lomas Santa Fe Development
Corporation,
a California corporation
(General Partner)
DATE: 11-5-97 By: /s/ Samuel B. Williams
---------------------------------------
Name: Samuel B. Williams
Title: President
TENANT
BestWay USA,
a Nevada corporation
DATE: --------------- By: /s/ Bryant Cragun
---------------------------------------
Name: Bryant Cragun
Title: Chief Executive Officer
36
<PAGE>
Exhibit A
Site Plan
<PAGE>
Exhibit B
Floor Plan of the Premises
<PAGE>
Exhibit C
Tenant Improvement Agreement
(Tenant to Construct)
Landlord and Tenant are executing simultaneously with this Tenant
Improvement Agreement ("Agreement"), a written lease ("Lease") covering those
certain premises more particularly described in Exhibit B to the Lease
("Premises"), in the Building more particularly described in the Lease. Landlord
and Tenant agree that Tenant shall improve and prepare the Premises for Tenant's
occupancy, on the terms and conditions set forth in this Agreement. To induce
Landlord and Tenant to enter into the Lease and in consideration of the mutual
covenants hereinafter contained, Landlord and Tenant mutually agree as follows:
1. General. The purpose of this Agreement is to set forth how the
interior improvements in the Premises as set forth in the Construction
Documents, as defined below in Section 4 ("Tenant Improvements"), are to be
constructed, who will be responsible for the construction of the Tenant
Improvements, and the time schedule for the construction and completion of the
Tenant Improvements.
2. Defined Terms. Except as defined in this Agreement to the contrary,
all terms utilized in this Agreement shall have the same meaning as the defined
terms in the Lease.
3. Incorporation of Lease. The provisions of the Lease, except where
clearly inconsistent or inapplicable to this Agreement, are hereby incorporated
into this Agreement.
4. Tenant Improvement Plans. Tenant shall retain either a licensed
architect or space planner (hereinafter "Space Planner") to prepare a
preliminary space plan layout and improvement plans ("Space Plan") to be
utilized in the preparation of final working drawings and specifications for the
improvements to the Premises to be performed by Tenant ("Tenant Improvements")
as more particularly described below. Tenant's selection of Space Planner shall
be subject to the prior written approval of Landlord, which approval shall not
be unreasonably withheld or delayed.
5. Space Plan. If Tenant has not previously delivered a Space Plan to
Landlord prior to the date of this Agreement, Tenant shall, within ten (10)
business days after the date of this Agreement, deliver the Space Plan to
Landlord. The Space Plan shall show the configuration of the proposed Tenant
Improvements and contain a "finish schedule" and all information necessary for
Tenant to have the mechanical, electrical and engineering drawings (collectively
"Engineering Plans") prepared at Tenant's expense, the cost of which will be
deducted from the Tenant Improvement Allowance. Such information submitted as
part of the Space Plan shall be in sufficient detail to show locations, types
and requirements for all heat loads, people loads, floor loads, power and
plumbing, regular and special HVAC needs, telephone communications, telephone
and electrical outlets, lighting, light fixtures and related power, and
electrical and telephone switches. Landlord shall approve, or disapprove for
reasonable reasons, the Space Plan within five (5) business days after Landlord
receives the completed Space Plan and, if disapproved, Landlord shall return the
Space Plan to Tenant, who shall make all necessary revisions within five (5)
business days after Tenant's receipt thereof. This procedure shall be repeated
until Landlord ultimately approves the Space Plan. When approved, the Space
Plan, as modified, shall be deemed the "Final Preliminary Plans."
6. Engineering Plans. If required by applicable building regulations,
Tenant shall select as the mechanical and electrical engineer a qualified and
licensed company, experienced in Building tenant improvements in San Diego
County, California,("Engineer") to prepare Engineering Plans based on the Final
Preliminary Plans. Tenant's selection of the Engineer shall be subject to the
prior written approval of Landlord, which approval will not be unreasonably
withheld or delayed. For purposes of the preparation of the Engineering Plans,
the Engineer may assume that the Final Preliminary Plans are precise, correct
and in compliance with applicable laws and codes. Upon completion of the
Engineering Plans, they will be submitted to Landlord and Space Planner for
approval. Landlord shall approve, or disapprove for reasonable reasons, the
Engineering Plans within five (5) business days after Landlord receives the
Engineering Plans and, if disapproved, return the Engineering Plans to Tenant
1
<PAGE>
who shall cause the Engineer to make all necessary revisions within five (5)
business days after Landlord's receipt thereof. This procedure shall be repeated
until Landlord ultimately approves the Engineering Plans. When approved, the
Engineering Plans, as modified, shall be deemed the "Final Engineering Plans".
7. Construction Documents. Within ten (10) business days following
Landlord's approval of the Final Preliminary Plans and the Final Engineering
Plans (if any), Tenant shall cause Space Planner to prepare final plans and
specifications ("Final Tenant Plans") for completion of the Tenant Improvements.
Tenant shall then deliver two (2) complete sets of the Final Tenant Plans to
Landlord. Landlord shall approve, or disapprove for reasonable reasons, the
Final Tenant Plans within five (5) business days after Landlord receives the
Final Tenant Plans and, if disapproved, Landlord shall return the Final Tenant
Plans to Tenant who shall cause Space Planner to make all necessary revisions
within five (5) business days after Tenant's receipt thereof. This procedure
shall be repeated until Landlord ultimately approves the Final Tenant Plans.
When approved, the Final Tenant Plans, as modified, shall be deemed the
"Construction Documents". No construction of the Tenant Improvements shall
commence until the Final Tenant Plans have been so approved by Landlord. Any and
all costs incurred by Tenant in the preparation of the Construction Documents
shall be deducted from the Tenant Improvement Allowance set forth below in
Section 6. All deliveries of the Space Plan, Final Preliminary Plans, and Final
Tenant Plans shall be delivered by messenger service, by personal hand delivery
or by overnight parcel service.
8. Landlord's Approval of Plans. Tenant specifically acknowledges that
although Landlord has the right to approve the Space Plan, Final Preliminary
Plans, Final Engineering Plans, and Final Tenant Plans, Landlord's sole interest
in doing so is to protect the Building and Landlord's interests. Accordingly,
Tenant shall not rely upon Landlord's approvals and Landlord shall not be the
guarantor of, nor responsible for, the correctness or accuracy of any such Space
Plan, Final Preliminary Plans, Final Engineering Plans or Final Tenant Plans, or
the compliance thereof with applicable laws, and Landlord shall incur no
liability of any kind by reason of granting such approvals.
9. Approvals/Fees/Compliance with Laws. Promptly following Landlord's
approval of the Construction Documents, Tenant shall apply, at Tenant's sole
cost and expense, for all governmental approvals ("Approvals") required for
construction of the Tenant Improvements. Upon receipt of the Approvals,
Contractor (defined below) shall commence construction of the Tenant
Improvements. Tenant's failure to commence such construction within thirty (30)
days of Tenant's receipt of the Approvals shall constitute a material default
under this Agreement and shall entitle Landlord to terminate this Agreement and
the Lease. In addition, Tenant shall, at Tenant's sole cost and expense, be
responsible for the payment of (i) all "impact fees" or exactions which may be
imposed or assessed as a condition to the issuance of the building permit or
other approvals necessary for the construction of the Tenant Improvements; and
(ii) all utility hook-up fees and meter setting fees for water, sewer, gas,
electric, telephone and any other utility facilities necessary for Tenant's use
of the Premises; provided however, Tenant may, upon written notice to Landlord,
request that all of the foregoing expenses be deducted from the Tenant
Improvement Allowance. Tenant acknowledges that Tenant shall be solely
responsible for investigation of all requirements necessary for obtaining a
building permit for the Tenant Improvements, including, without limitation, all
requirements for the payment of impact fees and exactions and utility fees and
hook-up charges. Tenant shall undertake all steps necessary to insure that the
construction of the Tenant Improvements is accomplished in strict compliance
with all state or local laws, ordinances, rules and regulations applicable to
such construction and the requirements and standards of any insurance
underwriting board, inspection bureau or insurance carrier insuring the Premises
pursuant to the Lease.
10. Construction. Tenant shall employ an outside contractor or
contractors of Tenant's choice ("Contractor") to construct the Tenant
Improvements in substantial conformance with the Construction Documents;
provided, however, that the Contractor and construction contracts between Tenant
and Contractor and Tenant's subcontractors shall be subject to Landlord's prior
written approval (which approval shall not be unreasonably withheld or delayed),
and provided further, that the Contractor and the performance of the work shall
be subject to the following conditions:
2
<PAGE>
11. Licensing Requirements/Experience. Contractor shall be duly
licensed and experienced in the construction of tenant improvements in similar
retail premises.
12. Notice of Commencement. Tenant or Contractor shall provide Landlord
with at least five (5) days prior written notice of commencement of construction
so that Landlord may post appropriate Notices of Non-responsibility within the
Premises.
13. Insurance - OSHA Compliance. In addition to the requirements of the
Lease, and without any limitation thereof, Contractor and each subcontractor
retained by Tenant or by Contractor shall, with respect to the work to be
performed by Contractor or each such subcontractor, (a) comply with all
governmental rules and regulations, including applicable OSHA standards, and (b)
carry Builder's Risk insurance, workers' compensation and public liability
insurance (including property damage), with limits and in a form approved in
advance by Landlord and issued by insurance companies approved in advance by
Landlord. With the exception of Worker's Compensation insurance, Landlord shall
be named as an additional insured on each policy. Prior to commencement of the
Tenant Improvements, Tenant and/or Contractor shall deliver to Landlord
certificates evidencing all of the foregoing insurance coverage together with
endorsements evidencing that Landlord has been added as an additional insured.
14. Contractor's Warranty. Tenant shall ensure that Contractor and each
subcontractor used by Contractor to perform work hereunder, shall guarantee that
the portion thereof for which he is responsible, or which he performs, shall be
free from any defects in workmanship and materials for a period of not less than
one (1) year from the date of completion of the Tenant Improvements. The
correction of such work shall include, without limitation, all expenses and
corrections to or in connection with the structure, of which the Tenant
Improvements are part, or any common area, should such structure or common area
be damaged or affected by such defective work or by the repair or replacement of
such defective work. All such warranties or guarantees as to materials or
workmanship with respect to the Tenant Improvements shall be contained in
Tenant's agreement with the Contractor, and Tenant shall require Contractor to
include such warranties or guarantees in each subcontract, and all such
warranties or guarantees shall be so written so that same shall inure to the
benefit of both Tenant and Landlord, as their respective interests may appear.
Tenant hereby covenants to give to Landlord any assignment or other assurance
necessary to perfect the right to direct enforcement by Landlord.
15. Material Storage. Contractor and each subcontractor retained by
Tenant or by Contractor shall obtain prior written approval from Landlord to use
any space outside of the Premises and within the Building to use for storage,
handling, or moving of materials or equipment.
16. Debris Removal. Contractor and each subcontractor retained by
Tenant, or by Contractor, shall remove and dispose of, at least once a week or
more frequently as Landlord may direct, or as shall be required by OSHA
standards or other applicable laws or regulations, all debris and rubbish caused
by, or resulting from, or related to, the Tenant Improvements, and upon
completion of such Tenant Improvements, shall remove all temporary structures,
surplus materials, debris and rubbish remaining within the Building, which has
been brought in or created by or in connection with the same. If Contractor or
any subcontractor shall neglect, refuse, or fail to remove any such debris,
rubbish, surplus material or temporary structures within five (5) calendar days
after notice to Tenant from Landlord, Landlord may remove or cause same to be
removed, and Tenant shall bear the expense of removal and hold Landlord harmless
therefor.
17. Bond. Landlord shall have the right, in Landlord's sole discretion,
to require Tenant to furnish a bond or other security, in form satisfactory to
Landlord, to assure the prompt, complete and faithful performance of the Tenant
Improvements.
3
<PAGE>
18. Landlord's Inspection Rights. Landlord or Landlord's agents shall
have the right to inspect the construction work to be conducted by Tenant during
the progress thereof, it being the intent of the parties hereto that Landlord
shall be reasonable in its inspection of the construction work conducted by
Tenant and that Landlord shall recognize, to the extent commercially reasonable
and practicable, the necessity of field changes based on field conditions. If
Landlord shall give notice to Tenant of faulty construction or any other
deviation from the Construction Documents, Tenant shall cause Contractor to
promptly make corrections. However, neither the privilege herein granted to
Landlord to make such inspections, nor the making of such inspections by
Landlord, shall operate as a waiver of any rights of Landlord to require good
and workmanlike construction and improvements erected in accordance with the
Construction Documents.
19. Notice of Completion. Tenant shall give Landlord at least five (5)
working days prior written notice of the anticipated completion date of the
Tenant Improvements. As a condition precedent to Landlord's approval, Tenant
shall be required to settle and/or bond against any mechanic's or materialman's
liens, or other similar liens, filed against the Premises and/or the Building a
result of the Tenant Improvements in accordance with the provisions relating to
such liens in the Lease. Tenant shall further reimburse Landlord in full, and
indemnify, defend and hold Landlord harmless from and against, any liability,
cost or expenses incurred by Landlord in connection with any such liens. Tenant
shall, within ten (10) working days after completion of the Tenant Improvements,
execute and record a Notice of Completion with respect thereto, in a form
complying with the applicable provisions of the California Civil Code (and in
particular specifying the name of Contractor and the kind of work done and/or
materials furnished under the construction contract), and shall furnish a copy
thereof to the Landlord promptly following recordation in the Official Records
of the San Diego County Recorder.
20. Tenant Improvement Allowance. Landlord will pay an amount equal to
Zero ($00.00); Tenant to pay all Tenant Improvement costs ("Tenant Improvement
Allowance") toward the cost of the design, permitting and fees (only to the
extent set forth herein) and construction of the Tenant Improvements and for no
other purpose. Landlord shall make payments to Tenant from the Tenant
Improvement Allowance only in progress payments not more frequently than once
per month and only after receipt by Landlord of unconditional mechanics' lien
releases and receipted bills marked "paid" (which mechanics' lien releases
shall, at Landlord's option, be executed by subcontractors, labor suppliers and
materialmen, as reasonably determined by Landlord, in addition to Contractor).
Landlord shall also withhold ten percent (10%) of the Tenant Improvement
Allowance until the lien-free expiration of the time for the filing of any
mechanics' liens claimed or which might be filed on account of any work ordered
by Tenant or Contractor or any subcontractor of Tenant. Upon completion of the
Tenant Improvements, Tenant shall provide Landlord with a copy of the recorded
Notice Of Completion as provided in Section 19 above. All retention required
under Tenant's contract with Contractor shall be included within the ten percent
(10%) retention provided for herein. In the event the cost of construction of
the Tenant Improvements exceeds the available amount of the Tenant Improvement
Allowance, Tenant shall pay such excess cost to Landlord within ten (10)
business days after Tenant's execution of the construction contract with
Contractor, which amount shall be disbursed by Landlord prior to the
disbursement of any portion of the Tenant Improvement Allowance.
21. Engineering. The cost of all electrical, mechanical, and structural
engineering, including all permits, licenses, and fees relative to the
construction of the Tenant Improvements (including, without limitation, the fees
identified in Section 4 above) shall be paid by Tenant, but may be deducted from
the Tenant Improvement Allowance.
22. Change Orders. In the event that Tenant requests (in writing) any
changes to the Construction Documents (each being a "Change Order"), Landlord
shall not unreasonably withhold its consent to any such Change Order, provided
the Change Order does not affect the structure, systems, equipment or appearance
of the Premises or the Building. If such Change Orders, as approved by Landlord,
increase the cost of constructing the Tenant Improvements in excess of the
Tenant Improvement Allowance, Tenant shall pay such increased costs at the time
of Landlord's approval of such Change Order.
23. Construction Materials. Tenant will utilize, for the construction
of the Tenant Improvements, the items and materials specified in the
Construction Documents. However, whenever Tenant determines in its reasonable
judgment that it is not practical or efficient to use such materials, Tenant
4
<PAGE>
shall have the right, upon receipt of prior written approval of Landlord, which
approval will not be unreasonably withheld or delayed, to substitute comparable
items and materials.
24. Landlord's Fee. Landlord shall be paid a fee in connection with
Landlord's obligations set forth in Section 2 with respect to reviewing and
approving the design and construction of the Tenant Improvements for the
Premises in the amount equal to Five Percent (5%) of the total cost of the
Tenant Improvements which amount shall be deducted from the Tenant Improvement
Allowance.
25. Prompt Construction/General Responsibility for Costs. Tenant shall
instruct Contractor to build the Tenant Improvements as soon as reasonably
possible. Since Landlord's sole economic responsibility is to pay the Tenant
Improvement Allowance, all of the Tenant Improvements shall be designed and
constructed at Tenant's sole and entire cost, with Landlord being obligated only
to disburse the Tenant Improvement Allowance pursuant to the terms of this
Agreement.
26. Description of the Tenant Improvements. The Tenant Improvements
shall include, but shall not be limited to, the purchase, installation and
performance of the following: Permanently affixed interior improvements
including demising walls, carpet, paint, electrical and lighting outlets and
fixtures.
27. Default. Any default by Tenant under the terms of this Agreement
shall constitute a default under the Lease and shall entitle Landlord to
exercise all remedies set forth in the Lease. Tenant shall have any and all
rights to remedy such default pursuant to the provisions of the Lease.
28. Reasonable Diligence. Both Landlord and Tenant agree to use
reasonable diligence in performing all of their respective obligations and
duties under this Agreement and in proceeding with the construction and
completion of the Tenant Improvements.
29. Conflicts. In the event of any conflict between the terms of this
Agreement and the Lease, the terms of this Agreement shall control.
LANDLORD
PROPCO, LP,
a California limited partnership
By: Lomas Santa Fe Development
Corporation,
a California corporation
(General Partner)
DATE: 11-5-97 By: /s/ Samuel B. Williams
---------------------------------------
Name: Samuel B. Williams
Title: President
TENANT
BestWay USA,
a Nevada corporation
DATE: 10/20/97 By: /s/ Bryant Cragun
---------------------------------------
Name: Bryant Cragun
Title: Chief Executive Officer
5
<PAGE>
Exhibit D
Guaranty of Lease
(Intentionally Omitted)
<PAGE>
Exhibit E
Rules and Regulations
1. Except as specifically provided in Article 21 of the Lease to which
these Rules and Regulations are attached, no sign, placard, picture,
advertisement, name or notice shall be installed or displayed on any part of
Premises without the prior written consent of Landlord if visible from outside
the Premises. Landlord shall have the right to remove, at Tenant's expense and
without notice, any sign installed or displayed in violation of this rule. All
approved signs or lettering on doors and walls shall be printed, painted,
affixed or inscribed at the expense of Tenant by a person approved by Landlord.
If Landlord objects in writing to any curtains, blinds, shades, screens or
hanging plants or other similar objects attached to or used in connection with
any window or door of the Premises, or placed on any windowsill, which is
visible from the exterior of the Premises, Tenant shall immediately discontinue
such use. Tenant shall not install or permit to be installed in the Premises any
food vending or similar machines for the dispensing of food or beverages without
Landlord's prior written consent. Tenant shall not use a representation
(photographic or otherwise) of the Building or the Project, if any, or their
name(s) in connection with Tenant's business, without Landlord's prior consent.
2. All cleaning and janitorial services for the Building and the
Premises shall be provided exclusively through Landlord, and except with the
prior written consent of Landlord, no person or persons other than those
approved by Landlord shall be employed by Tenant or permitted to enter the
Building for the purpose of cleaning the same.
3. Landlord will furnish Tenant, free of charge, with two keys to each
door lock in the Premises. Landlord may impose a reasonable charge for any
additional keys. Tenant shall not make or have made additional keys, and Tenant
shall not alter any lock or install a new additional lock or bolt on any door of
its Premises. Tenant, upon the termination of its tenancy, shall deliver to
Landlord the keys of all doors which have been furnished to Tenant, and in the
event of loss of any keys so furnished, shall pay Landlord therefor.
4. If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain, and comply with, Landlord's instruction in
their installation.
5. The Building freight elevator(s) (if any) shall be available for use
by all tenants in the Building, subject to such reasonable scheduling as
Landlord, in its discretion, shall deem appropriate. No equipment, materials,
furniture, packages, supplies, merchandise or other property will be received in
the Building or carried in the elevators except between such hours and in such
elevators as may be designated by Landlord. Tenant's initial move in and
subsequent deliveries of bulky items, such as furniture, safes and similar items
shall, unless otherwise agreed in writing by Landlord, be made during the hours
of 6:00 P.M. and 6:00 A.M. or on Saturday or Sunday. Deliveries during normal
office hours shall be limited to normal office supplies and other small items.
No deliveries shall be made which impede or interfere with other tenants or the
operation of the Building.
6. Tenant shall not place a load upon any floor of the Building or
Premises which exceeds the load per square foot which such floor was designed to
carry and which is allowed by law. Heavy objects shall, if considered necessary
by Landlord, stand on such platforms as determined by Landlord to be necessary
to properly distribute the weight, which platforms shall be provided at Tenant's
expense. The persons employed to move such equipment in or out of the Project
must be acceptable to Landlord. Landlord will not be responsible for loss of, or
damage to, any such equipment or other property from any cause, and all damage
done to the Project by maintaining or moving such equipment or other property
shall be repaired at the expense of Tenant.
1
<PAGE>
7. Tenant agrees to cooperate fully with Landlord to assure the most
effective operation of the Building's heating and air-conditioning and to comply
with any governmental energy-saving rules, laws or regulations of which Tenant
has actual notice.
8. Landlord reserves the right to exclude from the Building between the
hours of 6 P.M. and 7 A.M. or such other hours as may be established from time
to time by Landlord, and on Sundays and Legal Holidays, any person unless that
person is known to the person or employee in charge of the Building and has a
pass or is properly identified. Tenant shall be responsible for all persons for
whom it requests passes and shall be liable to Landlord for all acts of such
persons. Landlord shall not be liable for damages for any error with regard to
the admission to or exclusion from the Building of any person.
9. The toilet rooms, toilets, urinals, wash bowls and other apparatus
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be thrown
therein. The expense of any breakage, stoppage or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose employees or
invitees, shall have caused it.
10. Tenant shall not sell, or permit the sale at retail, of newspapers,
magazines, periodicals, theater tickets or any other goods or merchandise to the
general public in or on the Premises. Tenant shall not make any room-to-room
solicitation of business from other tenants in the Project. Canvassing,
soliciting and distribution of handbills or any other written material, and
peddling in the Project are prohibited, and Tenant shall cooperate to prevent
such activities.
11. Tenant shall not install any radio or television antenna,
loudspeaker or other devices on the roof or exterior walls of the Project nor
shall Tenant install any exterior lighting, amplifiers or similar devices or use
in or about the Premises any advertising medium which may be heard or seen
outside the Premises, such as flashing lights, searchlights, loudspeakers,
phonographs or radio broadcasts. Tenant shall not interfere with radio or
television broadcasting or reception from or in the Project or elsewhere.
12. Tenant shall not mark, drive nails, screw or drill into the
partitions, woodwork or plaster or in any way deface the Premises or any part
thereof, except in accordance with normal decorating practices. Landlord
reserves the right to direct electricians as to where and how telephone and
telegraph wires are to be introduced to the Premises. Tenant shall not cut or
bore holes for wires. Tenant shall not affix any floor covering to the floor of
the Premises in any manner except as approved by Landlord. Tenant shall repair
any damage resulting from noncompliance with this rule.
13. Tenant shall store all its trash and garbage within its Premises or
in other facilities provided by Landlord. Tenant shall not place in any trash
box or receptacle any material which cannot be disposed of in the ordinary and
customary manner of trash and garbage disposal. All garbage and refuse disposal
shall be made in accordance with directions issued from time to time by
Landlord.
14. The Premises shall not be used for the storage of merchandise held
for sale to the general public, or for lodging or for manufacturing of any kind,
nor shall the Premises be used for any improper, immoral or objectionable
purpose. No cooking shall be permitted on the Premises without Landlord's
consent, except that use by Tenant of Underwriters' Laboratory approved
equipment for brewing coffee, tea, hot chocolate and similar beverages or use of
microwave ovens for employee use shall be permitted, provided that such
equipment and use is in accordance with all applicable federal, state, county
and city laws, codes, ordinances, rules and regulations.
15. Landlord may waive any one or more of these Rules and Regulations
for the benefit of Tenant or any other tenant, but no such waiver by Landlord
shall be construed as a waiver of such Rules and Regulations in favor of Tenant
or any other tenant, nor prevent Landlord from thereafter enforcing any such
Rules and Regulations against any or all of the tenants of the Building or
Project. Landlord reserves the right to make such other and reasonable and
nondiscriminatory Rules and Regulations as, in its judgment, may from time to
time be needed for safety and security, for care and cleanliness of the Project
and for the preservation of good order therein.
2
<PAGE>
Exhibit F
Sign Criteria
Tenant shall be entitled to one (1) Building Standard identification
sign on the exterior of the Premises and one (1) strip on the Building Directory
Sign. All signage shall be prepared by Landlord's sign contractor and shall be
at Tenant's sole cost and expense.
<PAGE>
Exhibit G
IRREVOCABLE LETTER OF CREDIT
DATE: ____________________, 19__
TO: __________________________
Letter of Credit No. Amount Expiration Date
We hereby establish our irrevocable letter of credit in your favor for the
account of:
available by your drafts drawn at SIGHT on _____________________ for any sum or
sums not exceeding a total of ____________________ Dollars ($__________) as more
specifically outlined below:
1. We undertake to honor your drafts when accompanied by a signed statement
certified by ________________________________, a ___________________ (or
its assignee, successor, or transferee) that
______________________________________ is in default of the executed on
______________________________ between yourself as Lessor and
___________________ as Lessee.
2. All drafts under this letter of credit must be marked "Drawn under
letter of credit of ____________________________ Bank No. _______________,
dated ____________________, 19__.
3. We undertake to automatically renew this letter of credit each year
until we have received written instructions from you to cancel this letter
of credit provided that this obligation to automatically renew shall not
extend beyond three (3) years from the date hereof. If for any reason
whatsoever a renewal is not made, we will notify you not less than thirty
(30) days prior to expiration of the letter of credit.
4. This letter of credit may be drawn upon in whole or part.
This credit is subject to the Uniform Customer and Practice for Documentary
Credits (1983 Revisions), International Chamber of Commerce Publication No. 400.
LOMAS SANTA FE CORPORATE CENTER II
ADDENDUM TO LEASE
This Addendum to Lease ("Addendum") is made to the Lease dated as of
October 20, 1997 ("Lease"), by and between PROPCO, LP, a California limited
partnership ("Landlord") and BestWay USA, a Nevada corporation ("Tenant").
Landlord and Tenant hereby agree that notwithstanding anything contained in
the Lease to the contrary, the provisions set forth below shall be deemed to be
a part of the Lease and shall supersede, to the extent appropriate, any contrary
provision in the Lease. All references in the Lease and in this Addendum to
"Lease" shall be construed to mean the Lease as amended and supplemented by this
Addendum. All capitalized terms used in this Addendum unless specifically
defined in this Addendum shall have the same meaning as the terms used in the
Lease.
AGREEMENT
1. Term (Section 1.06). The first and second sentences of Section 1.6 are
deemed replaced with the following:
The Term shall be Sixty (60) full calendar months commencing upon the
earlier of the following ("Commencement Date") (i) ninety (90) days
following the date of this Lease and (ii) the date on which the Tenant
Improvements have been substantially completed as evidenced by
Tenant's receipt of the City of Solana Beach building inspection
department's final approval of the Tenant Improvements to be
constructed by Tenant within the Premises as described on Exhibit C
attached to and made a part of this Lease and Tenant's telephone
system is operational.
Furthermore, the following is deemed added to Section 1.06 of the Lease:
Landlord hereby grants to Tenant one (1) option ("Renewal Option") to
extend the initial Term of this Lease for a period of five (5) years
("Renewal Term"). The Renewal Option must be exercised, if at all, by
written notice ("Option Notice") delivered by Tenant to Landlord not
later than six (6) months prior to the end of the initial Term.
Further, the Renewal Option shall not be deemed to be properly
exercised if, as of the date of the Option Notice or at the end of the
initial Term, Tenant (i) is in default under the Lease, (ii) has
assigned all or any portion of this Lease or its interest therein or
(iii) has sublet all or any portion of the Premises. Provided Tenant
has properly and timely exercised the Renewal Option, the initial Term
shall be extended by the Option Term, and all terms, covenants and
conditions of the Lease shall remain unmodified and in full force and
effect, except that the Minimum Monthly Rent shall be modified as set
forth below.
1
<PAGE>
The Minimum Monthly Rent payable for the Option Term shall be the fair
market rental value of the Premises, as determined herein. Landlord
shall determine fair market rental value by using its best good faith
judgment in accordance with the criteria set forth below. As used
herein, "fair market rental value" shall mean the projected prevailing
market rental rates and other generally applicable economic terms and
conditions which a willing, comparable, new non-renewal, non-equity
tenant would pay, and which a willing landlord of a comparable office
in the immediate market area of the Building would accept, projected
to be paid as of the commencement of the Option Term for similar
office space (improved with tenant improvements of substantially
similar age, quality then existing in the Premises) situated in office
buildings located in the immediate market area of the Building, taking
into account items that professional real estate brokers customarily
consider, including but not limited to, rental rates, office space
availability, tenant size, tenant improvement allowances over building
standard, free rent and any other concessions projected to be offered
for such similar office space as of such date. Landlord shall use its
best efforts to provide written notice of such amount not later than
three (3) months prior to the expiration of the initial Term. Tenant
shall have ten (10) days ("Tenant's Review Period") after receipt of
Landlord's notice of the fair market rental value within which to
accept such fair market rental value or to reasonably object thereto
in writing. In the event Tenant objects to the fair market rental
value submitted by Landlord, Landlord and Tenant shall attempt in good
faith to agree upon such fair market rental value, using their best
good faith efforts. If Landlord and Tenant fail to reach agreement on
2
<PAGE>
such fair market rental value within fifteen (15) days following
Tenant's Review Period (the "Outside Agreement Date"), then the Option
Notice shall have no effect and this Lease shall expire at the end of
the initial Term. Neither party shall have the right to have a court,
arbitrator, or other third party set the Minimum Monthly Rent for the
Option Term. Notwithstanding the foregoing, in no event shall the
Minimum Monthly Rent for the Option Term be less than the scheduled
Minimum Monthly Rent payable by Tenant during the calendar month
immediately preceding the commencement of the Option Term.
2. Security Deposit (Section 1.10). The following shall be added to the
Security Deposit Section 1.10 of the Lease:
Upon execution of this Lease, Tenant shall deliver to Landlord an
unconditional and irrevocable letter of credit ("Letter of Credit"),
in favor of Landlord, in a form substantially the same as Exhibit G
which is attached hereto, for the principal sum totaling Fifty
Thousand Dollars ($50,000.00) which Tenant shall maintain and keep in
force until the expiration of the Term of this Lease (including any
extension or renewals thereof), as security for the faithful
performance and observance by Tenant of the terms, provisions and
conditions of this by Tenant to be kept and performed. Within thirty
(30) days prior to the expiration of the Letter of Credit, Tenant
shall provide Landlord with evidence satisfactory to Landlord,
evidencing the renewal of the Letter of Credit for the following year.
Tenant's failure to maintain said Letter of Credit and failure to
provide the assurances set forth herein shall constitute a material
breach of this Lease and entitle Landlord to draw upon the Letter of
Credit as provided for herein.
In the event Tenant fails to pay any amount due under this Lease when
due ("Monetary Default"), and such Monetary Default continues for a
period of five (5) days after Tenant's receipt of written notice by
Landlord of such Monetary Default, or if Tenant fails to perform any
other covenant or condition of this ("Non-Monetary Default") and
Tenant does not commence to cure, and thereafter diligently prosecute
curing such Non-Monetary Default, within thirty (30) days of receipt
of written notice from Landlord, Landlord shall be entitled to draw
upon the principal amount of said Letter of Credit to cure any default
or to compensate Landlord for any other loss or damage which Landlord
may suffer by reason of such default and Landlord shall have the
right, thereafter, to hold such funds or the balance of the Term of
this Lease (including any extensions or renewals thereof) in
accordance with the provisions of this section.
3
<PAGE>
Under no circumstances shall Tenant have the right to apply said
Letter of Credit against all or a portion of Tenant's payment
obligations under this Lease, without the prior written consent of
Landlord. Any of the provisions of this section to the contrary
notwithstanding, should Landlord draw upon the Letter of Credit,
Landlord shall thereafter hold such funds for the balance of the Term
of this Lease (including any extensions or renewals thereof), except
as such funds are applied in accordance with the terms hereof, in a
separate interest bearing account with interest accruing to the
benefit of Landlord. Prior to Landlord making a draw of the principal
amount of said Letter of Credit, Tenant shall be entitled to notices
of default and the rights to cure which are provided for in this
Lease.
Should Landlord apply all or part of the Letter of Credit in
accordance with the terms hereof, Tenant shall, upon written demand
from Landlord, immediately pay Landlord, in cash or other form
acceptable to Landlord, an amount sufficient to return the principal
sum of the Letter of Credit to the amount provided for herein. Failure
to do so by Tenant shall constitute a material default hereunder.
Should Tenant fail to replace a Letter of Credit as required
hereunder, Landlord shall have the right to draw down the Letter of
Credit and to hold such funds pursuant this section until such time as
Tenant provides Landlord with a replacement Letter of Credit.
Notwithstanding anything contained to the contrary in this Paragraph
2, if during the initial Thirty-sixth (36) months of the Term of this
Lease no material and uncured event of default by Tenant has occurred
under this Lease, Tenant shall have the right to replace the Letter of
Credit with a cash Security Deposit in the amount of Ten Thousand
Dollars ($10,000.00). The cash Security Deposit shall be governed by
the provisions of Section 3.3 of the Lease.
4
<PAGE>
3. Minimum Monthly Rent (Section 1.11.2). Subsection 1.11.2 shall be deemed
deleted and the following shall be deemed inserted in place thereof:
MONTH OF TERM MINIMUM MONTHLY RENT
01 - 12 $8,384.00
13 - 24 $8,719.78
25 - 36 $9,068.57
37 - 48 $9,431.31
49 - 60 $9,808.56
Provided Tenant shall not be in default under any term, covenant or condition
under this Lease, Tenant shall be entitled to a credit against Minimum Monthly
Rent ("Rent Credit"), commencing with the Thirty-seventh (37th) month of the
Term, in an amount equal to the actual and verified costs paid by Tenant in
connection with Tenant's construction of the Tenant Improvements in accordance
with Exhibit C attached to this Lease. The Rent Credit shall not exceed
$40,050.00 (i.e., $10.00 per Useable Square Foot of Floor Area within the
Premises) and shall be amortized in equal monthly installments, without
interest, over the 37th - 60th months of the Term. To illustrate the foregoing,
assume that Tenant utilized the entire Rent Credit (i.e., $40,050.00). In such
case, the monthly Rent Credit would be $1,668.75 commencing with the 37th month
of the Term and continuing thereafter until expiration of the 60th month of the
Term.
4. Early Occupancy (Section 2.3). Section 2.3 is deemed deleted and Tenant
shall be permitted access to the Premises for the purpose of constructing the
Tenant Improvements in accordance with Exhibit C attached to this Lease upon (i)
Landlord and Tenant's mutual execution of this Lease, (ii) Landlord's receipt of
Tenant's first installment of Minimum Monthly Rent, (ii) Landlord's receipt of
the Letter of Credit described in Paragraph 2 of this Addendum, and (iii)
Landlord's receipt of the Certificate of Insurance required by Article 14 of
this Lease.
5. Adjustments to Minimum Monthly Rent (Section 3.2). Section 3.2 shall be
deemed deleted.
6. Vehicle Parking (Section 19.3.1). The first and second sentences of
Section 19.3.1 are deemed replaced with the following:
Tenant shall be entitled to the use of the number of vehicle parking
spaces set forth in Section 1.14 of the Fundamental Lease provisions.
7. Building Planning (Article 25). The first paragraph of Article 25 is
deemed deleted.
8. Tenant Improvement Agreement (Exhibit C). Sections 4,5,6,7, 10 and 17
are deemed deleted and Tenant shall construct the Tenant Improvements
substantially in accordance with the Preliminary Floor Plan prepared by William
E. Smith & Associates dated October 10, 1997, a copy of which is attached to and
made a part of this Lease as Exhibit H. Tenant shall use Burger Construction and
Property Services as Tenant's Contractor.
5
<PAGE>
9. Effectiveness of Lease. Except as and to the extent modified by this
Addendum, all provisions of the Lease shall remain in full force and effect.
LANDLORD TENANT
PROPCO, LP, BestWay USA,
a California limited partnership A Nevada corporation
By: Lomas Santa Fe Development
Corporation, a California
Corporation (General Partner)
By:___________________________ By:___________________________
Name: Samuel B. Williams Name: Bryant Cragun
Title: President Title: Chief Executive Officer
HONG KONG FINANCE PROPERTY
COMPANY LIMITED
and
MOMENTUM ASSOCIATES LIMITED
--------------------------------
T E N A N C Y A G R E E M E N T
In respect of Unit A on 12th Floor,
First Pacific Bank Centre,
56 Gloucester Road, Wanchai,
Hong Kong.
---------------------------------
DATED the 1st day of December 1998
<PAGE>
THIS TENANCY AGREEMENT made this 1st day of December, 1998
BETWEEN the parties more particularly described and set out in the First
Schedule hereto.
WHEREBY IT IS AGREED as follows:
SECTION I
AGREEMENT TO LET
(a) The Landlord shall let and the Tenant shall take ALL THAT the premises more
particularly described and set out in the Second Schedule hereto
(hereinafter referred to as "the Premises") Together with the Landlord's
furniture, fixtures, fittings and household appliances, if any, set forth
in the Fourth Schedule hereto (hereinafter collectively referred to "the
Landlord's fixtures and fittings") AND Together with the use in common with
the Landlord and all others having the like right of the entrances,
staircases and passages in the building of which the Premises form part
(hereinafter referred to as "the Building") in so far as the same is
necessary for the proper use and enjoyment of the Premises And Together
Also with the right in common with others having the like right but subject
as aforesaid to use the lift service (if any) whenever the same shall be
operating and the recreational facilities (if any, and whenever the use
thereof shall be permitted) for the term and at the rent more particularly
described and set out in the Third Schedule hereto.
(b) The Tenant shall be entitled to a rent-free period from the
____________________________________(both days inclusive) Provided Always
that the Tenant shall during such rent-free period pay and discharge all
rates, management fees, and all outgoings payable by the Tenant under this
Agreement and perform all its other obligations hereunder save and except
the obligation to pay rent.
-1-
<PAGE>
SECTION 11
COVENANTS BY TENANT
The Tenant to the intent that the obligations hereunder shall continue
throughout the term of the tenancy hereby created ("the Term") agrees with the
Landlord as follows:
(1) TO PAY RENT
To pay the rent in manner as set out in Part IV of the Third Schedule
hereto.
(2) TO PAY RATES
To pay and discharge all rates, taxes, assessments duties, charges
impositions and outgoings of a recurring nature now or hereafter to be
assessed, imposed or charged by the Government of the Hong Kong Special
Administrative Region or other lawful authority upon the Premises or upon
the owner or occupier thereof (Government rent and Property Tax only
excepted).
(3) TO PAY MANAGEMENT FEES
To pay and discharge all service and management charges and
air-conditioning charges, the current amount of which is set out in the
Third Schedule payable by the owner or occupier of the Premises pursuant to
or by virtue of the Deed of Mutual Covenant and Management Agreement
relating to the Building (if any) and subject to review in accordance with
the service charge budget for the Building.
(4) TO PAY UTILITY CHARGES AND DEPOSITS
To pay and discharge all charges for gas water electricity and telephone
consumed on or in the Premises as may be shown by or from the Tenant's own
metered supplies or by accounts rendered to the Tenant.
- 2 -
<PAGE>
(5) TO PAY COSTS OF CLEARING DRAINS ETC
To pay to the Landlord on demand all costs incurred by the Landlord in
cleansing or clearing any of the drains, pipes or sanitary or plumbing
apparatus of the Premises choked or stopped up owing to the careless or
improper use or neglect by the Tenant or any employee, agent or licensee of
the Tenant.
(6) TO FIT OUT
To fit out the Premises at the Tenant's expense in compliance with all
government regulations and relevant enactments and in accordance with such
plans and specifications as shall have been first submitted to and approved
in writing by the Landlord and/or its authorized agents in a good and
proper workman like fashion and with good materials and so to maintain the
same throughout the Term in good repair and condition to the satisfaction
of the Landlord.
(7) TO REPAIR INTERIOR
To keep all the non-structural interior of the Premises including, without
limitation, the flooring and interior plaster or other finishes or
rendering to walls, floors, windows and ceilings and the Landlord's
fixtures and fittings therein including all doors, electrical installations
and wiring and internal decoration in good, clean tenantable and proper
repair and condition and properly preserved and painted as shown in the
pictures annexed hereto (fair wear and tear, structural and inherent
defects or defects arising from concealed wires, ducts or pipes excepted)
and so to maintain the same at the expense of the Tenant and to deliver up
the same to the Landlord at the expiration or sooner determination of the
term in like condition. The Tenant particularly agrees :
(i) to reimburse to the Landlord the cost of replacing all broken and
damaged window glass whether the same be broken or damaged by the
negligence of the Tenant or any employee, agent or licensee of the
Tenant;
(ii) to repair or replace, if so required by the appropriate Supply
Company, Statutory Undertaker or Authority as the
-3-
<PAGE>
case may be under the terms of any Electricity Supply Ordinance for
the time being in force or any Orders in Council or regulations made
thereunder, all the electrical wiring installations and fittings
within the Premises and the wiring from the Tenant's meter or meters
to and within the same;
(iii)to be wholly responsible for any damage or injury caused to any person
whomsoever or property whatsoever directly or indirectly through the
defective or damaged condition of any part of the interior of the
Premises and to make good the same by payment or otherwise and to
indemnify the Landlord against all costs claims demands actions
liabilities and legal proceedings whatsoever made upon the Landlord by
any person in respect thereof;
(iv) insofar as the same may not be part of the interior of the Premises to
keep in substantial and proper repair and condition all drains, soil
and other pipes, cables, wires, ducts mains and apparatus associated
therewith and any equipment and fittings ancillary thereto which
belong to or form part of or solely serve the Premises and to
indemnify the Landlord against all costs, claims, demands, actions,
liabilities, and legal proceedings whatsoever made upon the Landlord
by any person in respect of any breach of this covenant.
(8) TO COMPLY WITH ORDINANCES
To obey and comply with and to indemnify the Landlord against the breach of
all ordinances, regulations, bylaws, rules and requirements of any
Governmental or other competent authority relating to the Tenant's use and
occupation of the Premises or any other act, deed, matter or thing done,
permitted, suffered or omitted therein or thereon by the Tenant or any
employee, agent or licensee of the Tenant and to notify the landlord
forthwith in writing of any notice received from any statutory or public
authority concerning or in respect of the Premises or any services supplied
thereto.
- 4 -
<PAGE>
(9) TO COMPLY WITH DEED OF MUTUAL COVENANT
To obey and comply with and perform all the covenants terms and provisions
in the Deed of Mutual Covenant (if any) relating to the Building so far as
they relate to the Premises and to obey observe and comply with all House
Rules and any other rules and regulations (if any) which may from time to
time be made or adopted in relation to the management or servicing of the
Building and to indemnify the Landlord against any breach, non-observance
or non-performance thereof.
(10) TO PROTECT FROM TYPHOONS
To take all reasonable precautions to protect the interior of the Premises
against damage by storm or typhoon.
(11) TO INFORM LANDLORD OF DAMAGE
To give notice to the Landlord or its agent of any damage that may be
suffered to the Premises or to persons thereupon and of any accident to or
defects in the water pipes, gas pipes, electrical wirings, fittings,
fixtures or other facilities of and/or in or serving the Premises.
(12) TO PERMIT ENTRY BY LANDLORD.
To permit the Landlord and its agents authorized by it with written
authorization At all reasonable times by prior appointment with the Tenant
(except in the case of emergency) to enter and view the state of the
Premises, to take an inventory of the fixtures and fittings therein, to
carry out any work or repairs which are required to be done.
(13) TO REPAIR ELECTRICAL INSTALLATIONS
To appoint a duly registered contractor or person to repair or replace any
electrical installation or wiring in the Premises if the same becomes
dangerous or if so reasonably required by the Landlord. The Tenant shall
permit the Landlord or its authorized agent(s) or contractor(s) to test the
Tenant's wiring in the Premises at any time upon request being made upon
prior notice in writing (except in case of emergency) Provided that the
Landlord shall cause as little inconvenience and interference to the Tenant
as reasonably possible.
- 5 -
<PAGE>
(14) TO REPAIR ON NOTICE
On receipt of any notice from the Landlord or its authorized
representative(s) specifying any works or repairs which are required to be
done and which are the responsibility of the Tenant hereunder to put in
hand and execute the same with all possible despatch and without any delay
and if the Tenant shall fail to execute and complete such works or repair's
within 15 days after the receipt of such notice, then the Tenant shall
permit the Landlord together with workmen and all necessary equipment to
enter into the Premises for the purpose of carrying out or properly
completing such works or repairs; the costs thereon to be repaid by the
Tenant to the Landlord promptly on demand and be recoverable by the
Landlord from the Tenant as a debt.
(15) TO USE PREMISES FOR COMMERCIAL PURPOSES ONLY
To use the Premises for commercial purposes only and for no other purpose
whatsoever, but no warranty as to fitness of the Premises for the specific
use as aforesaid is given or deemed to be given by the Landlord.
(16) TO YIELD UP PREMISES AT EXPIRATION OF TENANCY
Quietly to yield up the Premises together with the Landlord's fixtures and
fittings and additions therein and thereto at the expiration or sooner
determination of this Agreement in good clean substantial and proper repair
and condition as shown in the pictures annexed hereto (fair wear and tear ,
structural and inherent defects or defects arising from concealed wires,
ducts or pipes excepted as aforesaid) and to deliver all the keys of the
Premises to the Landlord or its agent and remove at the Tenant's cost all
of the Tenant's signs, notices, fixtures, fittings and effects upon or in
- 6 -
<PAGE>
the Premises and to make good to the Landlord's satisfaction and at the
sole expense of the Tenant all damages caused by the removal of the same
and if the Tenant fails to do so, the Tenant shall on demand pay to the
Landlord the cost incurred in carrying out such removal or reinstatement or
making good. The Tenant hereby irrevocably appoints the Landlord to be its
agent to store or dispose of any effects left by the Tenant on the Premises
for more than seven (7) days after the expiration or sooner determination
of the term on any terms that the Landlord thinks fit and without the
Landlord being liable to the Tenant.
(17) NOT TO CUT INJURE MAIM WALLS ETC.
Not to cut, maim or injure, or permit or suffer to be cut, maimed or
injured, any doors, windows, walls, beams structural members or any part of
the fabric of the Premises nor any of the plumbing or sanitary apparatus or
installations included therein without the prior consent of the Landlord.
The Landlord hereby permit the Tenant to put up company sign(s) at the
positions as shown in the pictures annexed hereto.
(18) NOT TO KEEP ARMS OR COMBUSTIBLE OR HAZARDOUS GOODS ON PREMISES Not to keep
or store or permit or suffer to be kept or stored on or in the Premises any
arms, ammunition, gunpowder, saltpetre, kerosene or other explosive or
combustible or hazardous goods.
(19) NOT TO PERMIT ODOURS TO BE PERMEATED
Not to cause or permit any offensive odours or excessive smoke to be
produced upon, permeate through or emanate from the Premises.
(20) NOT TO PERMIT THE PREMISES TO BE INFESTED
Not to permit or suffer the Premises or any part thereof to be infested by
termites, rats, mice, cockroaches, or any other pests vermins and to take
at the sole costs and expense of the Tenant all such steps including the
employment of pest extermination contractors to keep the Premises free from
termites, rats, mice, cockroaches or any other pests or vermins.
- 7 -
<PAGE>
(21) NOT TO MAKE ALTERATIONS OR ADDITIONS
Except with the prior written consent of the Landlord, and subject to
payment on demand of all costs, charges and expenses (including legal costs
and fees payable to architects engineers and surveyors) incurred by the
Landlord in connection with the application for consent of any works
herein, not: to erect install or alter any fixtures partitioning or other
erection or installation in the Premises or any part thereof Provided
Always if consent shall be given the said alteration installation or
additions shall remain the property of the Landlord and the Tenant shall on
the expiration or sooner determination of the Term hereby granted deliver
the same to the Landlord in substantial repair and condition without any
claims or compensation whatsoever PROVIDED further that such alteration
installation or additions of the Tenant shall if so required by the
Landlord be removed or reinstated to its original state of layout as at the
date of first occupation of the Premises by the Tenant at the expense of
the Tenant at the expiration or sooner determination of this Agreement and
in such event the Tenant shall make good all damages caused by such
removal.
(22) NOT TO ASSIGN OR UNDERLET
Not to assign, underlet, license, part with the Possession of or transfer
the Premises or any interest therein, nor permit or suffer any arrangement
or transaction whereby any person other than the Tenant and it associated
company, Amber Securities Corporation, their employees and servants (if
any) obtains the use, possession, occupation or enjoyment of the Premises
without the previous written consent of the Landlord (which consent may be
withheld in the Landlord's absolute discretion) and irrespective of whether
any rental or other consideration is given for such use or possession and
in the event of any purported transfer, assignment, underletting,
licensing, sharing or parting with the possession of the Premises (whether
- 8 -
<PAGE>
for monetary consideration or not) the Landlord shall be entitled to
terminate this Agreement and the Tenant shall forthwith thereupon surrender
vacant possession of the Premises to the Landlord without prejudice however
to the rights of either party in respect of any antecedent breach of any of
the covenants, terms and conditions contained herein. The tenancy shall be
personal to the Tenant named in this Agreement and for the user specified
herein and, without in any way limiting the generality of the foregoing,
the following acts and events shall be deemed to be breaches of this Clause
(22):
(a) In the case of a Tenant which is a partnership, the death or
retirement of any person who is a partner at the date of signing of
this Agreement or the taking in of one or more partners whether on the
death or retirement of an existing partner or otherwise.
(b) In the case of a Tenant who is an individual (including a sole
surviving partner of a partnership tenant) , the death, insanity or
other disability of that individual, to the intent that no right to
use, possess, occupy or enjoy the Premises or any part thereof shall.
vest in the executors, administrators, personal representative, next
of kin, trustee or committee of any such individual.
(c) In the case of a Tenant which is a corporation, any take-over,
reconstruction, amalgamation, merger-, voluntary liquidation or change
in the person or persons who owns or own a majority of its voting
shares.
(d) The giving by the Tenant of a Power of Attorney or similar authority
whereby the donee of the Power obtains the right to use or possess
occupy or enjoy the Premises or does in fact use possess occupy or
enjoy the same.
(e) The change of the Tenant's business name.
- 9 -
<PAGE>
(23) NOT TO CAUSE EXCESSIVE NOISE
Not to produce or suffer or permit to be produced at any time in the
Premises any music or noise (including sound produced by broadcasting from
television radio and any apparatus or instrument capable of producing or
reproducing music and sound) or to permit or do any act or thing otherwise
to give cause for reasonable complaint on the part of the occupants or
tenants of other portions of the Building or of neighbouring premises or
buildings.
(24) NOT TO BREACH GOVERNMENT LEASE OR CAUSE INSURANCE TO BE AVOIDED OR
PREMIUM INCREASED
Not to do or permit or suffer to be done any act, deed, matter or thing
whatsoever which amounts to a breach of any of the covenants terms and
conditions under which the land on which the Building is erected is held
from the Government or whereby any insurance of the Building against loss
or damage by fire and/or claim by third parties for the time being in force
may be rendered void or voidable or whereby the premium thereon may be
increased Provided That if as the result of any act, deed, matter or thing
done permitted or suffered by the Tenant, the premium on any such insurance
shall be increased, the Landlord shall be entitled to at its option either
to terminate this Agreement or to continue the same upon payment by the
Tenant of the increased premium.
(25) NOT TO BREACH INSURANCE POLICY
Not to cause or suffer or permit to be done any act or thing whereby the
policy or policies of insurance on the Premises against damage by fire or
liability to third parties for the time being subsisting may become void or
voidable or whereby the rate of premium or premiums thereon may be
increased, and to repay to the Landlord on demand all sums paid by the
Landlord by way of increased premium or premiums thereon and all expenses
incurred by the Landlord in and about any renewal of such policy or
policies arising from or rendered necessary by a breach of this clause and
in the event of the Premises or the Building
- 10 -
<PAGE>
or any part or parts thereof being damaged or destroyed by fire or other
insurable cause at any time and the insurance money under any insurance
against fire or other such cause effected thereon being wholly or partially
irrecoverable by reason solely or in part of the Tenant's act or default
then and in every such case to pay to or indemnify the Landlord of all loss
and damage thereby incurred by the Landlord including the cost of
completely rebuilding or reinstating the same.
(26) NOT TO MISUSE PREMISES
Not to permit or suffer any part of the Premises to be used for the purpose
of gambling or for any illegal, immoral, or improper purposes or so as to
cause nuisance, annoyance, inconvenience damage or danger to the occupiers
of adjacent premises or other premises in the neighbourhood and not to
permit any touting or soliciting for business or the distributing of any
pamphlets notice or advertising matter outside the Premises or anywhere
within the Building by any of the Tenant's servants agents or licensees.
(27) NOT TO MAKE STRUCTURAL ALTERATIONS
Not to make any structural alterations in the Premises which may damage or
affect or interfere with the use or enjoyment of the other parts of the
Premises and the Building or cause any inconvenience to the other occupiers
nor to make or cause any alteration injury damage or interference to the
common facilities or common areas or the maintenance thereof nor to cut or
injure the cement concrete flooring columns beams or girders of the
Building nor to do anything whereby the structural strength thereof may be
affected and to indemnify the Landlord against any breach of this Section.
(28) NOT TO ERECT EXTERNAL STRUCTURES
Not to affix install any external shades, awnings, iron cages, flower
racks, flower shelves, flags, banners, poles, brackets, drying racks or any
other projections structures; or things whatsoever on the external walls of
the Building nor to block any windows.
- 11 -
<PAGE>
(29) NOT TO DISPLAY SIGNS
Not to affix or display or permit or suffer to be affixed or displayed
within or outside the Premises any signboard, sign decoration or other
device, whether illuminated or not, which may be visible from outside the
Premises without the written consent of the Landlord first had and
obtained.
(30) NOT TO REMOVE THE LANDLORD'S FIXTURES AND FITTINGS
Not without the prior written consent of the Landlord to remove the
Landlord's fixtures and fittings out of the Premises except for the normal
repair and maintenance of the same.
(31) NOT TO OBSTRUCT COMMON AREAS AND PASSAGES
Not to encumber or obstruct, or permit to be encumbered or obstructed, with
any boxes, packaging or obstruction of any kind or nature any of the
entrances, staircase, landings, passages, lifts (if any) , lobbies or other
parts of the Building in common use and not to leave rubbish or any
articles or thing in any part of the Building not in the exclusive
occupation of the Tenant.
(32) OVERNIGHT OPERATIONS, GUARDS, ETC.
Not to use or permit or suffer to be used the Premises or any part thereof
as sleeping quarters or as domestic premises within the meaning of the
Landlord and Tenant (Consolidation) Ordinance or any other enactment or
modification thereof for the time being in force and not to allow any
person to remain on the Premises overnight except the Tenant's night.
watchmen.
(33) TO COMPLY WITH CONDITIONS FOR GRANTING CONSENT To pay all the Landlord's
expenses and charges of and incidental to the Tenant's request for consent
or approval for whatever purpose required herein and the Tenant hereby
acknowledges that save as expressed to the contrary herein the Landlord is
entitled in its absolute discretion to
- 12 -
<PAGE>
grant or withhold any consent or approval which, if granted, shall be
subject to such conditions as the Landlord may in its absolute discretion
impose.
(34) NOT TO CARRY ON OFFENSIVE TRADE
Not to carry on any trade or business in the Premises which is now or may
hereafter be declared to be an offensive trade under the Public Health and
Urban Services Ordinance or any enactment amending or substituting the
same.
SECTION III
LANDLORD'S COVENANT
The Landlord hereby agrees with the Tenant as follows:-
(1) TO PAY GOVERNMENT RENT AND PROPERTY TAX
To pay the Government Rent and Property Tax in respect of the Premises and
to make payments of a capital and non-recurring nature attributable to or
payable in respect of the Premises save where such expenses are caused by
or attributable to the act neglect or default of the Tenant.
(2) QUIET ENJOYMENT
The Tenant (duly paying the rent and management charges and observing and
performing the terms of this Agreement) shall have quiet possession and
enjoyment of the Premises during the Term without any interruption by the
Landlord or anyone lawfully claiming under or through or in trust for the
Landlord.
SECTION IV
FURTHER COVENANTS
IT IS HEREBY FURTHER EXPRESSLY AGREED AND DECLARED as follows:-
(1) DEFAULT
If the rent hereby agreed to be paid or any part thereof shall
- 13 -
<PAGE>
be unpaid for fifteen days after the same shall become payable (whether
legally or formally demanded or not) or if the Tenant shall fail or neglect
to observe or perform any of the agreements stipulations terms and
conditions herein contained and on the Tenant's part to be observed and
performed or if -the Tenant shall become bankrupt or being a corporation
shall go into liquidation or if the Tenant shall otherwise become insolvent
or make any arrangement with creditors or shall suffer any execution to be
levied on the Premises or otherwise on the Tenant's goods, then and in any
such case it shall be lawful for the Landlord at any time thereafter to
forfeit the tenancy hereby created and to re-enter the Premises in the name
of the whole whereupon this Agreement shall absolutely cease and determine
but without prejudice to any right of action of the Landlord in respect of
any outstanding breach, non-observance or non-performance of any of the
said agreements, stipulations, terms and conditions herein contained and on
the Tenant's part to be observed and performed and to the Landlord's right
to deduct all loss damage and expense thereby incurred from the deposit
paid by the Tenant pursuant to Section VII hereof.
(2) EXERCISE OF RIGHT
A written notice served by the Landlord on the Tenant: in manner
hereinafter mentioned to the effect that the Landlord thereby exercise the
power of re-entry herein contained shall be a full and sufficient exercise
of such power without actual physical entry on the part of the Landlord.
(3) ACCEPTANCE OF RENT NOT WAIVER
Acceptance of rent by the Landlord shall not be deemed to operate as a
waiver by the Landlord of any right to proceed against the Tenant in
respect of any breach, non-observance or non-performance of the said
agreements, stipulations terms and conditions herein contained and on the
Tenant's part to be observed and performed.
- 14 -
<PAGE>
(4) DISTRAINT
For the purposes of Part III of the Landlord and Tenant (Consolidation)
Ordinance, (Chapter 7) and of this Agreement, the rent payable in respect
of the Premises shall. be and be deemed to be in arrear if not -paid in
full and in advance at the times and in manner herein provided for payment
thereof and the Landlord is entitled to treat any non-payment of rent,
management fees and any other sums payable by the Tenant hereunder as
non-payment of rent.
(5) NOTICE OF LETTING
During the three months immediately preceding the expiration of the Term,
the Landlord shall be at liberty to affix and maintain without interference
upon any windows or external part of the Premises a notice stating that the
Premises are to be let and such other information in connection therewith
as the Landlord shall require.
(6) LANDLORD'S RIGHT TO SHOW PREMISES TO PROSPECTIVE PURCHASERS/TENANTS
During the three months immediately preceding the expiration or earlier
determination of the term, the Tenant shall permit all persons having the
authority from the Landlord by prior reasonable notice to enter and view
the Premises and/or the Furniture and every part thereof at all reasonable
times and show the same to prospective purchasers and/or tenants.
(7) DELIVERY UP OF PREMISES BY TENANT
The Tenant hereby agrees and undertakes that it will quietly deliver up
vacant possession of the Premises at the termination of the Term either by
affluxion of time or otherwise and in the -event of the Tenant failing so
to do -the Landlord may repossess the Premises and for such purpose the
Landlord and their servants and agents may without previous notice enter
upon the Premises with power if necessary to break open any doors gates or
windows of the Premises without being liable to the Tenant or any person
claiming through under or in trust for it for trespass damage or otherwise
15
<PAGE>
and all costs and expenses loss and damage of whatsoever nature and
howsoever caused of and incidental to such re-possession thereof as
aforesaid which may be incurred by the Landlord shall be reimbursed by the
Tenant to the Landlord together with mesne profits at the rate of double
the rent calculated from the date of termination of the Term as aforesaid
up to the date of repossession and reinstatement of the Premises.
(8) INTEREST AND COST
The Landlord shall be entitled without prejudice to any other right or
remedy hereunder (including the right of re-entry) or otherwise available
to it:
(a) To charge the Tenant interest at the rate of 2% per calendar month if
any sum payable under this Agreement shall have become due but remain
unpaid for more than 14 days and such interest shall be payable on
demand to the Landlord from the date when such sum become due and not
14 days thereafter until actual payment thereof (as well after as
before any judgment); and
(b) To recover from the Tenant all costs including but not limiting to
legal and court fees, incurred by the Landlord (on a full indemnity
basis) in connection with the recovery of the rent hereby reserved
and/or any other monies payable hereunder and in arrears or other
proceedings taken by the Landlord as a result of the breach of or
default in observing or performing any of the agreements stipulations
and terms herein contained or referred to and on the part of the
Tenant to be observed or performed.
(9) NO FINE ETC.
The Tenant hereby expressly declares that no fine premium key money or
other consideration has been paid by the Tenant to the Landlord for or in
connection with the grant of this tenancy.
- 16 -
<PAGE>
SECTION V
EXCLUSIONS
(1) EXCLUSION OF LANDLORD'S LIABILITY FOR ESCAPE OF WATER, FIRE, ETC.
(a) Notwithstanding anything herein contained the Landlord shall not in
any circumstances be liable to the Tenant his servants licensees or
invitees or any other person whomsoever:
(i) in respect of any loss damage or injury to person or property
sustained by the Tenant its servants; licensees invitees or any
such other persons caused by or through or in any way owing to
any defect in and/or breakdown and/or the defective or negligent
working and/or operation and/or condition of the Premises, the
Landlord's fixtures and fittings, the lifts and/or the
recreational facilities or to the neglect or default of the
Landlord and/or its servants or otherwise; and/or
(ii) in respect of any loss or damage to person or property sustained
by the Tenant its servants licensees invitees or in any way owing
to fire or the overflow or leakage of water from or through any
part or portion of the Premises and/or the Building; and/or
(iii)for the security or safekeeping of the Premises or any contents
therein nor shall the rent and/or management fees, or any part
thereof abate or cease to be payable on account thereof.
(b) The Landlord shall not be liable or responsible for any damage
suffered by the Tenant (whether personally or in respect of the
Premises or any property of the Tenant therein or any property stored
therein) or any servant invitee or licensee of the Tenant caused by or
through the acts or neglect or default of the tenants and occupiers of
the other parts of the Building and their servants licensees and
invitees.
(c) The Landlord shall neither be liable to pay compensation to the Tenant
in respect of any period during which the services and operation of
17
<PAGE>
the lifts or the recreational facilities (if any) shall be interrupted
nor shall the Landlord be liable to grant any abatement of the rent or
management fees or any part or parts thereof.
(d) The Landlord shall not be in any way liable to the Tenant or to any
person or persons claiming any right title or interest under the
Tenant for any damage or injury which may be sustained by the Tenant
or by any such person or persons as aforesaid on account of the
defective or damaged condition of the Building or the Premises the
Landlord's fixtures and fittings therein or any part thereof and in
particular the Landlord shall not be responsible to the Tenant or any
person or persons as aforesaid for any damage whatsoever caused by or
through or in any way owing to any typhoon escape of fire leakage of
water or electric current from the water pipes or electric wiring or
cable situated upon or in any way connected with the Building or any
part thereof, or the dropping of cigarette ends, broken pieces of
glass or other articles and the escape of water, fire or electricity
and vibrations from the floor unit or other premises in the Building
or in the neighbourhood and -the Tenant hereby agrees to indemnify the
Landlord against all claims demands actions costs expenses whatsoever
made upon the Landlord by any person or persons as aforesaid in
respect of the matters aforesaid.
SECTION VI
SUSPENSION OF RENT
If the Premises shall at any time during the tenancy be destroyed or damaged or
become inaccessible or become subject to a Closure Order or Demolition Order due
or owing to fire water storm wind typhoon defective construction white ants
earthquake subsidence of the ground or any calamity beyond the control of the
Landlord and not attributable to any failure of the Tenant to observe and carry
out the terms of this Agreement so as to render the Premises unfit
18
<PAGE>
for habitation and use or inaccessible or so that the Premises or the Building
shall be condemned as a dangerous structure and the policy or policies of
insurance effected by the Landlord shall not have been vitiated or payment of
the policy moneys refused in whole or part in consequence of any act or default
of the Tenant, then the rent hereby reserved or a fair proportion of the rent
according to the nature and extent of the damage sustained or order made shall,
after the day when the Premises being rendered inaccessible, be suspended until
the Premises shall again be rendered accessible and fit for habitation and use
Provided always that the Landlord shall not be under any obligation to reinstate
the Premises so affected as aforesaid and Provided further that should the
Premises not have been reinstated in the meantime either the Landlord or the
Tenant may at any time after three months from the occurrence of such damage or
destruction or order give to the other a notice in writing to determine this
Agreement and thereupon the same and everything herein contained shall cease and
be void as from the date of the occurrence of such destruction or damage or
order or of the Premises becoming dangerous but without prejudice to the rights
and remedies of either party against the other in respect of any antecedent
claim or breach of the agreements stipulations terms and conditions herein
contained or of the Landlord in respect of the rent payable hereunder prior to
the coming into effect of the suspension PROVIDED FURTHER that the Landlord
shall not in any event be liable to pay compensation or damages to the Tenant in
respect of any period during which the occupation or use of the Premises shall
be interrupted or unavailable as aforesaid or in respect of the determination of
the tenancy as aforesaid and that the Tenant shall not in any event have any
claim, interest, right or property, all of which are hereby expressly waived and
forfeited, of and in any compensation or award payable by any relevant authority
in respect of the interruption or cessation of use or occupation of the Premises
or the determination of the tenancy in respect thereof.
19
<PAGE>
SECTION VII
DEPOSIT
1. DEPOSIT
The Tenant shall on the signing hereof deposit and maintain with the
Landlord the sum or sums specified in Part V of the Third Schedule hereto
to secure the due observance and performance by the Tenant of the
agreements, stipulations, terms and conditions herein contained and on the
part of the Tenant to be observed and performed which said deposit shall be
held by the Landlord throughout the currency of this Agreement free of any
interest to the Tenant and in the event of any breach or non-observance or
non-performance by the Tenant of any of the agreements stipulations or
conditions aforesaid the Landlord shall be entitled to deduct therefrom the
amount of any rent, rates and other charges payable hereunder which is in
arrears and any costs, expenses, loss or damage sustained by the Landlord
as the result of any non-observance or non-performance by the Tenant of any
of the said agreements, stipulations, obligations or conditions. In the
event of any deduction being made by the Landlord from the said deposit in
accordance herewith during the currency of this Agreement the Tenant shall
as a condition precedent to the continuation of the tenancy hereby created
within 15 days on demand by the Landlord make a further deposit equal to
the amount so deducted and failure by the Tenant so to do shall entitle the
Landlord to re-enter upon the Premises and to determine this Agreement as
hereinbefore provided without prejudice to any other right or remedy of the
Landlord hereunder provided that in no event shall the Tenant be entitled
to treat payment of the deposit as payment of the rent hereby reserved.
2. DEDUCTION FROM DEPOSIT
If there shall be any rent or other sums under this Agreement due to the
Landlord and unpaid including, without limitation, any cost incurred by the
Landlord as a result of the non-payment of the rent or other sums, the
Landlord may (without prejudice to any other rights or remedies available
to it) apply the Deposit towards payment of the rent or other sums and if
there shall be any breach, default, non-observance or non-
20
<PAGE>
performance by the Tenant of any of the said agreements, stipulations or
conditions, the Landlord may pay or apply the Deposit or such part thereof
as shall be required towards remedying the same insofar as it may be
possible (without prejudice to any other rights or remedies available to
it) and, as a condition precedent to the continuation of the Term, the
Tenant shall within 15 days after such deduction deposit with the Landlord
the amount so deducted and if the Tenant shall fail to do so the Landlord
shall be entitled to re-enter the Premises in accordance with the
provisions hereinabove but without prejudice to any other rights or
remedies available to the Landlord.
3. INCREASE IN DEPOSIT
Should Part VI of the Third Schedule hereto provide for an increase in
Management Charges and Air-Conditioning Charges during the said term, the
Tenant shall upon such increase becoming applicable pay to the Landlord by
way of an increase in the said deposit a sum proportional thereto in order
to restore the ratio of deposit to Management Charges and Air-Conditioning
Charges to that previously subsisting and the payment of such increase
shall be a condition precedent to the continuation of this tenancy.
4. REFUND OF DEPOSIT
Subject as aforesaid the Deposit shall be refunded to the Tenant by the
Landlord without interest within 14 days after the expiration or sooner
determination of the Term and the delivery of vacant possession to the
Landlord or within 14 days after settlement of the last outstanding claim
by the Landlord against the Tenant in respect of any breach, default,
non-observance or non-performance of any of the agreements, stipulations or
conditions herein contained or referred to and on the part of the Tenant to
be observed and performed, whichever is the later.
5. TRANSFER OF DEPOSIT
If the Premises shall be assigned by the Landlord during the Term hereby
created, the Landlord shall be at liberty to transfer the Deposit to the
assignee (hereinafter called "the New Landlord") and deliver to the Tenant
- 21 -
<PAGE>
within 7 days of such transfer a notice (hereinafter called "the Notice of
Transfer of Deposit") in the form as set out in the Sixth Schedule hereto
executed by the New Landlord. Upon completion of such transfer and delivery
of such Notice of Transfer of Deposit, the Landlord shall be released of
any further liability to return the Deposit to the Tenant.
SECTION VIII
TENANCY SUBJECT TO MORTGAGE
1. Tenancy Agreement Subject to Mortgage
Notwithstanding all the terms and conditions contained herein, the parties
hereto hereby agree that this Agreement is made subject to a Legal Charge
dated 23rd August 1994 and registered in the Land Registry by Memorial No.
6115525 ("the Mortgage") executed by the Landlord in favour of the Kincheng
Banking Corporation ("the Lender") and all the rights of the Lender in
relation to the Premises shall take precedence and are hereby reserved
accordingly.
2. Condition Precedent
The parties hereto hereby agree that this Agreement is conditional upon
having obtained the written consent from the Lender for the Landlord to
enter into this Agreement. In the event this condition is not fulfilled,
either party may by notice in writing cancel this Agreement in such event
this Agreement shall be treated as null and void and with no further
effect. The Landlord shall forthwith return all the Deposit paid hereunder
to the Tenant but. without any compensation interest costs or otherwise
whatsoever and the Tenant shall deliver up vacant possession of the
Premises to the Landlord in accordance with this Agreement neither party
shall have any claim against the other hereon.
- 22 -
<PAGE>
SECTION IX
INTRPRETATION AND MISCELLANEOUS
(1) DEEMED ACTS OF TENANT
Term hereby created, the Landlord shall be at liberty to transfer the
Deposit to the assignee (hereinafter called "the New Landlord") and deliver
to the Tenant
For the purpose of this Agreement any act, default neglect or omission of
any family members, guest, visitor, servant, agent, licensee or invitee of
the Tenant and/or its associated company Amber Securities Corporation and
the occupier of the Premises, where the Tenant is a corporation, shall be
deemed to be the act, default, neglect or omission of the Tenant.
(2) SERVICE OF NOTICES
Any notice required to be served hereunder shall, if to be served on the
Tenant, be sufficiently served if addressed to the Tenant and sent by
prepaid post to or delivered at the Premises or the Tenant's registered off
ice in Hong Kong and if to be served on the Landlord shall be sufficiently
served if addressed to the Landlord and sent by prepaid post to or
delivered at the Landlord's registered office or residence in Hong Kong.
(3) ACCEPTANCE OF PREMISES IN "AS IS" CONDITION
The Tenant declares that it has duly inspected the Premises and agreed to
take the Premises on an "as is" basis and the Landlord gives no warranty
whatsoever of the state and condition of the Premises or the Building or
any fixtures and fittings, installation and facilities relating thereto.
(4) NO WARRANTY AS TO USER
The Landlord shall have no objection to the purposes as stipulated in
Clause 15, Section II hereof for which the Premises shall be used by the
Tenant but the Landlord does not warrant that the Premises are fit for any
particular purposes. The Tenant shall be responsible for obtaining any
necessary permits from the appropriate Government authorities for the user
of the Premises and shall at all times comply with all rules and
regulations laid down by such authorities for giving such permits and the
Tenant shall indemnify the Landlord from and against all proceedings
actions fines damages claims and demands whatsoever which may arise as a
result of the noncompliance by the Tenant of such rules and regulations or
any of them.
23
<PAGE>
(5) STAMP DUTY AND COSTS
Each party shall bear its own legal costs and disbursements in the
preparation, completion and registration of this Agreement. The stamp duty
payable on this Agreement and its counterpart and the registration fee (if
any) theron shall be borne by the parties hereto in equal shares.
(6) EXCLUSION OF WARRANTIES
This Agreement sets out the full agreement between the parties. No other
warranties or representations have been made or given relating to this
tenancy or to the Building or the Premises, or if any warranty or
representation has been made the same is hereby waived and/or is or will
not be relied upon by either party.
(7) INTERPRETATION
(a) The headings and index herein are intended for guidance only and do
not form part of this Agreement nor shall any of the provisions of
this Agreement be construed or interpreted by reference thereto or in
any way affected or limited thereby.
(b) In this Agreement unless the content otherwise requires, words herein
importing the masculine feminine or neuter gender shall include the
other or others of them and words herein in the singular shall include
the plural and vice versa and the terms "Landlord" and "Tenant" shall
include their respective successors in title and assigns.
(8) CONDONATION NOT A WAIVER
No condoning excusing or overlooking by the Landlord of any default breach
or non-observance or non-performance by the Tenant at any time or times of
any of the Tenant's obligations herein contained shall operate as a waiver
of the Landlord's rights hereunder in respect of any continuing or
subsequent default breach or non-observance or non-performance or so as to
defeat or affect in any way the rights and remedies of the Landlord
hereunder in respect of any such continuing or subsequent default or breach
and no waiver by the Landlord shall be inferred from or implied by anything
- 24 -
<PAGE>
done or omitted by the Landlord unless expressed in writing and signed by
the Landlord. Any consent given by the Landlord shall operate as a consent
only for the particular matter to which it relates; and in no way shall be
considered as a waiver or release of any of the provisions hereof nor shall
it be construed as dispensing with the necessity of obtaining the specific
written consent of the Landlord in the future unless expressly so provided.
(9) JOINT AND SEVERAL LIABILITY
Where more than one person is named as the Tenant in the First Schedule
hereto all such persons shall sign this Agreement and shall be jointly and
severally liable for the performance and observance of the terms,
conditions and agreements contained herein and on the part of the Tenant to
be performed and observed.
- 25 -
<PAGE>
THE FIRST SCHEDULE ABOVE REFERRED TO
------------------------------------
Name address and description of parties hereto
Landlord: Hongkong Finance Property Company Limited whose registered office is
situate at 12th Floor, First Pacific Bank Centre, No.51-57 Gloucester Road,
Wanchai, Hong Kong.
Tenant: MOMENTUM ASSOCIATES LIMITED whose registered office is situate at 17th
floor, No. 53-55 Lockhart Road Wanchai, Hong Kong.
THE SECOND SCHEDULE ABOVE REFERRED TO
-------------------------------------
PREMISES: ALL THAT Unit No. A on the 12th Floor of First Pacific Bank Centre, 56
Gloucester Road, Wanchai, Hong Kong erected on The Remaining Portion of
Inland Lot No. 2818, The Remaining Portion of Section D of Inland Lot No.
2818, The Remaining Portion of Section F of Inland Lot No. 2817 and Section
M of Inland Lot No. 2817.
THE THIRD SCHEDULE ABOVE REFERRED TO
------------------------------------
Part I Term: Two years.
Part II Commencement Date: 1st December 1998
Part III Expiry Date: 30th November 2000
The Parties here by agreed that:
After the first 12 months of the TENANCY, the Tenant shall have an option
for early termination for the Tenancy and be released from the obligation
of the terms of agreement upon that giving (3) months prior notice or by
paying the sum equivalent to the (3) months rent in lieu of notice.
- 26 -
<PAGE>
Part IV Rent:
HONG KONG DOLLARS FIFTY FIVE THOUSAND ONLY (HKD.55,000-00 per month
(exclusive of government rates, services and management charges and
air-conditioning charges) payable in advance on the lst day of each and
every calendar month without any deduction whatsoever the first of such
payment shall be made by the Tenant to the Landlord upon signing of this
Agreement, and in the event that the rent shall commence to be payable from
a day other than the first day of a calendar month the first and last
payments of rent shall be due proportions of the calendar monthly rent
reserved only.
Part V Deposit:
HONG KONG DOLLARS ONE HUNDRED THIRTY-THREE THOUSAND TWO HUNDRED
NINETY-SEVEN AND CENT FORTY-TWO ONLY (HKD.133,297.42) being two months'
rental and management charges and air-conditioning charges.
Part VI Management Charges and Air Conditioning Charges:
CURRENTLY HONG KONG DOLLARS ELEVEN THOUSAND SIX HUNDRED FORTY EIGHT AND
CENTS SEVENTY ONE ONLY (HK$11,648.71)
- 27 -
<PAGE>
THE FOURTH SCHEDULE ABOVE REFERRED TO
THE LANDLORD'S FIXTURES AND FITTINGS
(a) reception table - 1 unit;
(b) (1.4 metre x 0.7 metre) office wooden table with wooden side return -
11 units;
(c) (0.875 metre x 1.78 metre) approx. wooden office table - 1 unit; (d)
(0. 74 metre x 1. 65 metre) approx. of f ice wooden table - 1 unit;
(e) (0. 74 metre x 1. 65 metre) approx wooden off ice table - 1 unit;
(f) small round conference table - 1 unit with guest chair - 4 units;
(g) (0.7 metre x 1.5 metre) approx wooden office table with side
return - 2 units; (h) (0. 7 metre x 1. 5 metre) approx -wooden office
table with side return - 2 units; and (3 metre) approx in length
oval-shaped conference table with straight-edges (wooden) - 1 unit
- 28 -
<PAGE>
AS WITNESS the hands of the parties hereto the day and year first above
written.
SIGNED by Mr. Zhang Guo Qiang.
It's Director For and on Behalf
Hong Kong Property Company Limited
for and on behalf of the Landlord in the authorized signature
presence of /S/ Zhang Guo Qiang
SIGNED by Anthony L Tobin For and on Behalf of
It's Director MOMENTUM ASSOCiates Limited
for and on behalf of the Tenant in the /S/ Anthony Tobin
presence of
RECEIVED on the day and year first above written of and from the Tenant the sum
of HONG KONG DOLLAR one hundred thirty three thousand two hundred ninety-seven
and cents forty-two only being the deposit money referred to in Part V of the
Third Schedule hereto. HKD133,297-42
For and on Behalf
Hong Kong Property Company Limited
authorized signature
-29-
CONTRACT OF LEASE
This Contract of Lease made and executed by and between:
REBECCA A. YNARES, Filipino, of legal age, with residence and postal
address at No. 25 Rizal St., San Carlos Heights Subdivision, Tayuman,
Binangonan, Rizal, hereinafter known as the LESSOR;
-and-
MOMENTUM INTERNET (PHILIPPINES) INC., an entity in the process of
incorporation under the laws of the Republic of tile Philippines, with
office address at Penthouse 3 Manila Luxury Condominium, Pearl Drive,
Ortigas Center, Pasig City, represented herein by its President, ANTHONY
TOBIN, hereinafter known as the LESSEE.
WITNESSETH: That
In consideration of the payments, terms, conditions and stipulations
hereinafter stated, the LESSOR hereby leases and lets unto the LESSEE, and the
latter hires, takes and accepts in lease from former the property known as tile
Unit PH-3, Manila Luxury Condominium, located at Pearl Drive corner Gold Loop
St. Ortigas Center, Pasig City, with an area of 389.39 sq.m. more or less.
1. TERM OF LEASE: The term of lease shall be for a period of one (1) year,
commencing January 01, 1999 ending December 31, 1999. This lease may be renewed
under such terms and conditions that may be the subject of negotiation and
mutual agreement of both panics, provided that written notice of the intention
to renew is first served by LESSEE to the LESSOR at least sixty (60) days before
the expiry date of the lease and provided further that both parties shall have
agreed on the new rental and other conditions corresponding to the renewal
period not later than thirty (30) days before the expiration of the original
lease. In the event no mutual agreement is reached with respect to the new
rental rate and other conditions within , the said period, this lease contract
shall automatically expire at the end of tile one-year period and the LESSEE
agrees to vacate the premises as provided for in paragraph 13 hereof.
2. RENTAL: The monthly rental for the leased premises with one (1)
telephone line (637-3508) and two (2) parking slots (#39 and 40 at Basement 1)
shall be NINETY THOUSAND (P90,000.00) PESOS Only, Philippine Currency, net of
Five (5%) Percent Witholding Tax; Ten (10%) Percent EVAT and the Association
Dues.
Upon signing of this Contract of Lease, LESSEE shall pay to the LESSOR
advance rental equivalent to two (2) months amounting to One Hundred Eighty
Thousand (P130,000.00) Pesos Only. The monthly rentals shall be paid every first
(Ist) day of the month starting January 01, 1999. The two (2) months advance
rental shall be applied to (lie remaining two (2) months of the contract
immediately before its termination.
In case of default and after a grace period of one (1) week, in payment of
said rental, amount owing shall bear interest at thirty six (36%) percent per
annum to be computed daily from the date of default until fully paid. Payment of
such interest is considered as penalty by reason of such default, without
prejudice to [lie right of LESSOR to terminate the contract and eject LESSEE for
non-payment of rental on due date;
The payment of Five (5%) Percent Withholding Tax and Ten (10%) EVAT upon
its effectivity, as mandated by tile government, shall be for the account of the
LESSEE.
1
<PAGE>
3. SECURITY DEPOSIT: Upon signing or this agreement, the LESSEE shall
deposit with the LESSOR a cash bond in a sum equivalent to two (2) months rental
or the amount of One Hundred Eighty Thousand (PI80,000.00) Pesos Only. Said bond
shall answer for the faithful compliance by the LESSEE of ail the LESSEE's
obligations under this contract, it being understood that the same shall not
earn interest nor is it intended to be measure of the damages that the LESSOR
may collect from the LESSEE under this contract. The said bond shall not be
refundable to the LESSEE until the LESSEE shall have vacated the premises upon
termination of this lease, or its extension or renewal, and only after deducting
all amounts that may be payable by the LESSEE to the LESSOR under this contract.
The LESSOR shall have the right from time to time to deduct front the deposit
any and all advances and damages which the LESSEE liable to the LESSOR under any
provisions of this contract, and in the event that the deposit is reduced as a
result of such deduction, the LESSEE shall, within five (5) days from demand,
make an additional deposit with the LESSOR in order to maintain the deposit at
an amount equal to two (2) months rental.
4. FURTHER OBLIGATIONS: The LESSEE shall be liable for the corresponding
proportionate monthly assessment fee or condominium due of TWENTY PESOS
(P20.00/SQ.M.) PER SQUARE METER of the total leased area, which may be subject
to adjustment and/or change under the direction of the condominium corporation
as the case maybe, pertaining to light and water consumption of the common
areas, security, elevator service, maintenance of common areas and similar
services.
The LESSOR shall pay real estate taxes for the subject leased premises, and
the building insurance and real estate tax for the land which shall likewise be
subjected to change by the condominium corporation and/or other competent
authorities.
The LESSEE hereby agrees to allow any prospective buyer of the LESSOR to
view the leased unit.
5. USE OF PREMISES: SUB-LEASE: The leased premises shall be used solely and
exclusively by tile LESSEE as and for office / residential space. The rights of
the LESSEE hereunder shall not be assigned or sub-leased in whole or in part
without the prior written consent of the LESSOR.
In using the leased premises, the LESSEE shall faithfully comply with the
following conditions:
5.1 The LESSEE shall not bring into nor store in the leased premises any
inflammable nor explosive goods and materials, nor any article which may expose
the leased premises to fire, or thereby increase the fire hazard of tile
building, or increase the rate of the insurance of the building, or any article
which the LESSOR reasonably prohibit; nor shall the LESSEE carry on and permit
upon the said premises any trade or occupation or suffer to be done any other
thing, which may make void or voidable in whole or in part any policy for such
insurance. The LESSEE shall be held liable for any and all damages the LESSOR
may suffer through any such act or omission of the LESSEE.
5.2 The LESSEE shall not use the corridors and patios of the building
except as passageway or aisle to go in and out of the leased premises; nor shall
the LESSEE make or cause to be made any openings in the leased premises to be
used as a counter to transact business with the general public from outside of
the leased premises, nor as door, chute, window, skylight, air-conditioning of
similar purpose.
-2-
<PAGE>
5.3 The LESSEE shall not make any alterations, additions or repairs, nor
start or procerd with any repair work, or any case, introduce improvements
without obtaining the LESSOR's written approval and consent: and the parties
hereto agree that all improvements or alterations, additions, repair or works of
whatsoever nature made on the leased premises shall upon completion, from an
integral part of the leased premises and shall not be removed there from and
shall belong to and become the exclusive property of the LESSOR; without any
right an the part of the LESSEE to be reimbursed for the cost nor value thereof.
5.4 The LESSOR reserves the right to prescribed or limit the weight of any
machinery, heavy safe, equipment or others or other articles which the LESSEE
may warrant to place in the leased premises. The LESSOR shall have the right to
designate the position or location for such subject. No machinery, furniture nor
other equipment may be brought into nor out of the building or leased premises
without the prior written approval of die LESSOR.
5.5 The LESSEE shall maintain the leased premises in a clean, safe and
/sanitary condition; the LESSEE shall dispose of all rubbish only through the
means that the LESSOR may require or provide.
5.6 The LESSEE shall not make, permit or suffer to be committed upon the
lease premises any disturbing noise caused by them or persons under their
control that may constitute a nuisance or convenience of the other tenants in
the above-mentioned office building or condominium.
5.7 The LESSEE must not, in any way, block the passageway leading to the
fire escape, nor use the said passageway as storage.
6. UTILITIES: During the existence of this lease, the LESSEE shall pay the
expenses for the electric power, water, telephone, and other utility services
which may be used or consumed by the LESSEE in the leased premises. Any
breakdown for any reason or cause of whatsoever of any said utilities within the
building or the leased premises shall not make tile LESSOR answerable for
damages.
Repair in the utility service system, including water pipes and toilet
equipment and facilities within the leased premises shall be undertaken by the
LESSOR, provided however, that if the making of such repair has been rendered
necessary due to damage resulting from the fault or negligence of the LESSEE's
employee, agent, guest, client or customer, said repairs shall be at the
LESSEE's expense. No delay in the making of such repairs nor defectiveness or
unsatisfactory condition thereof shall render the LESSOR liable for damage to
the LESSEE.
7. LESSOR'S EXEMPTION FROM LIABILITY: The LESSOR shall not be liable for
any damage caused or arising from the failure of tile water supply, failure of
fluctuation of the electric current, or defects from the plumbing, water or
electric installation, or the bursting, leaking or running of any washstand,
water closet, cistern, tank or waste pipe in or adjacent to the leased premises,
or for damage caused by water coming through the roof. The LESSEE during the
occupancy of the leased premises hold the LESSOR free and harmless from any
damage, liability or responsibility to any person arising out or as a
consequence of the used of the leased premises by (lie LESSEE, members of their
staff and guests.
8. COMPLIANCE WITH LAWS. REGULATIONS AND RULES AND RESTRICTIONS: The LESSEE
shall promptly comply with any and all laws, ordinances, rules & regulations,
orders which national, provincial or local government, or any department,
bureau, board, commission, or other agency or instrumentality thereof may
promulgate, and with all regulations that the LESSOR may, from time to time,
adopt and enforce regarding the use, occupation, sanitation and safety of the
leased premises.
3
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto signed these present in Pasig
City, Philippines, this _ day of December, 1998.
/S/ Rebceca A. Ynares
REBECCA A. YNARES MOMENTUM INTERNET
Lessor (PHILIPPINES) INC.
By: /s/ Anthony Tobin
ANTHONY TOBIN
President
SIGNED IN THE PRESENCE OF:
ACKNOWLEDGMENT
REPUBLIC OF THE PHILIPPINES )
)S.S.
BEFORE ME, a Notary Public for and in, ________________, Metro Manila, this
________ day of December, 1998 personally appeared the following:
Name Com.Tax/Passport No. Date/Place Issued
Rebecca A. Ynares
Anthony Tobin B339203 July 18, 1989 / Manila
known to me and to me known to be the same persons who executed the foregoing
CONTRACT OF LEASE, and acknowledged to me that the same is their true act and
voluntary deed.
WITNESS MY HAND AND NOTARIAL SEAL on the date and place first above written.
Doc. No.
Page No.
Book No.
Series of 1998.
FIRST AMENDMENT TO
THE
CONTRACT OF LEASE
This First Amendment to the Contract of Lease made and executed by and
between:
REBECCA A. YNARES, Filipino, of legal age, with residence and postal
address at No. 25 Rizal St., San Carlos Heights Subdivision, Tayunlan,
Binangonan, Rizal, hereinafter known as the LESSOR;
- and -
MOMENTUM INTERNET (PHILIPPINES) INC., a corporation duly organized and
existing under the laws of the Republic of tile Philippines, with office
address at Penthouse 3 Manila Luxury Condominium, Pearl Drive, Ortigas
Center, Pasig City, represented herein by its President, ANTHONY TOBIN,
hereinafter known as the LESSEE.
WITNESSETH: That
WHEREAS, on _ December 1998, the parties executed a Contract of Lease (the
"Contract") more particularly described as Doc. No. Page No. __, Book No. Series
of 1998 in the Notarial Registry of a notary public of the City of
WHEREAS, the Parties desire to amend certain provision of the Contract;
NOW THEREFORE, the parties agrees as follows:
Section 1. Paragraph 5.3 of the Contract is hereby amended to read as follows:
Paragraph 5.3 The LESSEE shall not make any alterations, additions or
repairs, nor start or proceed with any repair work, or in any case,
introduce improvements without obtaining the LESSOR's written approval and
consent: and the parties hereto agree that all permanent improvements or
alterations, additions, repair or works made on the leased premises (i.e.
those which cannot be removed without defacing the premises) shall upon
<PAGE>
completion, form an integral part of tile leased premises and shall not be
removed therefrom and shall belong to and become the exclusive property of
the LESSOR; without any right on the part of the LESSEE, to be reimbursed
for the cost nor value thereof.
Section 2. Paragraph 6 of the Contract is hereby amended to read as follows:
Paragraph 6. During the existence of this lease, the LESSEE shall pay the
expenses for the electric power, water, telephone, and other utility
services which may be used or consumed by the LESSEE in the leased
premises. Any breakdown for any reason or cause of whatsoever of any said
utilities within the building or the leased premises shall not make the
LESSOR answerable for damages.
Repair in the utility services system, including water pipes and
toilet equipment and facilities within the leased premises shall be
undertaken by the LESSOR, provided however, that if the making of such
repair has been rendered necessary due to damage resulting from the fault
or negligence of the LESSEE's employee, agent, guest, client or customer,
said repairs shall be at the LESSEE's expense.
No delay in the making of such repairs nor defectiveness or
satisfactory condition thereof shall render the LESSOR liable for damage to
the LESSEE. However, if there is unreasonable delay in making repairs
despite due notice in writing, the LESSEE shall have the option to
preterminate the Lease and the advance payments and deposit, less
deductions permitted pursuant to the Contract, shall be immediately
returned to the LESSEE.
Section 3. Paragraph 7 of the Contract is hereby amended to read as follows:
Paragraph 7 The LESSOR shall not be liable for any damages caused or
arising from the failure of the water supply, failure of fluctuation of the
electric current, or defects from the plumbing, water or electric
installation, or bursting, leaking or running of any washstand, water
closet, cistern, tank or waste pipe in or adjacent to the leased premises,
or for damages caused by water coming through the roof. However, if there
is unreasonable delay in making repairs despite due notice in writing, the
LESSEE shall have the option to preterminate the Lease and the advance
payments and deposit, less deductions permitted pursuant to the Contract,
shall be immediately returned to the LESSEE.
<PAGE>
Except for reasons due to the fault or negligence of the LESSOR, the
LESSEE during the occupancy of the leased premises hold the LESSOR free and
harmless from any damages, liability or responsibility to any person
arising out or as a consequence of the used of the leased premises by the
LESSEE, members of their staff and guests.
Section 4. Paragraph 9 of the Contract is hereby amended to read as follows:
Paragraph 9 Failure of the LESSEE for any reason whatsoever to pay any
monthly rental for the lease premises on the date it is due, or violation
by the LESSEE of the prohibition against assignment and sub-lease, or
breach by the LESSEE of any of the conditions herein stipulated shall
entitle/the LESSOR, at its sole option and judgment, to immediately, and
without notice nor court action nor judicial order, enter and close the
leased premises as LESSEE's attorney-in-fact and discontinue the use or
occupancy thereof by the LESSEE until the LESSEE has remedied the breach to
the complete satisfaction of the LESSOR, it being understood that said
closure shall not abate the rentals nor subject the LESSOR to any kind of
civil nor criminal suit by the LESSEE, or any of the LESSEE's employees,
customers or other third persons.
Section 5. The Second Paragraph of Paragraph 13 of the Contract is hereby
transferred as the Second Paragraph of Paragraph 10 of the Contract.
IN WITNESS WHEREOF, the parties have hereunto signed these present in Pasig
City, Philippines, this ___ day of December, 1998.
/s/ Rebecca A. Ynares MOMENTUM INTERNET
REBECCA A. YNARES (PHILIPPINES) INC.
By: /s/ Anthony Tobin
ANTHONY TOBIN
President
SIGNED IN THE PRESENCE OF:
<PAGE>
ACKNOWLEDGMENT
REPUBLIC OF THE PHILIPPINES )
MANILA )S.S.
BEFORE ME, a Notary Public for and in MANILA Metro Manila, _______ this day
of December, 1999 personally appeared the following:
NAME CTC/Passport No. DATE/PLACE ISSUED
Rebecca A. Ynares 15869402 7 Jan. 1999/Binangonan, Rizal
Anthony Tobin B 339203 18 July 89; Manila
known to me and to me known to be the same persons who executed the foregoing
First Amended to the Contract of Lease, and acknowledged to me that the same is
their true act and voluntary deed.
WITNESS MY HAND AND NOTARIAL SEAL on the date and place first above
Doc. No.
Page No.
Book No.
Series of 1999
SEAL OF THE NOTARY PUBLIC
CONTRACT OF LEASE
This Contract of Lease is entered into this 11th day of May 1999 in Makati City
by and between:
PHILIPPINE INTERNATIONAL TRADING CORPORATION, a government owned and controlled
corporation organized and existing under and by virtue of the laws of the
Philippines with offices located at Philippines International Centre, 46 Sen
Gilpyyat Ave., Makati City, represented herein by its President, ISMAEL B. CRUZ,
hereinafter referred to as "LESSOR";
And
MOMENTUM INTERNET (PHILS) INC., a corporation organized and existing under and
by virtue of the laws of the Philippines with offices located at PH3 Manila
Luxury Condominium, Pearl Drive cor. Gold Loop, Ortigas Center, Pasig City,
represented herein by its VP-Administration, RICHARD DENNY, hereinafter referred
to as "LESSEE".
Witnesseth, that:
WHEREAS, LESSOR is the registered owner of parking space No. 11, Lower Basement,
located at the Manila Luxury Condominium (MLC), Pearl Drive, Ortigas Center,
Pasig City;
WHEREAS, the LESSEE has offered to lease the said parking space from the LESSOR
and the LESSOR has agreed thereto;
NOW THEREFORE, for and in consideration of the foregoing premises, the LESSOR
leases unto the LESSEE the aforementioned parking space subject to the following
terms and conditions:
1. LEASE TERM
The term of this lease shall be for a period of one (1) month effective on
May 11, 1999 to midnight of June 10, 1999, automatically renewable on a
monthly basis thereafter, PROVIDED: that either party may terminate this
lease for any reason by giving the other party due written notice of at
least one (1) month prior to the intended date of termination.
<PAGE>
2. RENTALS
The monthly rental for the parking slot shall be PESOS: ONE THOUSAND FIVE
HUNDRED (P1500.00), inclusive of VAT, to be paid to the LESSOR within the
first Five (5) days of the month at the LESSOR's offices in Makati City.
Upon signing of this Contract, the LESSEE shall remit to LESSOR the monthly
rental for the first month and three (3) post-dated checks covering the
monthly rentals for the succeeding three (3) months. Subsequent checks for
monthly rentals for each quarter to be submitted thereafter, if the lease
is renewed. The LESSOR reserves the right to impose a penalty charge of 2%
a month for delayed payments based on outstanding amounts due and payable
to LESSOR.
The rentals may be increased by the LESSOR, PROVIDED: that the increase
shall become effective only from the subsequent lease month onwards from
date of receipt by LESSEE of the notice of increase by the LESSOR.
In case of pretermination of the lease by the LESSOR for reasons other than
breach or default committed by the LESSEE, any rentals paid in advance
shall be refunded (pro-rata) to the LESSEE within five (5) banking days
from the termination of the lease, less any unpaid accounts of the LESSEE
to the LESSOR.
3. COMPLIANCE WITH RULES AND REGULATIONS
The LESSEE shall comply with all rules, regulations and restrictions of the
MLC Condominium Association relative to the occupancy and use of the said
parking space, and shall use the leased area only for parking space for
vehicles and not for any other purpose. The LESSEE shall indemnify and hold
harmless the LESSOR against any actions, suits, damages or claims
whatsoever which may be brought or made by reason of the LESSEE's
nonobservance of the rules, regulations and restrictions of said MLC
Association.
4. LIABILITY
For the duration of the lease, the LESSEE shall hold the LESSOR free and
harmless from any injury, losses or damages caused to any person or
property which may occur on the leased area, and shall furthermore, be
responsible for all acts or omissions of its agents, representatives,
employees, visitors or family members while using or occupy the parking
area, whether temporarily or otherwise, and it is expressly agreed that the
LESSEE shall be fully responsible for such injury, loss or damage without
recourse to the LESSOR.
In addition, the LESSOR makes no warranty or assumes no responsibility for
the security of safety of the vehicle(s) parked at the said parking space
and the LESSEE understands that such risks shall be borne by the LESSEE at
all times.
2
<PAGE>
5. BREACH OF CONTRACT
In the event of violation by the LESSEE of any of the terms and conditions
of this lease, the LESSOR is hereby authorized to terminate this contract
upon written notice to the LESSEE. and eject the LESSEE without need of'
any judicial intervention. To effect this remedy, the LESSOR is hereby
expressly authorized by the LESSEE to repossess the leased parking space.
6. OTHER TERMS AND CONDITIONS
6.1 The LESSEE is not authorized to sublease or assign this lease to any
person or entity without the prior written consent of the LESSOR.
6.2 At the end of the lease term, or any renewals thereof, the LESSEE
shall peacefully vacate the leased parking area and deliver the same
to the LESSOR free of any debris or obstructions, and in the same
condition as it was at the beginning of the lease.
6.3 The LESSEE shall, at all times and for its own account, maintain the
leased parking area in clean condition, free from any obnoxious odor
or garbage.
6.4 None of the terms and conditions of this contract may be changed or
modified by mere tolerance on the part of the LESSOR and any such
changes or modifications, in order-to be binding, must be in writing
and signed by the duly authorized representatives of the parties.
6.5 In case of litigation arising from this contract, the venue shall be
the proper courts of Makati City.
IN WITNESS WHEREOF, the parties have signed this contract on the date and place
first above-written.
PHILIPPINE INTERNATIONAL MOMENTUM INTERNET
TRADING CORPORATION (PHILS) INC.
(LESSOR) (LESSEE)
BY: /s/ Ismael B. Cruz By: /s/ Richard Denny
- -------------------------------- ----------------------------------
ISMAEL B. CRUZ RICHARD DENNY
President VP-Administration
3
<PAGE>
SIGNED IN THE PRESENCE OF
MARLENE R. LOPEZ
VP-Finance & Administration
ACKNOWLEDGEMENT
REPUBLIC OF THE PHILIPPINES)
MAKATI CITY ) S.S.
BEFORE ME, a Notary Public for Makati City this 7th day of June 1999 personally
appeared the following:
NAME CTC/PASSPORT NO. DATE/PLACE ISSUED
ISMAEL B. CRUZ 00045888 2/26/99/Makati City
RICHARD DENNY 500035485 11/6/99 London
known to me and to me known to be the same persons who executed the foregoing
instrument and who acknowledged to me that the same are their free and voluntary
acts and that of the corporations which they represent.
IN WITNESS WHEREOF, I have set my hand and seal on the date and place first
above-written.
SEAL OF THE NOTARY PUBLIC
Doc. No. 492
Page No. NOTARY PUBLIC
Book No. UNTIL DECEMBER 31, 20100
Series of 1999 PTR NO. 0446024
ISSUED AT MAKATI CITY
ISSUED 0N JANUARY 5, 1999
SUB-LEASE AGREEMENT
This Sub-lease Agreement, entered into by and between:
PHILEXCEL TEXTILES, INCORPORATED (PTI) a corporation duly organized and
existing under the laws of the Republic of the Philippines, the duly authorized
representative of EXCEL TEXTILES, INCORPORATED (ETI) a corporation organized and
existing under the laws of the British Island, with principal address at
Mitchell Highway 1961 st Area, Clark Field, Pampanga, represented herein by it's
General Manager Elizabeth M. Castro, herein referred to as the "SUB-LESSOR",
-AND -
NEW AGE PUBLICATIONS, INC. a corporation duly organized and existing under
the laws of the Republic of the Philippines, with principal address at Bldg.
8584 Boton Wharf, Subic Bay Freeport Zone, Olongapo City, represented herein by
it's president Eric Montandon, hereinafter referred to as the "SUB-LESSEE," (or
any other company under Eric Montandon's control to be nominated by him prior to
December 1, 1996.)
WITNESSETH
WHEREAS, the SUB-LESSOR is the LESSEE of a certain property being managed
and administered by Clark Development Corporation (CDC), consisting of land with
an area of 52 hectares, more or less, located within the CLARK SPECIAL ECONOMIC
ZONE (CSEZ) at Clark Field, Pampanga, as evidenced by a lease agreement executed
by the Lessee and CDC dated July 31, 1993 and recorded as Doc. No. 160, Page No.
33, Book No. 47, Series of 1993, of the National Register of Atty. Maximo U.
Mercado, a Notary Public for and in Manila, and attached hereto as ANNEX "A" and
made an integral part hereof:
WHEREAS, the SUB-LESSEE is interested to lease a certain portion of the
above mentioned leased property;
NOW THEREFORE, for and in consideration of the foregoing, the sub-lessor
hereby sublets and sublesses unto the sub-lessee the portions of the leased
property described below and sub-lesses hereby accepts the sub-lease, subject to
the following terms and conditions:
1. SUB-LEASED PROPERTY. The SUB-LESSOR hereby transfers and conveys by way
of sub-lease in favor of the SUB-LESSEE a certain portion of the former's leased
property, specifically of building PTI-07 with an area of TWO THOUSAND FIVE
HUNDRED (2,500) SQUARE METERS at Mitchell Highway 1961st Area, Clark Field,
Pampanga. The map showing the location and portion of the said sub-leased
property is herein attached as "ANNEX "B." The leased area includes sufficient
area around the building for parking and manuevering.
2. TERM. The term of this sub-lease shall be for a period of TEN YEARS
commencing from December 1, 1996. It may be renewed thereafter by mutual
agreement of the parties but subject to such new terms and conditions as may
then be mutually agreed upon between the parties and subject to the prior
written approval and consent of the original lessor (CDC). It is a condition
precedent however, of this SUB-LEASE that this sub-lease agreement which shall
prevail over the term stipulated herein.
<PAGE>
3. RENTALS. SUB-LESSEE shall pay rentals of TWO DOLLARS ($2.00) per square
meter per month based on the floor area sub-leased or a total of FIVE THOUSAND
DOLLARS ($5,000.00) per month without need of demand at the SUB-LESSOR'S office.
The rental is payable monthly prior to the 5th day of each month.
NEW AGE PUBLICATIONS, INC.
The monthly rent shall consist of the following
a] Land $ 625.00
b] Building 4,375.00
c] Equipment 0
-----------
$ 5,000.00
-----------
-----------
The monthly rentals shall be increased by six (6%) percent every year,
compoundedly annually.
4. ADVANCE RENTAL. Upon signing of this agreement the SUB-LESSEE hereby
agrees to pay the SUB-LESSOR the sum of FIVE THOUSAND DOLLARS ($5,000.00) for
one month advance rent, to be applied to the final months lease payment.
5. SECURITY DEPOSIT. The SUB-LESSEE agrees to pay the sum of FIFTEEN
THOUSAND DOLLARS ($15,000.00) to cover charges for any unpaid bills for water,
telephone and power as well as payment for damages that may be caused on the
leased premises by the SUB-LESSEE. Balance of the said amount, if any, after
payment of the above mentioned obligations shall be refunded by the SUB-LESSOR
to the SUB-LESSEE upon expiration, termination or cancellation of the sub-lease
agreement as provided for herein. In case of delay in the payment of monthly
rentals, a surcharge of three (3%) percent per month or fraction thereof
computed from the date of delay shall be added and paid by the SUB-LESSEE
without prejudice to the other penalties and rights of the SUB-LESSOR as
provided for herein.
6. USE OF THE SUB-LEASED PROPERTY. The SUB-LESSEE expressly agrees and
warrants that the Sub-leased premised shall be used by it exclusively for
printing, binding, packaging, mailing, storage and handling of printed material,
related office use and exporting said printed matter and other related products.
SUB-LESSEE is strictly prohibited from using said premises for any other purpose
without the prior written consent of the SUBLESSOR and the original lessor
(CDC).
7. IMPROVEMENTS, INSTALLATIONS AND FACILITIES. The SUB-LESSEE may introduce
any renovations or additional facilities suitable for its authorized purposes
provided that the prior written consent of the SUB-LESSOR is first secured. Any
such improvements or alterations of whatsoever nature shall, upon termination of
this sub-lease, or cancellation thereof as provided for herein, form integral
parts of the leased premises and shall not be removed but shall belong to and
become the exclusive property of the SUB-LESSOR, without any right of the part
of the SUB-LESSEE to reimbursement for the cost or value thereof.
8. PROHIBITION ON ASSIGNMENT, ENCUMBRANCE. The SUB-LESSE shall not assign,
transfer, convey, mortgage or any way incumbent it's right under this contract
or any portion of the leased premises unless prior written consent of the
SUB-LESSOR and the original lessor (C.D.C.) is obtained.
<PAGE>
9. SUBLEASING. The SUB-LESSEE has the right to sublease any portion of tile
building, with the prior written consent of the sub-lessor, not to be
unreasonably withheld by the sub-lessor. The sub-lessee agrees to pay sub-lessor
10% of the gross proceeds of all subleases executed.
10. TENANTABLE CONDITION, REPAIRS, ENCUMBRANCE. The SUBLESSEE hereby
expressly acknowledges receipt of the leased premises as of December 1, 1996, in
good and tenantable condition and agrees to keep the same in such condition at
it's own expense ordinary wear and tear expected. Any provision of the law,
present or future or any stipulation in th.is agreement to the contrary
notwithstanding the SUB-LESSEE hereby agrees and binds himself to undertake and
do all repairs major and minor witich maybe due in the premises. Major repairs
due to defects in the roof and structural components of the building, or due to
unforseen causes (see below) wUl be the responsibility of the SUB-LESSOR for
thefirst 5 years of the lease term.
11. DAMAGES OUTSIDE OF CONTROL. In case of damage to the leased property as
a result of exterior fire, earthquake, volcanic eruption, war, or other acts of
God or unforeseen causes outside of SUB-LESSEE's control, the SUB-LESSEE may
suspend rental payments until repairs can be completed and normal business
operations can be resumed.
12. WATER, ELECTRICITY, LIGHT AND OTHER UTILITY SERVICES. The SUB-LESSEE
shall pay for and defray all it's exclusively expense, the cost of water
consumption, electric, telephone or other utility services in the leased
premises.
13. GOVERNMENT RULES AND REGULATIONS. The SUB-LESSEE shall strictly comply
with any and all laws, ordinances, regulations or orders of the National or
Local Government Authorities, arising from the use and occupation of the leased
premises. All cost s/requirement s in mandated laws, ordinances, regulations or
order shall be at the risk of and expense of the SUB-LESSEE.
14. LESSOR/SUB-LESSOR RULES AND REGULATION. The SUB-LESSEE expressly agrees
to strictly abide by all the rules and regulation which may be given from time
to time by the SUB-LESSOR of the original lessor pertaining to the use of the
lease premises, to include among other to wit:
a. For aesthetic value, all office sign must be uniform size.
b. For security reason, the SUB-LESSOR hereby unilaterally imposes upon
itself to provide security and janitorial services to every sub-lesse
tenant. Compensensation for such services shall be commensurate to
tile area subject of the lease and to the respective requirement of
each sub-lessee and shall be paid for separately by the SUB-LESSEE
also on a monthly basis as in par. 3 above.
15. INSPECTION OF PREMISES. The SUB-LESSOR or it's duly authorize
representative shall have the right to inspect the leased premises during
business hours upon giving prior to notice to the SUB-LESSEE.
<PAGE>
16. OBNOXIOUS SUBSTANCES. The SUB-LESSEE shall not introduce, keep or store
in the sub-lease premises any obnoxious substance or inflammable materials or
substances that might constitute a fire hazard, without the prior consent of the
SUB-LESSOR when needed by the SUB-LESSEE for it's authorized business activities
of the SUB-LESSEE.
17. PENALTY CAUSE.
a. In case either party violates any of the terms and conditions of this
contract, the innocent or aggrieved party shall have the right to
cancel this contract.
b. The guilty party shall be liable for any and all damages resulting
therefrom.
c. Should either party be forced to litigate and engage the services of a
lawyer to enforce his rights under this contract, the guilty party
shall likewise be liable for attorney's fees amounting to 25% of the
amount involved by in no case less that $10,000.00.
d. In case it is the SUB-LESSEE who violates any of the terms and
conditions hereof and the SUB-LESSOR exercises his right to cancel the
contract or upon expiration of the term agreed upon, the SUB-LESSEE
agrees to peacefully and voluntarily vacate the premises and turn over
the same to the SUB-LESSOR or the latter's authorized representative
upon written demand served by registered mail or by personal delivery
on SUB-LESSEE's address indicated in this contract or on the leased
premises.
e. In case SUB-LESSEE abandons the leased premises, the SUB-LESSEE hereby
authorizes the SUB-LESSOR to obtain possession of the Sub-leased
premises and/or to open or break any locked doors or windows to gain
entry without heed of any court order, this document serving as
authority therefore. If there are any goods, merchandise or other
movable properties belonging to the SUB-LESSEE and left on the leased
premises, SUB-LESSOR is hereby authorized to remove the same to be
stored in any public or private warehouse at SUB-LESSEE's expense.
SUB-LESSEE furthermore authorized the SUB-LESSOR to pay for the costs
of the storage and/or any unpaid rents or damages caused on the lease
premises by selling the said goods at public auction under the
supervision of the Sheriffs of the Courts of Angeles City. The
expenses of such auction sale shall likewise from the proceeds thereof
and/or shouldered by the SUB-LESSEE. Any excess proceeds will be
applied against unpaid rents if any and the balance to be refunded to
SUBLESSEE.
f. If the SUB-LESSEE refuses or fails to surrender possession when
required as stated in paragraph d above, SUB-LESSEE shall be obliged
to pay SUB-LESSOR as monthly rental provided for herein computed from
date of demand up to the date of SUB-LESSOR obtains actual possession
thereof, in addition to any other penalties under this contract or
under the law.
18. OTHER TERMS AND CONDITIONS. All other terms and conditions of the lease
agreement entered into by and between the SUB-LESSOR and CDC, herein attached as
Annex "A", not inconsistent with the terms and conditions of this SUB-LEASE
AGREEMENT and SUB-LESSEE binds itself to faithfully comply with the same.
<PAGE>
19. VENUE. In case of court suit, the parties expressly submits themselves
to the jurisdiction of the courts Angeles City.
20. SUB-LESSOR APPROVAL. This agreement is subject to final approval of
Clark Development Corporation and according to the terms thereof of such
approval.
IN WITNESS WHEREOF, the parties have hereunto affixed their signature this
5th day of September 1996 at Angeles City, Philippines.
PHILEXCEL TEXTILES, INC. NEW AGE PUBLICATIONS, INC.
(Sub-lessor) (Sub-lessee)
by: /S/ Elizabeth M. Castro by: eric Montandon
- ----------------------------- ---------------------------------
ELIZABETH M. CASTRO ERIC MONTANDON
General Manager President
SIGNED IN THE PRESENCE OF:
ACKNOWLEDGEMENT
REPUBLIC OF THE PHILIPPINES )
)S.S.
CITY OF OLONGAP0
Before me, a Notary Public in and for on this 5th day of September, 1996
personally appeared the following:
COMMUNITY TAX DATE/PLACE
NAME CERTIFICATE ISSUED
- --------------------------------------------------------------------------------
Elizabeth M. Castro 148913220 2-2-96, Angeles City
PASSPORT NO.
Eric Montandon 13083261 5-28-92, Houston, Texas
known to me to be the same persons who executed the foregoing instrument and
acknowledged that the same is their free act and voluntary deed and that of the
principals herein represented.
This document consist of six (6) pages pertain to a Sublease Agreement
signed by the parties and their instrumentalities witnesses on every page
thereof.
/S/ EN GELBERTO T. DE CASTRO
EN GELBERTO T. DE CASTRO
Notary Public
Until December 31, 1997
PTR # 4314222, 1-3-96
Doc No. 418
Page No. 84
Book No. XI
Series of 1996
AMENDED SUBLEASE AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This Sublease Agreement, dated December 1, 1998, was entered by and between:
PHILEXCEL TEXTILES, INC. a corporation duly organized and existing under
the laws of the Republic of the Philippines, with duly authorized representative
of EXCEL TEXTILES, INCORPORATED (ETI), a corporation duly organized and existing
under the laws of the British Islands, with principal address at Manuel Roxas
Highway, 1961st Area, Clark Special Economic Zone, Clark Field, Pampanga,
represented herein by its General Manager ELIZABETH M. CASTRO, hereinafter
referred to as the "SUB-LESSOR",
-AND-
MOMENTUM ASIA, INC., a corporation duly organized and existing under the
laws of the Republic of the Philippines, with principal office address at Bldg.
07, PhilExcel Compound, M. Roxas Highway 19616' Area, Clark Field, Pampanga,
Philippines, represented by its President ERIC MONTANDON, hereinafter referred
to as the "SUBLESSEE".
WITNESSETH: That
WHEREAS, the SUB-LESSOR is the LESSEE of a certain property being managed
and administered by Clark Development Corporation (CDC), consisting of land with
an area of 52 hectares, more or less, located within the CLARK SPECIAL ECONOMIC
ZONE (CSEZ) at Clark Field, Pampanga, as evidence by a lease agreement executed
by the Lessee and CDC dated July 31, 1993 and recorded as Doc. No. 160, Page No.
33, Book No. 47, Series of 1993, of the National Register Attorney Maximo U.
Mercado, a Notary Public for and in Manila, and attached hereto as Annex "A" and
made an integral part hereof;
WHEREAS, the parties had entered into a SUBLEASE AGREEMENT dated 7
September 1996 which document was notarized by Notary Public Augusto G. Panlilio
and entered in the latter's notarial register as Doc. No. 187; Page No. 038;
Book No. XXIV; Series of 1996;
WHEREAS, the parties desire to amend the term and other provisions in the
subject
NOW, THEREFORE, for and in consideration of the foregoing, the SUBLESSOR
hereby sublets and subleases unto the SUB-LESSEE the portions of the leased
property described below and the SUB-LESSEE hereby accepts the sublease, subject
to the following terms and conditions, to wit:
1. SUB-LEASED PROPERTY. The SUBLESSOR hereby transfers and conveys by way
of sublease in favor of the SUB-LESSEE a certain portion of the formers leased
property, specifically Bldg. 07 with an area of TWO THOUSAND FIVE HUNDRED
(2,500) SQUARE METERS at M. Roxas Highway, 1961st Area Clark Field, Pampanga.
The map
1
<PAGE>
showing the location and portion of the said subleased property is herein
attached as ANNEX "B" .
2. TERM. The term of this sublease shall be for a period of eighteen (18)
years commencing from December 01, 1998 or up to November 30, 2016. It may be
renewed thereafter by mutual agreement of the parties but subject to such new
terms and conditions as may then be mutually agreed upon and subject to the
prior written approval and consent of the original lessor CDC. It is a condition
precedent however of this SUBLEASE that this Sublease Agreement is co-terminus
with the SUBLESSOR'S term and subject to the terms of its original lease. In the
event of pre-termination or cancellation of SUBLESSOR'S original lease with CDC,
this contract is likewise automatically deemed cancelled and/or terminated.
3. RENTALS.
3.1 SUB-LESSEE shall pay rentals at the rate of TWO US DOLLARS & TWENTY
FIVE CENTS ($2.25) per square meter per month based on the floor area
subleased or a total of FIVE THOUSAND THREE HUNDRED (US $5,300.00) US
DOLLARS per month.
3.2 The monthly rentals shall be increased by six (6%) percent every year
compounded annually except for the rentals for year 2 covering the
period from December 01, 1999 up to November 2000 which increase shall
be deferred and spread over the next three (3) years. For this
purpose, the monthly rentals per square meter shall be as follows:
Year 1-12/1/1998 to 11/30/1999 = US$2.25/sq.m.
Year 2-12/1/1999 to 11/30/2000 = 2.25
Year 3-12/1/2000 to 11 /30/2001 = 2.43
Year 4-12/1/2001 to 11/30/2002 = 2.62
Year 5-12/1/2002 to 11/30/2003 = 2.83
Year 6-12/1/2004 to 11/30/2005 = 3.00
Year 7-12/1/2005 to 11/30/2006 = 3.18
Year 8-12/1/2006 to 11/30/2007 = 3.37
Year 9-12/1/2007 to 11/30/2008 = 3.57
Year 10-12/1/2008 to 11/30/2009 = 3.80
Year 11 -12/1/2010 to 11/30/2011 = 4.02
Year 12-12/l/2011 to 11/30/2012 = 4.26
Year 13-12/1/2012 to 11/30/2013 = 4.52
Year 14-12/1/2013 to 11/30/2014 = 4.79
Year 15-12/1/2014 to 11/30/2015 = 5.08
Year 16-12/1/2015 to 11/30/2016 = 5.38
Year 17-12/l/2016 to 11/30/2017 = 5.70
Year 18-12/1/2017 to 11/30/2018 = 6.04
3.3 The rents shall be paid monthly in advance at the SUBLESSOR'S office
within the first five (5) days of every month without need of demand.
3.4 In case of delay in the payment of monthly rentals, a surcharge of
three (3%) percent per month or fraction thereof computed from the
sixth (6th ) day of the current month of delay shall be added and paid
by the SUBLESSEE without prejudice to the other penalties and rights
of the SUBLESSOR as provided for herein.
2
<PAGE>
4. DEPOSITS. The SUBLESSOR confirms receipt of and the payment by the
SUBLESSEE of the following deposits:
4.1 SECURITY DEPOSIT. The sum of FIFTEEN THOUSAND (US$15,000.00) US
Dollars as non-interest bearing security deposit to answer for any
unpaid utility bills such as water, telephone and electricity, as well
as for damages that may be caused on the leased premises by the
SUBLESSEE. Balance of the said amount, if any, after payment of the
above-mentioned obligations shall be refunded by the SUBLESSOR to the
SUBLESSEE upon expiration, termination, or cancellation of the
Sublease Agreement as provided for herein, unless there are any unpaid
rents, interests, or penalties, in which case SUBLESSOR shall have the
right to offset this deposit or any balance thereof against such
unpaid obligations. SUBLESSEE, however, has no right to offset this
deposit against any unpaid rentals.
4.2 RENTAL DEPOSIT. The sum of FIVE THOUSAND (US $5,000.00) US Dollars as
non-interest bearing rental deposits to be applied against the last
month's rent or whatever is proportionately applicable.
5. USE OF THE SUBLEASED PROPERTY. The SUBLESSEE expressly agrees and
warrants that the subleased premises shall be used by it exclusively for
printing, binding, packaging, mailing, storage and handling of printed
materials, related office use, and exporting of said printed matter and related
products. The SUBLESSEE is strictly prohibited from using said premises for any
other purpose without consent of the SUBLESSOR and CDC. The SUBLESSEE shall have
no right to change the form of its business organization as stated herein or
bring in any new partners, investors, or joint venture partners without the
prior written consent of the SUBLESSOR, and LESSOR, if required by the latter.
6. IMPROVEMENTS, INSTALLATION AND FACILITIES. The SUBLESSEE may introduce
any renovations or additional facilities suitable for its authorized purposes
provided that the prior written consent of the SUBLESSOR is first secured. Any
such improvements or alterations of whatsoever nature shall, upon termination of
this sublease, or cancellation thereof as provided for herein, form integral
parts of the leased premises and shall not be removed but shall belong to and
become the exclusive property of the SUBLESSOR, without any right on the part of
the SUBLESSEE to the reimbursement for the cost or value thereof.
7. PROHIBITION ON ASSIGNMENT, ENCUMBRANCE. The SUBLESSEE shall not directly
or indirectly further sublease, assign, transfer, convey, mortgage or in any way
encumber its rights under this contract or any portion of the leased premises
unless prior written consent of the SUB-LESSOR and the original lessor (C.D.C.)
is obtained.
8. TENANTABLE CONDITION, REPAIRS, IMPROVEMENTS. The SUBLESSEE hereby
expressly acknowledges receipt of the leased premises in good and tenantable
condition and agrees to keep the same in such condition at its own expense,
ordinary wear and tear excepted. Any provision of the law, present or the future
or any stipulation in this agreement to the contrary notwithstanding, the
SUBLESSEE hereby agrees and binds itself to undertake and do all the repairs
major and minor which may due on the premises. Major repairs due to defects in
the in the roof and structural components of the building, or due to unforeseen
causes (see below) will be the responsibility of the SUB-LESSOR for the first 3
years of the lease term.
3
<PAGE>
9. WATER, ELECTRICITY, LIGHT AND OTHER UTILITY SERVICES. The SUBLESSEE
shall pay for and defray at its exclusive expense the cost of water consumption,
electric, telephone, or other utility services in the leased premises.
10. GOVERNMENT RULES AND REGULATIONS. The SUBLESSEE shall comply with any
and all laws ordinances, regulations or orders of the National or Local
Government Authorities and CDC arising from the use and occupancy of the leased
premises. All costs/requirements in mandated laws, ordinances , regulations or
orders shall be at the risk and expense of the said SUBLESSEE.
11. LESSOR/SUBLESSOR RULES AND REGULATIONS. The SUBLESSEE expressly agrees
to strictly abide by all the rules and regulations which may be given from time
to time by the SUBLESSOR or the original LESSOR pertaining to the use of the
leased premises to include, among others, to wit:
a. For aesthetic value, all office signs must be of uniform size
with those prescribed by the SUBLESSOR and/or CDC.
b. SUBLESSOR is hereby authorized to engage the services of any
local security agency to provide security services on the entire
compound including the subleased portions and for janitorial
services for the vacant lands surrounding the building. SUBLESSEE
shall share in the cost of such security or janitorial services
procured by the SUBLESSEE shall be at the latter's expense.
c. Considering the nature of the SUBLESSOR'S prime business as well
as that of the tenants in the building where an innocuously
thrown cigarette may cause conflagration, smoking, whether of
cigars, cigarettes or pipes is absolutely and totally banned
within the premises whether inside or outside of all the offices,
warehouse or building.
12. INSPECTIONS OF PREMISES. The SUBLESSOR or its duly authorized
representative shall have the right to inspect the leased premises during
business hours upon giving prior notice to the SUBLESSEE.
13. OBNOXIOUS SUBSTANCES. The SUBLESSEE shall not introduce, keep, deposit
or store in the subleased premises any obnoxious substance or inflammable
materials or substances that might constitute a fire hazard, without the prior
written consent of the SUBLESSOR which consent shall not be unreasonably with
held when needed by the SUBLESSEE for its authorized business activities.
14. PENALTY CLAUSE
a. In case either party violates any of the terms and conditions of
this contract, the innocent or aggrieved party shall have the
right to cancel this contract extra-judicially and without need
of any court order or proceedings except the service of a written
notice thereof to the other party.
b. The guilty party shall be liable for any and all damages
resulting therefrom including but not limited to what is provided
for in this contract.
4
<PAGE>
c. In case it is the SUBLESSEE who violates any of the terms and
conditions hereof and the SUBLESSOR exercises his right to cancel
the contract, or upon expiration of the terms agreed upon, the
SUBLEESSEE agrees to peacefully and voluntarily vacate the
premises and turn over the same to the SUBLESSOR or the latter's
authorized representative upon written demand served by
registered mail or by personal delivery on SUBLESSEES address
indicated in this contract or on the leased premises.
d. If the SUBLESSEE refuses or fails to surrender possession when
required as stated in par. (c) above, SUBLESSEE shall be obliged
to pay SUBLESSOR a monthly rent and liquidated damages an amount
equivalent to four (4) times the prevailing monthly rental plus
3% interest per month as provided for herein computed from date
of demand up to the date the SUBLESSOR obtains actual possession
thereof, in addition to any other penalties under this contract
or under the law.
e. In case SUBLESSEE abandons the subleased premises which includes
padlocking the building and/or failure to conduct business
operations/authorized purposes for a period of at least thirty,
(30) days without paying the monthly rents. The SUBLESSEE hereby
authorizes the SUBLESSOR to obtain possession of the subleased
premises with right to break-open any locked doors or windows to
gain entry without need of any court order or proceedings with
this document serving as authority therefore. For this purposes,
SUBLESSEE hereby waives any action for trespass, coercion, or any
other similar suits. Thereafter, SUBLESSOR shall be free to use
the premises for its own purposes or to sublease the same to any
third party as may be authorized by CDC by virtue of its original
lease agreement. If there are any goods, merchandise or other
movable properties belonging to the SUBLESSEE and left on the
subleased premises. SUBLESSOR is hereby authorized to remove the
same to be stored in an, public or private warehouse at
SUBLESSEE'S expense. SUBLESSEE furthermore authorizes the
SUBLESSOR to pay for the costs of the storage and/or for any
unpaid rents or damage caused on the subleased premises by
selling the said goods at public auction under the supervision of
the Sheriffs of the Courts of Angeles City. The expenses of such
auction sale shall likewise be taken from the proceeds will be
applied against unpaid rents, interests and penalties, if any,
and the balance to be refunded to SUBLESSEE.
f. If the SUBLESSEE vacates the premises or withdraws from or
cancels or causes the cancellation of the contract at any time
after signing but before the expiration of the term or period
agreed upon SUBLESSEE shall be liable for all the rents due on
the un-expired term of the lease or the forfeiture of the
security and rental deposits, whichever is higher, without
prejudice to any other penalties which may have been incurred as
provided for in this contract.
g. Should either party be forced to litigate and/or to engage the
services of a lawyer to enforce its rights under this contract,
the guilty party or party committing the breach shall likewise be
liable for attorney's fees amounting to 25% of the amount
involved but in no case less than P1150,000.00, plus all other
litigation expenses incurred.
h. Any notice or demand served/sent on the leased premises by
personal delivery or registered mail even if the subleased
premises were abandoned or if served on whomsoever is found
thereat shall be sufficient notice to the SUBLESSEE.
5
<PAGE>
15. OTHER TERMS AND CONDITIONS. All other terms and conditions of the lease
agreement entered into by and between the SUBLESSOR and CDC, herein attached as
ANNEX "A", not inconsistent with the terms and conditions of this SUBLEASE
AGREEMENT, are hereby incorporated as integral parts of this SUBLEASE AGREEMENT
and SUBLESSEE binds itself to faithfully comply with the same.
16. VENUE. In case of court suit, the parties expressly submits themselves
to the jurisdiction of the courts of Angeles City.
17. LESSOR'S APPROVAL. This agreement is subject to final approval by Clark
Development Corporation and according to the terms of such approval.
18. PRIOR SUBLEASE AGREEMENT. Upon effectivity of this Amended Sublease
Agreement, the original Sublease Agreement dated 7 September 1996 is hereby
cancelled and rendered of no further force and effect.
IN WITNESS WHEREOF, the parties have hereunto affixed their signature this
20th day of January 1999, at Clark Field, Pampanga.
PHILEXCEL TEXTILES, INC. MOMENTUM ASIA, INC.
Sublessor Sublessee
by: /S/ Elizabeth M. Castro by: eric Montandon
- ----------------------------- ---------------------------------
ELIZABETH M. CASTRO ERIC MONTANDON
General Manager President
SIGNED IN THE PRESENCE OF:
6
<PAGE>
ACKNOWLEDGMENT
REPUBLIC OF THE PHILIPPINES )
(CITY OF ANGELES ) S.S
BEFORE ME , a Notary Public in and for Pampanga, on this 20th day of January
1999 personally appeared the following:
CTC No/
Name Passport No. Place Issued Date Issued
- --------------------------------------------------------------------------------
ELIZABETH M. CASTRO 6424523 Angeles City January 21, 1998
ERIC MONTANDON 130832609 Houston May 28, 1992
Known to me to be the same persons who executed the foregoing instrument and
acknowledged to me that the same is their free and voluntary act and deed and
those of the entities which they represent.
This instrument related to an Amended Contract of Lease which consists of
seven (7) pages including this page where the acknowledgment is written and duly
signed by the parties herein and their instrumental witnesses on each and every
page hereof. "'
WITNESS MY HAND AND OFFICIAL SEAL on the date and place
above-mentioned.
Seal of the Notary Public
Doc. No. 005;
Page No. 0331
Book No xxix
Series of 1998
7
LEASE AGREEMENT BETWEEN
EsNET PROPERTIES, L.C.,
A Utah limited liability Company, as
Landlord
and
Online Investor Advantage, Inc., as
Tenant
DATED May 25 ,1999
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT (THIS "LEASE") is enter as of the 25 day of May, 1999
by, between and among EsNET PROPERTIES, L.C., a Utah limited liability company,
as Landlord, and Online Investors Advantage Inc., as Tenant.
ARTICLE 1: DEFINITIONS.
The definitions of certain of the capitalized terms used in this Lease are
set forth in the Glossary of Defined terms attached as Exhibit A and by this
reference made a part hereof
ARTICLE 2: PREMISES
Subject to the provisions of this Lease, Landlord hereby leases to Tenant,
and Tenant hereby leases from Landlord, approximately Three Thousand, Three
Hundred, Forty (3,340) square feet of Net Rentable Area in the Building, which
space is outlined on the floor plan attached hereto as Exhibit B and by this
reference made a part hereof (the "Premises"). In connection with such demise,
Landlord hereby grants to Tenant the non-exclusive right to use during the Term
all Common Areas designed for the use of all tenants in the Building, in common
with all tenants in the Building and their invitees, for the purposes for which
the common Areas are designed and in accordance with the requirements of this
Lease and all Legal Requirements. By occupying the Premises, Tenant Accepts the
Premises as being suitable for Tenant's intended use of the Premises.
ARTICLE 3: TERM
The Term of this Lease shall commence on the Commencement Date (which is
scheduled to be August 1, 1999) and shall expire at 5:00 p.m. on July 20, 2004,
unless earlier terminated as provided herein (the "Term".
ARTICLE 4: USE
Tenant shall occupy and use the Premises solely for lawful, general
business office purposes in strict compliance with the Building Rules and
Regulations from time to time in effect and all other Legal Requirements. Tenant
shall not use or occupy the Premises for any other use or purpose without the
prior written consent of Landlord, which consent can be withheld by Landlord in
Landlord's sole discretion.
Page 2
<PAGE>
ARTICLE 5: RENT
5.1 Base Rent.
In consideration of Landlord's leasing the Premises to Tenant, Tenant shall
pay to Landlord, as "Base Rent" for the Premises, the following amounts:
MONTHLY ANNUAL
TERM AMOUNT AMOUNT
---------------------------------------------------------------------------
Year 1 Annual Letter of Credit $75,264.90
----------------------- ----------
Year 2 $4,156.91 $49,882.90
--------- ----------
Year 3 $4,281.62 $51,379.39
--------- ----------
Year 4 $4,410.06 $52,920.77
--------- ----------
Year 5 $4,542.37 $54,508.39
--------- ----------
5.2 Additional Rent. For purposes of this Lease, Tenant's "Additional Rent"
for any Fiscal Year (or portion thereof) shall mean the product of (a) Net
Rentable Area of the Premises multiplied by (b) the Operating Expenses, divided
by the Net Rentable Area of the Building, all as applicable for the period in
question. By the Commencement Date, Landlord shall estimate the Additional Rent
to be due by Tenant for the balance of the Fiscal Year in which the Commencement
Date occurs. Thereafter, unless Landlord delivers to Tenant a revision of the
estimated Additional Rent Tenant shall pay to Landlord, coincident with Tenant's
payment of Base Rent an amount equal to the estimated Additional Rent for the
remainder of such year divided by the number of months remaining in such year.
From time to time during any Fiscal Year, Landlord may estimate and re-estimate
the Additional Rent to be due by Tenant for that Fiscal Year and deliver a copy
of the estimate or re-estimate to Tenant. Thereafter, the monthly installments
of Additional Rent payable by Tenant shall be appropriately adjusted in
accordance with the estimation so that, by the end of the Fiscal Year, Tenant
shall have paid all of the additional Rent as estimated by Landlord. After the
conclusion of each Fiscal Year during the Term, and after the termination or
expiration of the Term, Landlord shall deliver to Tenant a statement of actual
Additional Rent due by Tenant for the Fiscal Year (or, with respect to
termination or expiration, the portion of the Fiscal Year) just ended. Within
thirty (30) days thereafter, Tenant shall pay to Landlord or Landlord shall
credit against the next installment of Additional Rent due by Tenant (or
Landlord shall refund to Tenant, if the Term has expired and all payments due by
Tenant to Landlord have been paid in full) the difference between the actual
Additional Rent due for such year and the estimated Additional Rent paid by
Tenant during such year. Tenant may review, at Tenant's expense and after giving
twenty (20) days prior written notice to Landlord, Landlord's records relating
to Operating Expenses for any periods within two Fiscal Years prior to the
review, provided, however, no review or audit shall extend to periods of time
preceding the Commencement Date. In lieu of allowing Tenant to review Landlord's
records under this Section 5.2, Landlord may deliver to Tenant a report of the
Operating Expenses prepared by a certified public accountant which report shall
be conclusive for purposes of this Lease.
Page 3
<PAGE>
5.3 Parking Charge. Tenant shall at all times during the Term lease from
Landlord Zero (0) unassigned automobile parking spaces in the Parking Facility,
at a cost of Forty Dollars ($40.00) per month per space. Contemporaneously with
the payment of the first installment of Rent, Tenant shall pay to Landlord as
Additional Rent the product of the number of parking spaces multiplied Forty
Dollars ($40.00) for the access cards needed to gain access to the Parking
Facility.
5.4 Payment of Rent. Except as otherwise expressly provided in this Lease,
all Rent shall be due in advance monthly installments on the first day of each
calendar month during the Term. Rent shall be paid to Landlord at its address
recited in Section 27.7, or to such other person or at such other address as
Landlord may from time to time designate in writing. Rent shall be paid without
notice, demand, abatement, deduction or offset in legal tender of the United
States of America. If the Term commences or ends on other than the first or the
last day of a calendar month, the Rent for the partial month shall be prorated
on the basis of the number of days during such month for which the Term was in
effect. If the Term commences or ends on other than the first or the last day of
a Fiscal Year, the Additional Rent for the partial Fiscal Year shall be prorated
on the basis of the number of days during the Fiscal Year for which the Term was
in effect.
5.5 Delinquent Payments and Handling Charge. All Rent and other payments
required of Tenant hereunder shall bear interest from the date due until the
date paid at the rate of interest specified in Section 27.13. In addition to
interest, if any such Rent or other payment is not received within ten (10) days
from the date it is due, Tenant shall pay to Landlord a late charge equal to
five (5%) percent of the amount of such Rent or other payment to reimburse
Landlord for its cost and inconvenience incurred as a consequence of Tenant's
delinquency. In no event, however, shall the charges permitted under this
Section 5.5 or elsewhere in this Lease, to the extent the same are considered to
be interest under applicable law, exceed the maximum rate of interest allowable
under applicable law.
5.6 Security Deposit. On the date of this Lease, Tenant shall deposit with
Landlord the Security Deposit as security for the faithful performance by Tenant
under this Lease. The Security Deposit shall be returned (without interest) to
Tenant (or, at Landlord's option, to the last permitted assignee of Tenant's
interest under this Lease) after the expiration of the Term, or sooner
termination of this Lease and delivery of possession of the Premises to Landlord
in accordance with Article 26 if, at such time, Tenant is not in default under
this Lease. If - ' Landlord's interest in this Lease is conveyed, transferred or
assigned, Landlord shall transfer or credit the Security Deposit to Landlord's
successor in interest, and Landlord shall be released from any liability for the
return of the Security Deposit. Landlord may intermingle the Security Deposit
with Landlord's own funds, and shall not be deemed to be a trustee of the
Security Deposit. If Tenant fails to timely-pay or perform any obligation under
this Lease, Landlord may, prior to, concurrently with or subsequent to
exercising any other right or remedy, use, apply or retain all or any part of
the Security Deposit for the payment of any monetary obligation due under this
Lease, or to compensate Landlord for any other expense, loss or damage which
Landlord may incur by reason of Tenant's failure, including any damage or
deficiency in the reletting of the Premises. If all or any portion of the
Security Deposit is so used, applied or retained, Tenant shall immediately
Page 4
<PAGE>
deposit with Landlord cash in an amount sufficient to restore the Security
Deposit to the original amount. Landlord may withhold the Security Deposit after
the expiration of the Term or sooner termination of the Lease Until tenant has
paid the full Tenant's Operating Expenses for the Fiscal Year in which such
expiration or sooner termination occurs and all other amounts payable under this
Lease. The Security Deposit is not a limitation on Landlord's damages or other
rights under this Lease, a payment of liquidated damages or prepaid Rent, and
shall not be applied by Tenant to the Rent for the last (or any) month of the
Term, or to any other amount due under this Lease. If this Lease is terminated
due to any default of Tenant, any portion of the Security Deposit remaining at
the time of such terminations shall immediately inure to the benefit of Landlord
as partial compensation for the costs and expenses incurred by Landlord in
connection with this Lease.
ARTICLE 6: CONSTRUCTION OF IMPROVEMENTS.
6.1 General. Subject to events of Force Majeure, Landlord shall install,
furnish, perform, and apply, at its expense, the Landlord's Work as specified in
the Work Letter. performance of the Landlord's Work shall constitute Landlord's
sole construction obligation to Tenant under this Lease.
6.2 Access by Tenant Prior to Landlord's Work Completion Date. Provided
that Tenant obtains and delivers to Landlord the certificates of policies of
insurance called for in Section 17.1, Landlord, in its sole discretion, may
permit Tenant and its employees, agents, contractors and suppliers to enter the
Premises before the Landlord's Work Completion Date (and such entry alone shall
not constitute Tenant's taking possession of the Premises for the purpose of
Section 6.3), to prepare the Premises for Tenant's occupancy. Tenant and each
other person or firm who or which enters the Premises before the Landlord's Work
Completion Date shall conduct itself so as to no interfere with Landlord or
other occupants of the Building. Landlord may withdraw any permission granted
under this Section 6.2 upon twenty-four (24) hours' notice to Tenant if
Landlord, in its sole discretion, determines that any such interference has been
or may be caused. Any prior entry shall be under all the terms of this Lease
(other than the obligation to pay Base Rent and Additional Rent) and at Tenant's
sole risk. Landlord shall not be liable in any way for personal injury, death or
property damage (including damage to any personal property which Tenant may
bring into, or any work which Tenant may perform in, the Premises) which may
occur in or about the Complex by Tenant or such other person or firm as a result
of any prior entry.
6.3 Commencement Date; Adjustments to Commencement Date. For purposes of
this Lease, the "Commencement Date" shall mean the earliest of (a) the date on
which Landlord substantially completes the Landlord's Work and tenders
possession of the Premises to Tenant, (b) the date on which Landlord would have
substantially completed the Landlord's work and tendered possession of the
Premises to Tenant but for (i) the delay or failure of Tenant to furnish
information or other matters required in the Work Letter, (ii) Tenant's request
for changes in the plans or non-Building Standard items, or (3) any other action
or inaction of Tenant, or any person or firm employed or retained by Tenant, or
(c) the date on which Tenant takes possession of the Premises. If by the
scheduled Commencement Date specified in Article 3, the Landlord's Work has not
been substantially completed, and such failure to substantially complete renders
the Premises unsuitable for the commencement of Tenant's business on the
Page 5
<PAGE>
Premises as reasonably determined by Landlord, then the Commencement Date (and
the commencement of payment of Base Rent and Additional Rent) shall be postponed
until the Landlord's Work is substantially completed as reasonably determined by
Landlord or until possession of the Premises is tendered to Tenant, as the case
may be. Such postponement shall extend the scheduled expiration of the Term for
a number of days equal to the postponement. The postponement of the payment of
Base Rent and Additional Rent under this Section 6.3 shall be Tenant's exclusive
remedy for Landlord's delay in completing the Landlord's Work or tendering
possession of the Premises to Tenant.
ARTICLE 7: SERVICE TO BE FURNISHED BY LANDLORD
7.1 General. Subject to applicable Legal Requirements, the provisions of
this Lease, and Tenant's performance of its obligations hereunder, Landlord
shall use all reasonable efforts to furnish the following services:
(a) Air conditioning and heating to the Premises during Building
Operating Hours, at such temperatures and in such amounts as are considered
by Landlord to be suitable and standard (thus excluding air conditioning or
heating for electronic data processing or other specialized equipment). Air
conditioning and heating of any areas which require special treatment
because of excessive heat from machines, lights, or other sources, shall,
upon Landlord's written consent, be installed and paid for by Tenant and
the additional electrical consumption paid for by the Tenant at the then
current utility rate. I
(b) Hot and cold water at those points of supply common to all floors
for lavatory and drinking purposes only.
(c) Janitorial services shall be provided by Landlord in the manner
stated in the attached Exhibit C entitled "Janitorial Services", which by
this reference is incorporated as part of this Lease. Janitorial Services
shall be provided in the evening, Monday through Friday, and shall be of
the same quality as other first class buildings. These services shall be
provided to the Premises and all common areas in the Building.
(d) Elevator service during Building Operating Hours, if necessary, to
provide access to and egress from the Premises.
(e) Electricity (for normal business usage) for wall plugs 24 hours
per day and for lighting during Building Operating Hours. Tenant's use of
electric energy in the Premises shall not at any time exceed the capacity
of any of the electrical conductors and equipment in or otherwise serving
the Premises. To insure that such capacity is not exceeded and to avert
possible adverse effect upon the Building's electric service, Tenant shall
not, without Landlord's prior written consent in each instance, connect any
additional fixtures, equipment, or appliances (other than lamps,
typewriters and similar small office machines or personal computers which
singly consume not more than 0.5 kilowatts per hour at rated capacity and
use a voltage of 120 volts single phase) to the Building's electric
distribution system or make any alteration or addition to the electric
Page 6
<PAGE>
system of the Premises existing on the Commencement Date. Should Landlord
grant such consent, and should such additional capacity exceed 4.5 watts
per square foot of Net Rentable Area of the Premises, all additional risers
or other equipment required therefore, shall be provided by Landlord and
the cost thereof shall be paid by Tenant upon Landlord's demand. As a
condition to granting such consent, Landlord may require Tenant to agree to
an increase in the Base Rent by an amount which will reflect the value to
Tenant of the additional service to be furnished by landlord; that is, the
potential additional electrical energy to be made available to Tenant based
upon the estimated additional capacity of such additional risers or other
equipment.
(f) Replacement of fluorescent lamps in Building Standard light
fixtures installed by Landlord and of incandescent bulbs or fluorescent
lamps in all public rest rooms, stairwells and other Common Areas in the
Building
If any of the services described above or elsewhere in this Lease are
interrupted, Landlord shall use reasonable diligence to promptly restore the
same. However, neither the interruption nor cessation of such services, not the
failure of Landlord to restore same, shall render Landlord liable for damages
to person or property, or be construed as an eviction of Tenant, or work an
abatement of Rent or relive Tenant from fulfilling any of its other obligations
hereunder. If not previously installed, Landlord may cause an electric and/or
water meter(s) to be installed in the Premises in order to measure the amount
of electricity and/or water consumed for any such use.
7.2 After Hours Heating, Air Conditioning, and Lighting. Heating, lighting,
and air conditioning shall be provided to the Premises by Landlord during times
other than Building Operating Hours upon the request of Tenant; provided,
however, that Tenant shall pay Landlord the actual cost of providing such
additional services. Tenant shall request service(s) for hours other than
Building Operating Hours by telephoning Building Management 24-hours prior to
the time such service is desired.
7.3 Keys. Landlord shall furnish Tenant, at Landlord's expense, with two
keys, and at Tenant's expense with such additional keys as Tenant may request,
to unlock each corridor door entering the Premises. Tenant shall not install, or
permit to be installed, any additional lock on any door into or in the Premises
or make, or permit to be made, an duplicates of keys to the Premises. Landlord
shall be entitled at all times to possession of a duplicate of all keys to all
doors to or inside of the Premises. All keys referred to in this Section 7.3
shall remain the property of the Landlord. Upon the expiration or termination of
the Term, Tenant shall surrender all such keys to Landlord and shall deliver to
Landlord the combination to all locks on all safes, cabinets, and vaults which
will remain in the Premises. Landlord shall be entitled to install, operate and
maintain security systems in or about the Premises and the Complex which
monitor, by closed circuit television or otherwise, all persons leaving or
entering the Complex, the Building and the Premises.
7.4 Tenant Identity. Landlord shall provide and install, in Building
Standard graphics, letters or numeral identifying Tenant's name and suite number
on entrance doors to the Premises. Without Landlord's prior written consent no
other signs, numerals, letters, graphics, symbols, or marks identifying Tenant
Page 7
<PAGE>
shall be placed on the exterior, or in the interior if they are visible from the
exterior, of the Premises. Landlord shall install up to one (1) directory strip
for each three thousand (3,000) square feet of Net Rentable Area in the
Premises, listing the name(s) and suite number(s) of Tenant on the Building
directory board to be placed in the main lobby of the Building. Tenant shall not
place or suffer to be placed on any exterior door, wall or window of the
Premises, on any part of the inside of the Premises which is visible from the
outside of the Premises, or elsewhere on the Complex, any sign decoration,
lettering, attachment, advertising matter or other thing of any kind, without
first obtaining Landlord's written approval. Landlord may, at Tenant's cost, and
without notice or liability to Tenant, enter the Premises and remove any item
erected in violation of this Section. Landlord may establish rules and
regulations governing the size, type and design of all such items and Tenant
shall abide by such rules and regulations. All approved signs or letterings on
doors shall be printed, painted and affixed at the sole cost of Tenant by a
person approved by Landlord, and shall comply with all Legal Requirements. At
Tenant's sole cost, Tenant shall maintain all permitted signs and shall, on the
expiration of the Term or sooner termination of this Lease, remove all such
permitted sips and repair any damage caused by such removal.
7.5 Charges. Tenant shall pay to Landlord monthly as billed, as Additional
Rent, such charges as may be separately metered or as Landlord may compute for
(a) any utility services utilized by Tenant for computers, data processing
equipment or other electrical equipment in excess of that agreed to be furnished
by Landlord pursuant to Section 7.1(e), (b) lighting installed in the Premises
in excess of Building Standard lighting, (c) air conditioning heating and other
services in excess of that stated in Section 7. 1 (a) or provided at times other
than Building Operating Hours, and (d) janitorial services required with respect
to non-Building Standard Items within the Premises. Landlord may elect to
estimate the charges to be paid by Tenant under this Section 7.5 and bill such
charges to Tenant monthly in advance, in which event Tenant shall promptly pay
the estimated charges. When the actual charges are determined by Landlord, and
appropriate cash adjustment shall be made between Landlord and Tenant to account
for any underpayment or overpayment by Tenant.
7.6 Operating Hours. Subject to Building Rules and Regulations and such
security standards as Landlord may from time to time adopt, the Building shall
be open to the public during the Building Operating Hours and the Premises shall
be open to Tenant during hours other than Building Operating Hours.
ARTICLE 8: REPAIR AND MAINTENANCE
8.1 By Landlord. Landlord shall maintain the Building, excepting the
Premises and portions of the Building leased by persons not affiliated with
Landlord, in a good and operable condition, and shall make such repairs and
replacements as may be required to maintain the Building in such condition. This
Section 8.1 shall not apply to damage resulting from a Taking (as to which
Article 14 shall apply), or damage resulting from a casualty (as to which
Section 15.1 shall apply), or to damage for which Tenant is otherwise
responsible under this Lease.
8.2 By Tenant. Tenant, at Tenant's sole cost, shall maintain the Premises
and every part of the Premises (including, without limitation, all floors, walls
and ceilings and their coverings, doors, and locks, furnishings, trade fixtures,
Page 8
<PAGE>
signage, leasehold improvements, equipment and other personal property from time
to time situated in or on the Premises) in good order, condition and repair, and
in a clean, safe, operable, attractive and sanitary condition. Tenant will not
commit or allow to remain any waste or damage to any portion of the Premises.
Tenant shall repair or replace, subject to Landlord's direction and supervision,
any damage to the Complex caused by Tenant or Tenant's agents, contractors or
invitees. If Tenant fails to make such repairs or replacements, Landlord may
make the same at Tenant's cost. Such cost shall be payable to Landlord by Tenant
on demand as Additional Rent. All contractors, workmen, artisans and other
persons which or whom Tenant proposes to retain to perform work in the Premises
(or the Complex, pursuant to the second sentence of this Section) pursuant to
this Section 8.2 or Article 11 shall be approved by Landlord prior to the
commencement of any such work.
ARTICLE 9: TAXES ON TENANT'S PROPERTY
Tenant shall be liable for and shall pay, before they become delinquent,
all taxes and assessments levied against any personal property placed by Tenant
in the Premises (even if same becomes a fixture by operation of law or the
property of Landlord by operation of this Lease), including any additional
Impositions which may be assessed, levied, charged or imposed against Landlord
or the Building by reason of non-Building Standard Items in the Premises. Tenant
may withhold payments of any taxes and assessments described in this Article 9
so long as Tenant contests its obligation to pay in accordance with applicable
law and non-payment thereof does not pose a threat of loss or seizure of the
Building or any interest of Landlord therein.
ARTICLE 10: TRANSFER BY TENANT.
10.1 General. Without the prior written consent of Landlord, Tenant shall
not effect or suffer any Transfer. Any attempted Transfer without such consent
shall be void. If Tenant desires to effect a Transfer, it shall deliver to
Landlord written notice thereof in advance of the date on which Tenant proposes
to make the Transfer, together with all the terms of the proposed Transfer and
the identity of the proposed Transferee. Landlord shall have thirty (30) days
following receipt of the notice and information within which to notify Tenant in
writing whether Landlord elects (a) to refuse to consent to the Transfer and to
terminate this Lease as to the space proposed to be Transferred as of the date
so specified by Tenant, in which event Tenant will be relieved of all further
obligations hereunder as to such space, (b) to refuse to consent to the Transfer
and to continue this Lease in full force as to the entire Premises, or (c) to
permit Tenant to effect the proposed Transfer. If Landlord fails to notify
Tenant of its election within said thirty (30) day period, Landlord shall be
deemed to have elected the option specified in Section 10.1 (b). The consent by
Landlord to a particular Transfer shall not be deemed a consent to any other
Transfer. If a Transfer occurs without the prior written consent of Landlord as
provided herein, Landlord may nevertheless collect rent from the Transferee and
apply the net amount collected to the Rent payable hereunder, but such
collection and application shall not constitute a waiver of the provisions
hereof or a release of Tenant from the further performance of its obligations
hereunder. No consent by Landlord to any Transfer shall relieve Tenant of any
obligation to be performed by Tenant under this Lease, whether such obligation
arises prior to or after such consent.
Page 9
<PAGE>
10.2 Conditions. The following, conditions shall automatically apply to
each Transfer, without the necessity of same being stated or referred to in
Landlord's written consent:
(a) Tenant shall execute, have acknowledged and deliver to Landlord,
and cause the Transferee to execute, have acknowledged and deliver to
Landlord, an instrument in form and substance acceptable to Landlord in
which (1) the Transferee adopts this Lease and agrees to perform, jointly
and severally with Tenant, all of the obligations of Tenant hereunder, as
to the space Transferred to it, (2) the Transferee grants Landlord an
express first and prior security interest all its personal property brought
into the transferred space to secure its obligations to Landlord hereunder,
(3) Tenant subordinates to Landlord's statutory lien and security interest
any liens, security interests or other rights which Tenant may claim with
respect to any such property of the Transferee, (4) Tenant agrees with
Landlord that, if any rent or other consideration payable by the Transferee
to Tenant exceeds the Rent for the transferred space, then Tenant shall pay
Landlord as Additional Rent hereunder all such excess rent and other
consideration immediately upon Tenant's receipt thereof, (5) Tenant and the
Transferee agree to provide to Landlord, at their expense, direct access
from a public corridor in the Building to the transferred space, (6) The
Transferee agrees to use and occupy the Transferred space solely for the
purpose specified in Article 4 and otherwise in strict accordance with this
Lease, and (7) Tenant acknowledges that, notwithstanding the Transfer,
Tenant remains directly and primarily liable for the performance of all the
obligations of Tenant hereunder (including, without limitation, the
obligation to pay all Rent), and Landlord shall be permitted to enforce
this Lease against Tenant or the Transferee, or both, without prior demand
upon or proceeding in any way against any other persons; and
(b) Tenant shall deliver to Landlord a counterpart of all instruments
relative to the Transfer executed by all parties to such transaction
(except Landlord).
(c) If Tenant requests Landlord to consent to a proposed Transfer,
Tenant shall pay to Landlord, whether or not consent is given, Landlord's
reasonable attorney's fees incurred in connection with such request.
10.3 Liens. Without in any way limiting the generality of the foregoing,
Tenant shall not grant, place or suffer, or permit to be granted, placed or
suffered, against the Complex or any portion thereof, any lien, security
interest, pledge, conditional sale contract, claim, charge or encumbrance
(whether constitutional, statutory, contractual or otherwise) and, if any of the
aforesaid does arise or is asserted, Tenant will, promptly upon demand by
Landlord and at Tenant's expense, cause the same to be released.
ARTICLE 11: ALTERATIONS
Tenant shall not make (or permit to be made) any change, addition or
improvement to the Premises (including, without limitation, the attachment of
any fixture or equipment) unless such change, addition or improvement (a) equals
or exceeds the Building Standard and utilizes only new and first-grade
materials, (b) is in conformity with all Legal Requirements, and is made after
Page 10
<PAGE>
obtaining any required permits and licenses, (c) is made with prior written
consent of Landlord, (d) is made pursuant to plans and specifications approved
in writing in advance by Landlord and prepared by an architect approved in
writing in advance by Landlord, (e) is made after Tenant has provided to
Landlord such indemnification, insurance, and/or bonds requested by Landlord,
including, without limitation, a performance and completion bond in such form
and amount as may be satisfactory. to Landlord to protect against claims and
liens for labor performed and materials furnished, and to insure the completion
of any change, addition or improvement, (f) is carried out by persons approved
in writing by Landlord who, if required by Landlord, deliver to Landlord before
commencement of their work proof of such insurance coverage as Landlord may
require, with Landlord named as an additional insured, and (g) is done only at
such time and in such mariner as Landlord may reasonably specify. All such
alterations, improvements and additions (including all articles attached to the
floor, wall or ceiling of the Premises) shall become the property of Landlord
and shall, at Landlord's election, be (1) surrendered with the Premises as part
thereof at the termination or expiration of the Term, without any payment,
reimbursement or compensation therefor, or (2) removed by Tenant, at Tenant's
expense with all damage caused by such removal repaired by Tenant. Tenant may
remove Tenant's trade fixtures, office supplies, movable office furniture and
equipment not attached to the Building, provided such removal is made prior to
the expiration of the Term, no uncured Event of Default has occurred and Tenant
promptly repairs all damage caused by such removal. Tenant shall indemnify,
defend and hold harmless Landlord from and against all liens, claims, damages,
losses, liabilities and expenses, including attorneys' fees, which may arise out
of, or be connected in any way with, any such change, addition or improvement.
Within ten (10) days following the imposition of any lien resulting from any
such change, addition or improvement, Tenant shall cause such lien to be
released of record by payment of money or posting of a proper bond.
ARTICLE 12: PROHIBITED USES
Tenant will not (a) use, occupy or permit the use or occupancy of the
Premises for any purpose or in any manner which is or may be, directly or
indirectly, violative of any Legal Requirement, or dangerous to life or
property, or a public or private nuisance, or disruptive of obstructive of any
other tenant or of the Building, (b) keep or permit to be kept any substance in,
or conduct or permit to be conducted any operation from, the Premises which
might emit offensive odors or conditions into other portions of the Building.,
or make undue noise or create undue vibrations, (c) commit or permit to remain
any waste to Premises, (d) install or permit to remain any improvements to the
Premises (other than window coverings which have first been approved by
Landlord) which are visible from the outside of the Premises, or exceed the
structural loads of floors or walls of the Building, or adversely affect the
mechanical, plumbing or electrical systems of the Building, or affect the
structural integrity of the Building in any way, (e) install any food, soft
drink or other vending machine in the Premises, or (f) commit or permit to be
committed any action or circumstance in or about the Building which, directly or
indirectly, would or might Justify any insurance carrier in canceling or
increasing the premium on the fire and extended coverage insurance policy
maintained by Landlord on the Building or contents, and if any increase results
from any act of Tenant, then Tenant shall pay such increase promptly upon demand
therefor by Landlord.
Page 11
<PAGE>
ARTICLE 13: ACCESS BY LANDLORD
Landlord, its employees, contractors, agents, and representatives, shall
have the right (and Landlord, for itself and such persons and firms, hereby
reserves the right) to enter the Premises at all hours (a) to inspect, clean,
maintain, repair, replace or alter the Premises or the Building, (b) to show the
Premises to prospective purchasers (or, during the last twelve (12) months of
the Term, to prospective tenants), (c) to determine whether Tenant is performing
its obligations hereunder and, if it is not, to perform same at Landlord's
option and Tenant's expense, or (d) for any other purpose deemed reasonable by
Landlord. In an emergency, Landlord (and such persons and firms) may use any
means to open any door into or in the Premises without any liability therefor.
Entry into the Premises by Landlord or any other person or firm named in the
first sentence of this Article 13 for any purpose permitted herein shall not
constitute a trespass or an eviction (constructive or otherwise), or entitle
Tenant to any abatement or reduction of Rent, or constitute grounds for any
claim (and Tenant hereby waives any claim) for damages for any injury to or
interference with Tenant's business, for loss of occupancy or quiet enjoyment,
or for consequential damages.
ARTICLE 14: CONDEMNATION
If all of the Complex is Taken, or if so much of the Complex is Taken that,
in Landlord's opinion, the remainder cannot be restored to an economically
viable, quality office building, or if the awards payable to Landlord as a
result of any Taking are, in Landlord's opinion, inadequate to restore the
remainder to an economically viable, quality office building, Landlord may, at
its election, exercisable by the giving of written notice to Tenant within sixty
(60) days after the date of the Taking, terminate this Lease as of the date of
Taking or the date Tenant is deprived of possession of the Premises (whichever
is later). If this Lease is not terminated as a result of a Taking, Landlord
shall restore the Premises remaining after the Taking to a Building Standard
condition. During the period of restoration, Base Rent shall be abated to the
extent the Premises are rendered untenantable and, after the period of
restoration, Base Rent and Tenant's Share shall be reduced in the proportion
that the area of the Premises Taken or otherwise rendered untenantable bears to
the area of the Premises just prior to the Taking. If any portion of Base Rent
is abated under this Article 14, Landlord may elect to extend the expiration
date of the Term for the period of the abatement. All awards, proceeds,
compensation or other payments from or with respect to any Taking of the Complex
or any portion thereof shall belong to Landlord, and Tenant hereby assigns to
Landlord all of its right, title, interest and claim to same. Whether or not
this Lease is terminated as a consequence of a Taking. all damages or
compensation awarded for a partial or total Taking, including any award for
severance damage and any sums compensating for diminution in the value of or
deprivation of the leasehold estate under this Lease, shall be the sole and
exclusive property of Landlord. Tenant may assert a claim for and recover from
the condemning authority, but not from Landlord, such compensation as may be
awarded on account of Tenant's moving and relocation expenses, and depreciation
to and loss of Tenant's moveable personal property. Tenant shall have no claim
against Landlord for the occurrence of any Taking, or for the termination of
this Lease or a reduction in the Premises as a result of any Taking.
Page 12
<PAGE>
ARTICLE 15: CASUALTY
15.1 General. Tenant shall give prompt written notice to Landlord of any
casualty to the Complex of which Tenant is aware and any casualty to the
Premises. If the Complex or the Premises are totally destroyed, or if the
Complex or the Premises are partially destroyed but in Landlord's opinion they
cannot be restored to an economically viable, quality office building, or if the
insurance proceeds payable to Landlord as a result of any casualty are, in
Landlord's opinion, inadequate to restore the portion remaining to an
economically viable, quality office building, Landlord may, at its election
exercisable by the giving of written notice to Tenant within sixty (60) days
after the casualty, terminate this Lease as of the date of the casualty or the
date Tenant is deprived of possession of the Premises (whichever is later). If
this Lease is not terminated as a result of a casualty, Landlord shall (subject
to Section 15.2) restore the Premises to a Building Standard condition. During
the period of restoration, Base Rent shall be abated to the extent the Premises
are rendered untentantable and, after the period of restoration, Base Rent and
Tenant's Share shall be reduced in the proportion that the area of the Premises
remaining tenantable after the casualty bears to the area of the Premises just
prior to the casualty. If any portion of Base Rent is abated under this Section
15. 1, Landlord may elect to extend the expiration date of the Term for the
period of the abatement. Except for abatement of Base Rent, if any, Tenant shall
have no claim against Landlord for any loss suffered by reason of any such
damage, destruction, repair or restoration, nor may Tenant terminate this lease
as the result of any statutory provision in effect on or after the date of this
Lease pertaining to the damage and destruction of the Premises or the Building.
The proceeds of all insurance carried by Tenant on Tenant's furnishings, trade
fixtures, leasehold improvements, equipment, merchandise and other personal
property shall be held in trust by Tenant for the purpose of the repair and
replacement of the same. Landlord shall not be required to repair any damage to
or to make any restoration of any furnishings, trade fixtures, lease hold
improvements, equipment, merchandise and other personal property installed in
the Premises by Tenant or at the direct or indirect expense of Tenant.
15.2 Acts of Tenant. Notwithstanding any provisions of this Lease to the
contrary, if the Premises or the Complex are damaged or destroyed as a result of
a casualty arising from the acts or omissions of Tenant, or any of Tenant's
officers, directors, shareholders, partners, employees, contractors, agents,
invitees or representatives, (a) Tenant's obligation to pay Rent and to perform
its other obligations under this Lease shall not be abated, reduced or altered
in any manner, (b) Landlord shall not be obligated to repair or restore the
Premises or the Complex, and (c) subject to Section 17.2, Tenant shall be
obligated, at Tenant's cost, to repair and to restore the Premises or the
Complex to the condition they were in just prior to the damage or destruction
under the direction and supervision of, and to the satisfaction of, Landlord and
any Landlord's Mortgage.
ARTICLE 16: SUBORDINATION AND ATTORNMENT.
16.1 General. This Lease, Tenant's leasehold estate created hereby, and all
Tenant's rights, titles and interests hereunder and in and to the Premises are
subject and subordinate to any Mortgage presently existing or hereafter placed
upon all or any portion of the Complex. However, Landlord and Landlord's
Mortgagee may, at any time upon the giving of written notice to Tenant and
without any compensation or consideration being payable to Tenant, make this
Lease, and the aforesaid leasehold estate and rights, titles and interests,
superior to any Mortgage. Upon the written request by Landlord or by Landlord's
Mortgagee to Tenant, and within five (5) days of the date of such request, and
without any compensation or consideration being payable to Tenant, Tenant shall
execute, have acknowledged and deliver a recordable instrument confirming that
this Lease, Tenant's leasehold estate in the Premises and all of Tenant's
rights, titles and interests hereunder are subject and subordinate (or, at the
election of Landlord or Landlord's Mortgagee, superior) to the Mortgage
benefiting Landlord's Mortgagee.
Page 13
<PAGE>
16.2 Attornment. Upon the written request of any person. or party
succeeding to the interest of Landlord under this Lease, Tenant shall
automatically become the tenant of and attorn to such successor in interest
without any change in any of the terms of this Lease. No successor in interest
shall be (a) bound by any payment of Rent for more than one month in advance,
except payments of security for the performance by Tenant of Tenant's
obligations under this Lease, or (b) subject to any offset, defense or damages
arising out of a default or any obligations of any preceding Landlord. Neither
Landlord's Mortgagee nor its successor in interest shall be bound by any
amendment of this Lease entered into after Tenant has been given written notice
of the name and address of Landlord's Mortgagee and without the written consent
of Landlord's Mortgagee or such successor in interest. The subordination,
attornment and mortgagee protection clauses of this Article 16 shall be
self-operative and no farther instruments of subordination attornment or
mortgagee protection need be required by any Landlord's Mortgagee or successor
in interest thereto. Nevertheless, upon the written request therefor and without
any compensation or consideration being payable to Tenant, Tenant agrees to
execute, have acknowledged and deliver such instruments as may be requested to
confirm the same. Tenant shall from time to time, if so requested by Landlord
and if doing so will not materially and adversely affect Tenant's economic
interests under this Lease, join with Landlord in amending, this Lease so as to
meet the needs or requirements of any lender that is considering making or that
has made a loan secured by all or any portion of the Complex.
ARTICLE 17: INSURANCE.
17.1 General. Tenant shall obtain and maintain throughout the Term the
following policies of insurance:
(a) Commercial general liability insurance with a combined single
limit for bodily injury and property damage of not less than One Million
Dollars ($ 1,000,000) per occurrence and Two Million Dollars
($2,000,000.00) aggregate, including, without limitation, contractual
liability coverage for the performance by Tenant of the indemnity
agreements set forth in Article 18.
(b) Hazard insurance with special causes of loss, including theft
coverage, insuring against fire, extended coverage risks, vandalism and
malicious mischief, and including boiler and sprinkler leakage coverage, in
an amount equal to the full replacement cost (without deduction for
depreciation) of all furnishings, trade fixtures, leasehold improvements,
equipment, merchandise and other personal property from time to time
situated in or on the Premises.
Page 14
<PAGE>
(c) Worker's compensation insurance satisfying Tenant's obligations
under the worker's compensation laws of the State of Utah.
(d) Such other policy or policies of insurance as Landlord
may reasonably require or as Landlord is then requiring from one or
more other tenants in the Building.
Such minimum limits shall in no event limit the liability of Tenant under this
Lease. Such liability insurance shall name Landlord, and any other person
specified from time to time by Landlord, as an additional insured; such property
insurance shall name Landlord as a loss payee as Landlord's interests may
appear; and both such liability and property insurance shall be with companies
acceptable to Landlord, having a rating of not less than in the most recent
issue of Best's Key Rating Guide, Property-Casualty. All liability policies
maintained by Tenant shall contain a provision that Landlord and any other
additional insured, although named as an insured, shall nevertheless be entitled
to recover under such policies for any loss sustained by Landlord and Landlord's
agents and employees as a result of the acts or omissions of Tenant. Tenant
shall furnish Landlord with certificates of coverage. No such policy shall be
cancelable or subject to reduction of coverage or other modification except
after thirty (30) days' prior written notice to Landlord by the insurer. All
such policies shall be written as primary policies, not contributing with and
not in excess of the coverage which Landlord may carry, and shall only be
subject to such deductibles as may be approved in writing in advance by
Landlord. Tenant shall, at least ten (10) days prior to the expiration of such
policies, furnish Landlord with renewals of, or binders for, such policies.
Landlord and Tenant waive all rights to recover against each other, against any
other tenant or occupant of the Complex, and against the officers, directors,
shareholders, partners, joint venturers, employees, agents, customers, invitees
or business visitors of each other, or of any other tenant or occupant of the
Building, for any loss or damage arising from any cause covered by any insurance
carried by the waiving party, to the extent that such loss or damage is actually
covered. Tenant shall cause all other occupants of the Premises claiming by,
through or under Tenant to execute and deliver to Landlord a waiver of claims
similar to the waiver contained in this Section and to obtain such waiver of
subrogation rights endorsements. Any Landlord's Mortgagee may, at Landlord's
option, be afforded coverage under any policy required to be secured by Tenant
under this Lease by use of a mortgage's endorsement to the policy concerned.
17.2 Waiver of Subrogation. Landlord hereby waives all claims, rights of
recovery and causes of action that Landlord or any party claiming by, through or
under Landlord may now or hereafter have by subrogation or otherwise against.
Tenant or against any of Tenant's officers, directors, shareholders, members,
partners or employees for any loss or damage that may occur to the Complex, the
Premises, Tenant's improvements or any of the contents of any of the foregoing
by reason of fire or other casualty, or by reason of any other cause except
gross negligence, willful misconduct, or the failure by Tenant to observe any of
Tenant's obligations under this Lease (thus including simple negligence of the
Tenant or Tenant's officers, directors, shareholders, members, partners or
employees), that could have been insured against under the terms of the standard
fire and extended coverage insurance policies available in the state where the
Complex is located at the time of the casualty; provided, however, that the
waiver set forth in this Section 17.2 shall not apply to any deductibles on
insurance policies carried by Landlord or to any coinsurance penalty which
Landlord might sustain. Tenant hereby waives all claims,
Page 15
<PAGE>
rights of recovery and causes of action that Tenant or any party claiming by,
through or under Tenant may now or hereafter have by subrogation or otherwise
against Landlord or against any of Landlord's officers, directors, members,
shareholders, members, partners or employees for any loss or damage that may
occur to the Complex, the Premises, Tenant's improvements or any of the contents
of any of the foregoing by reason of fire or other casualty, or by reason of any
other cause except gross negligence or willful misconduct (thus including simple
negligence of the Landlord or Landlord's officers, directors, shareholders,
members, partners or employees), that could have been insured against under the
terms of the fire and extended coverage insurance policies required to be
obtained and maintained under Section 17.1. Landlord and Tenant shall cause an
endorsement to be issued to their respective insurance policies recognizing this
waiver of subrogation.
ARTICLE 18: TENANT'S INDEMNITY
Subject to Section 17.2, Tenant shall defend, indemnify and hold harmless
Landlord and Landlord's officers, directors, shareholders, members, partners and
employees from and against liabilities, obligations, losses, damages, penalties,
claims, actions, suits, costs, expenses and disbursements (including, court
costs and reasonable attorneys' fees) resulting from any injuries to or death of
any person or damage to any property occurring during the Term in or about the
Premises.
ARTICLE 19: THIRD PARTIES; ACTS OF FORCE MAJEURE
Landlord shall have no liability to Tenant, or to Tenant's officers,
directors, shareholders, partners, employees, agents, contractors or invitees,
for bodily injury, death, property damage, business interruption, loss of
profits, loss of trade secrets or other tenant or such other direct or
consequential damages occasioned by (a) the acts or omissions of any other
tenant's officers, directors, shareholders, partners, employees agents,
contractors or other invitees; within the Complex, (b) Force Majeure, (c)
vandalism, theft, burglary and other criminal acts (other than those committed
by Landlord and its employees), (d) water leakage, or (e) the repair,
replacement, maintenance, damage, destruction or relocation of the Premises.
ARTICLE 20: SECURITY INTEREST
As security for Tenant's payment of Rent and performance of all of its
other obligations under this Lease, Tenant hereby grants to Landlord a security
interest in all property of Tenant now or hereafter placed in the Premises.
Landlord, as secured party, shall be entitled to all of the rights, remedies and
recourse afforded to a secured party under the Utah Uniform Commercial Code,
which rights, remedies and recourse shall be cumulative of all other rights,
remedies, recourse, liens and security interests afforded Landlord by law,
equity or this Lease. Contemporaneously with the execution of this Lease, Tenant
shall execute and deliver, as debtor, promptly upon request and without any
compensation or consideration being payable to Tenant, such additional financial
statement or statements as Landlord may request. However, Landlord may at any
time file a copy of this Lease as a financing statement.
Page 16
<PAGE>
ARTICLE 21: CONTROL OF COMMON AREAS
Landlord shall have the exclusive control over the Common Areas. Landlord
may, from time to time, create different Common Areas, close or otherwise modify
the Common Areas, and modify the Building Rules and Regulations with respect
thereto.
ARTICLE 22: PLIGHT TO RELOCATE
Landlord retains the right and power, to be exercised reasonably and at
Landlord's expense, to relocate Tenant within the Building in space which is
comparable in size to the Premises and is suited to Tenant's use. Instances when
the exercise of Landlord's right and power to relocate Tenant shall be deemed
reasonable include, but shall not be limited to, instances where Landlord
desires to consolidate the rentable area in the Building to provide Landlord's
services more efficiently, or to provide contiguous vacant space for a
prospective tenant. Landlord shall not be liable to Tenant for any claims
arising in connection with a relocation permitted under this Article 22.
ARTICLE 23: QUIET ENJOYMENT
Provided Tenant has performed all its obligations under this Lease, Tenant
shall and may peaceably and quietly have, hold, occupy, use and enjoy the
Premises during the Term subject to the provisions of this Lease. Landlord shall
warrant and forever defend Tenant's right to occupancy of the Premises against
the claims of any and all persons whosoever lawfully claiming the same or any
part thereof, by, through or under Landlord, but not otherwise, subject to the
provisions of this Lease.
ARTICLE 24: DEFAULT BY TENANT.
24.1 Events of Default. Each of the following occurrences shall constitute
Event of Default (herein so called):
(a) The failure of Tenant to pay Rent as and when due hereunder and
continuance of such failure for a period of three days after written notice
from Landlord to Tenant specifying the failure; provided, however, after
Landlord has given Tenant written notice pursuant to this Section 24.1 (a)
on two separate occasions, Landlord shall not be required to give Tenant
any further notice under this Section 24.1 (a);
(b) The failure of Tenant to perform, comply with or observe any other
agreement, obligation or undertaking of Tenant, or any other term,
condition or provision in this Lease, and the continuance of such failure
for a period of ten (10) days after written notice from Landlord to Tenant
specifying the failure;
(c) The abandonment of the Premises by Tenant or the failure of Tenant
to occupy the Premises or any significant portion thereof,
Page 17
<PAGE>
(d) The filing of a petition by or against Tenant (the term "Tenant"
also meaning, for the purpose of this Section 24.1 (d); any guarantor of
the named Tenant's obligations hereunder) (1) in any bankruptcy or other
insolvency proceeding (2) seeking any relief under the Bankruptcy Code or
any similar debtor relief law, (3) for the appointment of a liquidator or
receiver for all or substantially all of Tenant's property or for Tenant's
interest in this Lease, or (4) to reorganize or modify Tenant's capital
structure; and
(e) The admission by Tenant in writing that it cannot meet its
obligations as they become due or the making by Tenant of an assignment for
the benefit of its creditors.
24.2 Remedies of Landlord. Upon any Event of default, Landlord may, at
Landlord's option and in addition to all other rights, remedies and recourse
afforded Landlord hereunder or by law or equity, of an one or more of the
following:
(a) At Landlord's option and without waiving any default by Tenant,
Landlord shall have the right to continue this Lease in full force and
effect and to collect all Base Rent, Additional Rent, and any other amounts
to be paid by Tenant under this Lease as and when due. During any period
that Tenant is in default, Landlord shall have the right, pursuant to legal
proceedings or pursuant to any notice provided for by law, to enter and
take possession of the Premises, without terminating this Lease, for the
purpose of reletting, the Premises or any part thereof and making any
alterations and repairs that may be necessary or desirable in connection
with such reletting. Any such reletting or relettings may be for such term
or terms (including periods that exceed the balance of the term of this
Lease), and upon such other terms, covenants and conditions as Landlord may
in Landlord's sole discretion deem advisable. If the rent or rents received
during, any month and applied as provided above shall be insufficient to
cover all such amounts including the Base Rent and any other amounts to be
paid by Tenant pursuant to this Lease for such month, Tenant shall pay to
Landlord any deficiency; such deficiencies shall be calculated and paid
monthly. No entry or taking possession of the Premises by Landlord shall be
construed as an election by Landlord to terminate this Lease, unless
Landlord gives written notice of such election to Tenant or unless such
termination shall be decreed by a court of competent jurisdiction.
Notwithstanding any reletting by Landlord without termination, Landlord may
at any time thereafter terminate this Lease for such previous default by
giving written notice thereof to Tenant.
(b) Terminate Tenant's right to possession by notice to Tenant, in
which case this Lease shall terminate and Tenant shall immediately
surrender possession of the Premises to Landlord. I such event Landlord
shall be entitled to recover from Tenant all damages incurred by Landlord
by reason of Tenant's default, including without limitation the following:
(1) all unpaid Rent which has been earned at the time of such termination
plus (2) the amount by which the unpaid Rent which would have been earned
after termination until the time of award exceeds the amount of such rental
loss that is proved could have been reasonably avoided; plus (3) any other
amount necessary to compensate Landlord for all the detriment proximately
Page 18
<PAGE>
caused by Tenant's failure to perform Tenant's obligations under this
Lease, or in addition to or in lieu of the foregoing such damages as may be
permitted from time to time under applicable State law. Upon any such
re-entry Landlord shall have the night to make any reasonable repairs,
alterations or modifications to the Premises, which Landlord in Landlord's
sole discretion deems reasonable and necessary.
(c) If an Event of Default specified in Section 24. 1 (c) occurs,
Landlord may remove and store any property that remains on the Premises
and, if Tenant does not claim such property within ten (10) days after
Landlord has delivered to Tenant notice of such storage, Landlord may
appropriate, sell, destroy or otherwise dispose of the property in question
without notice to Tenant or any other person, and without an obligation to
account for such property.
24.3 Payment by Tenant. Upon any Event of Default, Tenant shall also pay to
Landlord all costs and expenses incurred by Landlord, including court costs and
reasonable attorneys' fees, in (a) retaking or otherwise obtaining possession of
the Premises, (b) removing and storing Tenant's or an other occupant's property,
(c) repairing, restoring, altering, remodeling or otherwise putting the Premises
into condition acceptable to a new tenant or tenants, (d) reletting all or an
part of the Premises, (e) paying or performing the underlying obligation which
Tenant failed to pay or perform, and (f) enforcing any of Landlords rights,
remedies of recourse arising as a consequence of the Event of Default.
24.4 Reletting. Upon termination of this Lease or upon termination of
Tenant's right to possession of the Premises, Landlord shall use reasonable
efforts to relet the Premises on such terms and conditions as Landlord in its
sole discretion may determine (including a term different than the Term, rental
concession, and alterations to and improvements of the Premises); however,
Landlord shall not be obligated to relet the Premises before leasing other
portions of the Building. Landlord shall not be liable for, nor shall Tenant's
obligations hereunder be diminished because of, Landlord's failure to relet the
Premises or collect rent due with respect to such reletting. If Landlord relets
the Premises, rent Landlord receives from such reletting shall be applied to the
payment of: first, any indebtedness from Tenant to Landlord other than Rent (if
any); second, all costs, including for maintenance and alterations, incurred by
Landlord in reletting; and third, Rent due and unpaid. In no event shall Tenant
be entitled to the excess of any rent obtained by reletting over the Rent herein
reserved.
24.5 Landlord's Right to Pay or Perform. Upon an Event of Default, Landlord
may, but without obligation to do so and without thereby waiving or curing such
Event of Default, pay or perform the underlying Obligation for the account of
Tenant, and enter the Premises and expend the Security Deposit, if any, and any
other sums for such purpose.
24.6 No Waiver; No Implied Surrender. Provisions of this Lease may only be
waived by the party entitled to the benefit of the provision evidencing the
waiver in writing. Thus, neither the acceptance of Rent by Landlord following an
Event of Default (whether known to Landlord or not), nor any other custom or
practice followed in connection with this Lease, shall constitute a waiver by
Landlord of such Event of Default or an other Event of Default. Further, the
failure by Landlord to complain of any action or inaction by Tenant, or to
Page 19
<PAGE>
assert that any action or inaction by Tenant constitutes (or would constitute,
with the giving of notice and the passage of time) an Event of Default,
regardless of how long such failure continues, shall not extinguish, waive or in
any way diminish the rights, remedies and. recourse of Landlord with respect to
such action or inaction. No waiver by Landlord of any provision of this Lease or
of any breach by Tenant of any obligation of Tenant hereunder shall be deemed to
be a waiver of any other provisions hereof, or of any subsequent breach by
Tenant of the same or any other provision hereof Landlord's consent to any act
by Tenant requiring Landlord's consent shall not be deemed to render unnecessary
the obtainin1c, of Landlord's consent to any subsequent act of Tenant. No act or
omission by Landlord (other than Landlord's execution of a document
acknowledging such surrender) or Landlord's agents, including the delivery of
the keys to the Premises, shall constitute an acceptance of a surrender of the
Premises.
ARTICLE 25: DEFAULT BY LANDLORD
Landlord shall not be in default under this Lease, and Tenant shall not be
entitled to exercise any right, remedy or recourse against Landlord or otherwise
as a consequence of any alleged default by Landlord under this Lease, unless
Landlord fails to perform any of its obligations hereunder and said failure
continues for a period of thirty (30) days after Tenant gives Landlord and
(provided that Tenant shall have been giving the name and address of Landlord's
Mortgagee) Landlord's Mortgagee written notice thereof specifying, with
reasonable particularity, the nature of Landlord's failure. If, however, the
failure cannot reasonably be cured within the thirty (30) day period, Landlord
shall not be in default hereunder if Landlord or Landlord's Mortgagee commences
to cure the failure within the thirty (30) days and thereafter pursues the
curing of same diligently to completion. If Tenant recovers a money judgement
against Landlord for Landlord's default of its obligations hereunder or
otherwise, the judgement shall be limited to Tenant's actual direct, but no
consequential, damages therefor and shall be satisfied only out of the interest
of Landlord in the Complex as the same may then be encumbered, and Landlord
shall not otherwise be liable for any deficiency. In no event shall Tenant have
the right to levy execution against any property of Landlord other than its
interest in the Complex. The foregoing shall not limit any right that Tenant
might have to obtain specific performance of Landlord's obligations hereunder.
ARTICLE 26: RIGHT OF RE-ENTRY
Upon the expiration or termination of the Term for whatever cause, or upon
the exercise by Landlord of its right to re-enter the Premises without
terminating this Lease, Tenant shall immediately, quietly and peaceably
surrender to Landlord possession of the Premises in "broom clean" and good
order, condition and repair, except only for ordinary wear and tear, damage by
casualty not covered by Section 15.2 and repairs to be made by Landlord pursuant
to Section 15. 1. If Tenant is in default under this Lease, Landlord shall have
a lien on such personal property, trade fixtures and other property as set forth
in Section 38-3-1, et seq., of the Utah Code Ann. (Or any replacement
provision). Landlord may require Tenant to remove any personal property, trade
fixtures, other property, alterations, additions and improvements made to the
Premises by Tenant or by Landlord for Tenant, and to restore the Premises to
their condition on the date of this Lease. All personal property, trade fixtures
and other property of Tenant not removed from the Premises on the abandonment of
Page 20
<PAGE>
the Premises or on the expiration of the Term or sooner termination of this
Lease for any cause shall conclusively be deemed to have been, abandoned and may
be appropriated, sold, stored, destroyed or otherwise disposed of by Landlord
without notice to, and without any obligation to account to, Tenant or any other
person. Tenant shall pay to Landlord all expenses incurred in connection with
the disposition of such property in excess of any amount received by Landlord
from such disposition. Tenant shall not be released from Tenant's obligations
under this Lease in connection with surrender of the Premises until Landlord has
inspected the Premises and delivered to Tenant a written release. While Tenant
remains in possession of the Premises after such expiration, termination or
exercise by Landlord of its re-entry right, Tenant shall be deemed to be
occupying the Premises as a tenant-at-sufferance, subject to all of the
obligations of Tenant under this Lease, except that the daily Rent shall be
twice the per-day Rent in effect immediately before such expiration, termination
or exercise by Landlord. No such holding over shall extend the Term. If Tenant
fails to surrender possession of the Premises in the condition herein required,
Landlord may, at Tenant's expense, restore the Premises to such condition.
ARTICLE 27: GENERAL PROVISIONS
27.1 Independent Obligations; No Offset. The obligations of Tenant to pay
Rent and to perform the other undertakings of Tenant hereunder constitute
independent unconditional obligations to be performed at the times specified
hereunder, regardless of any breach or default by Landlord hereunder. Tenant
shall have no right, and Tenant hereby waives and relinquishes all rights which
Tenant might otherwise have, to claim any nature of lien against the Complex or
to withhold, deduct form or offset against any Rent or other sums to be paid to
Landlord by Tenant.
27.2 Time of Essence. Time is of the essence with respect to each date or
time specified in this Lease by which an event is to occur.
27.3 Applicable Law. THIS LEASE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF UTAH. ALL MONETARY AND OTHER
OBLIGATIONS OF LANDLORD AND TENANT ARE PERFORMABLE IN THE COUNTY WHERE THE
COMPLEX IS LOCATED.
27.4 Assignment by Landlord. Landlord shall have the right to assign, in
whole or in part, any or all of its rights, titles or interests in and to the
Complex or this Lease and, upon any such assignment, Landlord shall be relieved
of all unaccrued liabilities and obligations hereunder to the extent of the
interest so assigned.
27.5 Estoppel Certificates; Financial Statements. Tenant shall, from time
to time and within ten (10) days of written request from either Landlord or
Landlord's Mortgagee, and without compensation or consideration execute have
acknowledged and deliver a certificate setting forth the following: (a) a
ratification of this Lease; (b) the Commencement Date and expiration date; (c)
that this Lease is in full force and effect and has not been assigned, modified,
supplemented or amended (except by such writing as shall be stated); (d) that
this Lease, as modified, supplemented or amended (if such is the case)
constitutes the complete agreement between Landlord and Tenant with respect to
Page 21
<PAGE>
the Premises, the Building, and the Complex and that Tenant does not hold an
option to purchase the Complex or any interest therein, (e) that all conditions
under this Lease to be performed by Landlord have been satisfied or, in the
alternative, those claimed by Tenant to be unsatisfied; (f) that no defenses or
offsets exist against the enforcement of this Lease by Landlord or, in the
alternative, those claimed by Tenant to exist; (g) whether within the knowledge
of Tenant there are any existing breaches or defaults by Landlord hereunder and,
if so, stating the defaults with reasonable particularity; (h) the amount of
advance Rent, if any (or none if such is the case), paid by Tenant; (1) the date
to which Rent has been paid; 6) the amount of the Security Deposit, if any; and
(k) such other information as Landlord or Landlord's Mortgagee may request.
Landlord's Mortgagee and purchasers from either Landlord's Mortgagee or Landlord
shall be entitled to rely on any estoppel certificate executed by Tenant. Tenant
shall, within ten (10) days after Landlord's request, furnish to Landlord
current financial statements for Tenant, prepared in accordance with generally
accepted accounting principles consistently applied and certified by Tenant to
be true and correct.
27.6 Signs, Building Name and Building, Address. Landlord may, from time to
time at its discretion, maintain any and all signs anywhere in the Complex, and
may change the name and street address of the Complex. Tenant shall not use the
name of the Building for any purpose other than as the address of the building
for the business to be conducted by Tenant from the Premises.
27.7 Notices. All notices and other cormmunications given pursuant to this
Lease shall be in writing and shall either be mailed by first class United
States mail, postage prepaid, registered or certified with return receipt
requested, and addressed as set forth in this Section 27.7, or delivered in
person to the intended addressee, or sent by prepaid telegram, cable or telex
followed by a confirmatory letter. Notice mailed in the aforesaid manner shall
become effective three (3) business days after deposit; notice given in any
other manner, and any notice given to Landlord, shall be effective only upon
receipt by the intended addressee. For the purposes of notice, the address of
(a) Landlord shall be at the Building manager's office at the Building, and (b)
Tenant shall be, prior to the Commencement Date, the address recited on the
signature page I hereof, and after the Commencement Date, the Premises. Each
party shall have the continuing right to change its address for notice hereunder
by the giving of fifteen (15) days' prior written notice to the other party in
accordance with this Section 27.7.
27.8 Entire Agreement, Amendment and Binding Effect. This Lease constitutes
the entire agreement between Landlord and Tenant relating to the subject matter
hereof, and all prior agreements relative hereto which are not contained herein
are terminated. This Lease may be amended only by a written document duly
executed by Landlord and Tenant (and, if a Mortgage is then in effect, by the
Landlord's Mortgagee entitled to the benefits, thereof), and any alleged 0 17
amendment which is not so documented shall not be effective as to either party.
The provision of this Lease shall be binding upon and inure to the benefit of
the parties hereto and their heirs, executors, administrators, successors and
assigns; provided, however, that this Section 27.8 shall not negate, diminish or
alter the restrictions on Transfer applicable to Tenant set forth elsewhere in
this Lease.
27.9 Severabilitv. This Lease is intended to be performed in accordance
with and only to the extent permitted by all Legal Requirements. If any
Page 22
<PAGE>
provision of this Lease or the application thereof to any person or
circumstances shall, for any reason and to any extent, be invalid or
unenforceable, but the extent of the invalidity- or unenforceability does not
destroy the basis of the bargain between the parties as contained herein, the
remainder of this Lease and the application of such provision to other persons
or circumstances shall not be affected thereby, but rather shall be enforced to
the greatest extent permitted by law.
27.10 Number and Gender, Captions and References. As the context of this
Lease may require, pronouns shall include natural persons and legal entities of
every kind and character, the singular number shall include the plural, and the
neuter shall include the masculine and the feminine gender. Section headings in
this Lease are for convenience of reference only and are not intended, to any
extent and for any purpose, to limit or define any section hereof. Whenever the
terms "hereof," "hereby," "herein," "hereunder," or words of similar import are
used in this Lease, they shall be construed as referring to this Lease in its
entirety rather than to a particular section or provision, unless the context
specifically indicates to the contrary. Any reference to a particular "Section"
shall be construed as referring to the indicated section of this Lease.
27.11 Attornev's Fees. In the event either party commences a legal
proceeding to enforce an of the terms of this Lease, the prevailing party in
such action shall have the right to recover reasonable attorneys" fees and costs
from the other party, to be fixed by the court in the same action. "Lecral
proceedings" includes appeals from a lower court judgement as well as
proceedings in the Federal Bankruptcy Court ("Bankruptcy Court"), whether or not
they are adversary proceedings or contested matters. The "prevailing party" (a)
as used in the context of proceedings in the Bankruptcy Court means the
prevailing party in an adversary proceeding or contested matter, or an other
actions taken by the non-bankrupt party which are reasonably necessary to
protect its rights under this Lease, and (b) as used in the context of
proceedings in any court other than the Bankruptcy Court means the party that
prevails in obtaining a remedy or relief which most nearly reflects the remedy
or relief which the party sought; so that, for example, the prevailing party may
be a party which is ordered to pay One Hundred Dollars ($100) where the
obligation to pay Eighty Dollars ($80) was undisputed and the claiming party
alleged that it was entitled to One Thousand Dollars ($1,000).
27.12 Brokers. Tenant and Landlord hereby warrant and represent unto the
other that it has not incurred or authorized any brokerage commission, finders
fees or similar payments in connection with this Lease, other than that which is
due to D&B Real Estate, Inc. which payment shall by paid by Landlord Each party
shall defend, indemnify and hold the other han-n1ess from and against any claim
for brokerage commission, finder's fees or similar payment, arising by virtue of
authorization of such party, or any Affiliate of such party, in connection with
this Lease.
27.13 Interest on Tenant's Obligations. Any amount due from Tenant to
Landlord which is not paid when due shall bear interest at the lesser of
eighteen percent (18%) perannum or the maximum rate allowed by law from the date
such payment is due until paid, but the payment of such interest shall not
excuse or cure the default in payment.
Page 23
<PAGE>
27.14 Authority. The -person executing this Lease on behalf of Tenant
personally warrants and represents to landlord that (a) Tenant is a duly
organized and existing legal entity, in good standing in the State of Utah, (b)
Tenant has full right and authority to execute, deliver and perform this Lease,
(c) the person executing this Lease on behalf of Tenant was authorized to do so,
and (d) upon request of Landlord, such person will deliver to Landlord
satisfactory evidence of his or her authority to execute this Lease on behalf of
Tenant.
27.15 Recording. Neither this Lease (including any Exhibit hereto) nor any
memorandum hereto shall be recorded without the prior written consent of
Landlord.
27.16 Exhibits. All Exhibits and written addenda hereto are incorporated
herein for any and all purposes.
27.17 Multiple Counterparts. This Lease may be executed in two or more
counterparts, each of which shall be an original, but all of which shall
constitute but one instrument.
27.18 Miscellaneous. Any guaranty delivered in connection with this Lease
is an integral part of this Lease and constitutes consideration given to
Landlord to enter into this Lease. No amendment to this Lease shall be binding
on Landlord or Tenant unless reduced to writing and signed by both parties. Each
provision to be performed by Tenant shall be construed to be both a covenant and
a condition. Venue on any action arising out of this Lease shall be proper only
in the District Court of Utah County, State of Utah. Landlord and Tenant waive
trial by jury in any action, proceeding or counterclaim brought by either of
them against the other on all matters arising, out of this Lease or the use and
occupancy of the Premises. The submission of this Lease to Tenant is not an
offer to lease the Premises for Tenant. Landlord shall not be bound to Tenant
until Tenant has duly executed and delivered duplicate original copies of this
Lease to Landlord and Landlord has duly executed and delivered one of those
duplicate original copies to Tenant.
Page 24
<PAGE>
EXECUTED as of the date and year above first written.
TENANT ACKNOWLEDGES THAT LANDLORD HAS MADE NO WARRANTIES TO TENANT AS TO THE
CONDITION OF THE PREMISES, EITHER EXPRESS OR IMPLIED, AND LANDLORD AND TENANT
EXPRESSLY DISCLAIM ANY IMPLIED WARRANTY THAT THE PREMISES ARE SUITABLE FOR
TENANT'S INTENDED COMMERCIAL PURPOSE, AND TENANT'S OBLIGATION TO PAY RENT
HEREUNDER IS NOT DEPENDENT UPON THE CONDITION OF THE PREMISES FOR THE
PERFORMANCE BY LANDLORD OF ITS OBLIGATIONS HEREUNDER, AND TENANT SHALL CONTINUE
TO PAY THE RENT, WITHOUT ABATEMENT (EXCEPT AS OTHERWISE EXPRESSLY PROVIDED
HEREIN), SET OFF OR DEDUCTION, NOTWITHSTANDING ANY BREACH BY LANDLORD OF ITS
DUTIES OR OBLIGATIONS HEREUNDER, WHETHER EXPRESS OR IMPLIED.
TENANT: Online Investors Advantage, Inc.
BY: /S/ David McCoy
--------------------------------------------
TITLE: V.P. Marketing & Sales
NAME: David W. McCay
DATE: May 25, 1999
ADDRESS:
LANDLORD: EsNET PROPERTIES, L.C., a
Utah limited liability company
BY: /S/ David W. Cambell
--------------------------------------------
TITLE: Manager
NAME: Daniel W. Campbell
DATE: May 28, 1999
ADDRESS: 5152 North Edgewood Drive
Suite 350
Provo, Utah 84604
Page 25
<PAGE>
EXHIBIT
GLOSSARY OF DEFINED TERMS
-------------------------
1. "Addendum" shall mean the Addendum, if any, attached to this Lease.
2. "Affiliate" shall mean a person or party who or which controls, is
controlled by or is under common control with, another person or party.
3. "Building" shall mean that certain three-floor office building and
garage structure (if any) constructed on the Land, the street address of which
is 5252 North Edgewood Drive, Provo, Utah 84604. The term "Building" shall
include all fixtures and appurtenances in and to the aforesaid structure,
including specifically but without limitation all above-grade walkways and all
electrical, mechanical, plumbing, security, elevator, boiler, HVAC, telephone,
water, gas, storm sewer, sanitary sewer, and all other utility systems and
connections, all life support systems, sprinklers, smoke detection and other
fire protection systems, and all equipment, machinery, shafts, flues, piping,
wiring, ducts, duct work, panels, instrumentation and other appurtenances
relating thereto.
4. "Building, Operating Hours" shall mean 7:30 a.m. to 6:00 p.m. Monday
through Friday, and Saturday 8:00 a. In. to 1:00 p.m., exclusive of Sundays and
Holidays.
5. "Building Rules and Regulations" shall mean the rules and regulations
governing the Complex promulgated by Landlord from time to time. The current
Building Rules and Regulations maintained by Landlord are attached as Exhibit D
hereto.
6. "Building Standard", when applied to an item, shall mean such item. as
has been designated by Landlord (orally or in writing) as generally applicable
throughout the leased portions of the Building.
7. "'Commencement Date" shall mean the date of the commencement of the Term
as determined pursuant to Section 6.3.
8.. "Common Areas" shall mean all area and facilities within the Complex
which have been constructed and are being- maintained by Landlord for the
common, general, nonexclusive use of all tenants in the Building, and shall
include rest rooms, lobbies, corridors, service areas, elevators, stairs and
stairwells, the Parking Facility, other parking areas, driveways, loading areas,
ramps, walkways and landscaped areas.
9. "Complex " shall mean the Land and all improvements thereon, including
the Building and the Parking Facility.
10. "Fiscal Year" shall mean the fiscal year (or portion thereof) of
Landlord as elapses during the Term. The Fiscal Year currently commences on
January 1; however, Landlord may change the Fiscal Year at any time or times.
Page 26
<PAGE>
11. "Force Majeure" shall mean the occurrence of any event which
hinders, prevents or delays the performance by Landlord of any of its
obligations hereunder and which is beyond the reasonable control of Landlord.
12. "Holidays" shall mean (a) New Year's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day, (b)
other days on which in national or state banks located in the state where the
Complex is located must or may close for ordinary operations, and (c) other
days which are commonly observed as Holidays by the majority of tenants of the
Building. If the Holiday occurs on a Saturday or Sunday, the Friday preceding
or the Monday following may, at the Landlord's discretion, be observed as a
Holiday.
13. "HVAC" shall mean the heating, ventilation, and air conditioning
systems in the Building.
14. "Impositions" shall mean (a) all real estate, personal property,
rental, water, sewer, transit, use, occupancy owners' association and other
taxes, assessments, charges, excises and levies (including any interest, cost or
penalties with respect thereto), general and special, ordinary and
extraordinary, foreseen and unforeseen, of any kind and nature whatsoever which
are assessed, levied, charaed or imposed upon or with respect to the Complex, or
an portion thereof, or the sidewalks, streets or alleyways adjacent thereto, or
the ownership, use, occupancy or enjoyment thereof (including but not limited to
mortgage taxes and other taxes and assessments passed on to Landlord by
Landlord's Mortagee), and (b) all charges for any easement, license, permit or
agreement maintained for the benefit of the Complex. "Impositions" shall not
include income taxes, estate and inheritance taxes, excess profit taxes,
franchise taxes, taxes imposed on or measured by the income of Landlord from the
operation of the Complex, and taxes imposed on account of the transfer of
ownership of the Complex of the Land. If any or all of the Impositions shall be
discontinued and, in substitution therefor, taxes, assessments, charges, excises
or positions shall be assessed, levied, charged or posed wholly or partially on
the Rents received or payable hereunder (a "Substitute Imposition"), then the
Substitute Imposition shall be deemed to be included within the term
"Impositions."
15. "Land" shall mean the real property on which the Building is
constructed and which is further described in Exhibit E hereto.
16. "Landlord's Mortgagee" shall mean the mortgagee of any mortgage, the
beneficiary of any deed of trust, the pledgee of any pledge, the secured party
of any security interest, the assignee of any assignment and the transferee of
any other instrument of transfer (including the ground lessor of any ground
lease on the Land) now or hereafter in existence on all or any portion of the
Complex, and their successors, assigns and purchasers. "Mortgage" shall mean any
such mortgage, deed or trust, pledge, security agreement, assignment or transfer
instrument, including all renewals, extension and rearrangements thereof and of
all debts secured thereby.
17. "Landlord's Work" shall mean all improvements, components, assemblies,
installations, finish, labor, materials and services that Landlord is required
to furnish, install, perform, provide or apply to the Premises as specified in
the Work Letter.
Page 27
<PAGE>
18. "Landlord's Work Completion Date" shall mean earliest of (a) the date
on which Landlord substantially completes the Landlord's Work and tenders
possession of the ~premises to Tenant, (b) the date on which Landlord would have
substantially completed the Landlord's Work and tendered possession of the
Premises to Tenant but for (1) the delay or failure of Tenant to furnish
information or other matters required in the Work Letter, (2) Tenant's request
for changes in the plans or non-Building Standard items, or (3) any other action
or inaction of Tenant, or any person or firm employed or retained by Tenant, or
(c) the date on which Tenant takes possession of the Premises.
19. "Legal Requirements"- shall mean any and all (a) judicial decisions,
order, injunctions, writs, statues, rulings, rules, regulations, promulgations,
directives, permits, certificates or ordinances of any governmental authority in
any way applicable to Tenant or the Complex, including but not limited to the
Building Rules and Regulations, zoning environmental and utility conservation
matter, requirements imposed on Landlord by any Landlord's Mortgagee, (c)
insurance requirements, and (d) other documents, instruments or agreements
(written or oral) relating to the Complex or to which the Complex may be bound
or encumbered.
20. "Net Rentable Area" whether of the Premises or the Building shall mean
the rentable area determined pursuant to the American National Standard Method
for Measuring Floor Area in Office Buildings, as set forth in American National
Standard's Institute publication Z65.1-1980 and as, from time to time, revised
("BOMA Standard"); provided, however, that for purposes of determining the
rentable area of either the Premises or the Building (or any portion 7 C., of
the Building), the initial "R/U Ratio" (as defined in the BOMA Standard) shall
be equal to 118.37% to reflect a stipulated pro rata portion of the area covered
by the lobbies, corridors, restrooms, mechanical rooms, electrical rooms and
telephone closets of the Building 1.71
21. "Net Usable Area" whether of the Premises or the Complex shall mean the
usable area determined pursuant to the American National Standard Method for
Measuring Floor Area in Office Buildings, as set forth in American National
Standard's Institute publication Z65. 1 -1980 and as, from time to time,
revised. Landlord and Tenant hereby stipulate that the Net Rentable Area of the
Premises shall be Two Thousand, Eight Hundred, Twenty-Two (2,822 square feet and
the Net Usable Area of the Premises shall be Three Thousand, Three Hundred,
Forty (3,240 square feet.
22. "Operating Expenses" shall mean all costs and expenses which Landlord
pays or accrues by virtue of the ownership, use, management, leasing,
maintenance, service, operation, insurance or condition of the Complex during a
particular Fiscal Year or portion thereof as determined by Landlord or its
certified public accountant in accordance with generally accepted accounting
principles, plus (in instances where the Building was not fully occupied for the
entire period in question) all additional costs and expenses which Landlord or
such accountant reasonably determines Landlord would have paid or accrued during
such period if the Building had been occupied (defined as ninety-five percent
(95%) occupied). "Operating Expenses" shall include, but shall not be limited
to, the following to the extent they relate to the Complex:
(a) all Impositions and other governmental changes;
Page 28
<PAGE>
(b) all insurance premiums charged for polices obtained by Landlord, which
may include without limitation, at Landlord's election, (1) fire and extended
coverage insurance, including earthquake, windstorm, hail, explosion, riot,
strike, civil commotion, aircraft, vehicle and smoke insurance, (2) public
liability and property damage insurance, (3) elevator insurance, (4) workers'
compensation insurance for the employees covered by clause (h) below, (5)
boiler, machinery, sprinkler, water damage, legal liability, burglary, hold-up,
fidelity and pilferage insurance, (6) rental loss insurance, and (7) such other
insurance as Landlord may elect to obtain.
(c) all deductible amounts incurred in any Fiscal Year relating to an
insurable loss.
(d) all maintenance, repair, replacement and painting cost;
(e) all janitorial, custodial, cleaning, washing, landscaping, landscape
maintenance, trash removal and pest control costs;
(f) all security cost;
(g) all electrical, energy monitoring, water, water treatment, gas, sewer,
telephone and other utility and utility-related charges;
(h) all wages, salaries, salary-burdens, employee benefits, payroll taxes,
Social Security and insurance for all persons engaged by Landlord or an
Affiliate of Landlord;
(i) all costs of leasing or purchasing supplies, tools, equipment and
material;
(j) all management fees and other charges for management services
(including without limitation travel and related expenses), whether provided by
an independent management company, by Landlord or by an Affiliate of Landlord;
(k) all fees and other charges paid under all maintenance and service
agreement, including but not limited to window cleaning, elevator and HVAC
maintenance;
(l) all legal, accounting and auditing fees and expenses; and
(m) amortization of the cost of acquiring, financing and installing capital
items which are intended to reduce (or avoid increases in) operating expenses or
which are required by a governmental authority. Such costs shall be amortized
over the reasonable life of the items in accordance with generally accepted
accounting principles, but not beyond the reasonable life of the Building.
"Operating Expenses" shall not include (i) expenditures classified as capital
expenditures for federal income tax purposes except as set forth in clause (m),
(ii) costs for which Landlord is entitled to specific reimbursement by Tenant,
Page 29
<PAGE>
by any other tenant of the Building or by any other third party, (iii)
allowances specified in the Work Letter for expenses incurred by Landlord for
improvements to the Premises, (iv) leasing commissions, and all non-cash
expenses (including depreciation), except for the amortized costs specified in
clause (m), (v) land or ground rent if applicable, and (vi) debt service on any
indebtedness secured by the Complex (except debt service on indebtedness to
purchase or pay for items specified as permissible "Operating Expenses" under
clauses (a) through (m)).
23. "Parking Facility" shall mean any parking garage located under the
Building.
24. "Permitted Use" shall mean the use specified in Article 4 of the Lease.
25. "Premises" shall mean the area leased by Tenant pursuant to this Lease
as outlined on the floor plan drawing attached as Exhibit B hereto and all other
space added to the Premises pursuant to the terms of this Lease. The Premises
included the space between the top surface of the floor slab of the outlined
area and the finished surface of the ceiling immediately above.
26. "Rent" shall mean Base Rent, Additional Rent, the parking charge called
for in Section 5.3 and all other amounts provided for under this Lease to be
paid by Tenant, whether as Additional Rent or otherwise. "Base Rent" shall mean
the base rent specified in Section 5.1 "Additional Rent" shall mean the
additional rent specified in Section 5.2.
27. "Security Deposit" means Zero Dollars ($00.00).
28. "Taking" or "Taken" shall mean the actual or constructive condemnation,
or the actual or constructive acquisition by or under the threat of
condemnation, eminent domain or similar proceeding, by or at the direction of
any governmental authority or agency.
29. "Tenant's Share" shall mean the proportion by which the Net Rentable
Area of the Premises bears to the Net Rentable Area of the Building. "Tenant's
Share" shall be adjusted by Landlord from time to time to reflect adjustments to
the then-current Net Rentable Area of the Building or the Premises.
30. "Transfer" shall mean (a) an assignment (direct or indirect, absolute
or conditional, by operation of law of otherwise) by Tenant of all or any
portion of Tenant's interest in this Lease or the leasehold estate created
hereby, (b) a sublease of all or any portion of the Premises, or (c) the grant
or conveyance by Tenant of any concession or license within the Premises. If
Tenant is a corporation, then any transfer of this Lease by merger,
consolidation or dissolution, or by any change in ownership or power to vote a
majority of the voting stock (being the share of stock regularly entitled to
vote for the election of directors) in Tenant outstanding at the time of
execution of this Lease shall constitute a Transfer. If Tenant is a partnership
having one or more corporations as general partners, the preceding sentence
shall apply to each corporation as if the corporation alone had been the Tenant
hereunder. If Tenant is a general or limited partnership, joint venture or other
form of association, the Transfer of a majority of the ownership interests
therein shall constitute a Transfer. "Transferee" shall mean the assignee,
sublessee, pledgee, concessionaire, licensee or other transferee of all or any
portion of Tenant's interest in this Lease, the leasehold estate created hereby
or the Premises.
Page 30
<PAGE>
31. "Work Letter" shall mean the agreement, if any, attached as Exhibit F
hereto between Landlord and Tenant for the construction of improvements in the
Premises.
Page 31
<PAGE>
EXHIBIT B
PREMISES
[Attach floor plan of the Premises.]
Page 32
<PAGE>
EXHIBIT C
JANITORIAL SERVICES
-------------------
The cleaning specifications are as follows:
The Main Lobby area will be maintained by the Landlord's personnel. This
area will be maintained in keeping with a Class A Office Building on a daily
basis (Monday through Saturday). The outside "courtyard" area will be kept neat
and clean (Monday through Saturday). The Landscaping will be well taken care of
in the appropriate seasons.
I. SERVICES OF ELEVATORS, LOBBIES AND CORRIDORS
1. Daily Services:
(a) Empty and clean ashtrays and cigarette urns.
(b) Vacuum all carpet. Clean carpet as needed.
(c) Clean drinking fountain tops, sides and fronts.
(d) Clean lights, vents, directional sips and glass on doors.
2. Weekly Services:
(a) Clean outside of flower pots and furnishings.
(b) Clean skylights.
3. Elevators Inside:
(a) Vacuum daily.
(b) Keep elevator thresholds clean.
(c) Clean light covers as needed.
(d) Clean metal, around buttons as needed.
(e) Clean walls and doors as needed.
(f) Make monthly cosmetic repairs to elevator walls and doors.
II. OFFICE AREAS
1. Daily Services:
(a) Empty all trash cans and deliver to designated areas. (b) Empty
and clean ashtrays and cigarette urns. (c) Mop all spills on resilient
floors.' (d) Vacuum all carpet. (e) Vacuum the edges of the carpet as
needed. They must be kept clean. (f) Clean partitions, partition
glass, doors and casings, electric.
cover plates, kick plates and push plates on doors.
Page 33
<PAGE>
(g) Daily clean sinks, tables, counters, chairs, refrigerators,
machine sides, top and front, cupboard fronts, walls, lights,
vents, etc. All horizontal surfaces that can be reached without a
adder should be dusted daily.
(h) Clean all trash cans as needed. (i) Clean all drinking fountains.
2. Weekly Services:
(a) Clean all desk tops.
(b) Clean telephone receiver only.
(c) NEVER TOUCH OR CLEAN TERMINALS, COMPUTERS, OR CALCULATORS. Please
clean sides of and front of copy machines with glass cleaner only.
(d) Dust all horizontal surfaces, shelves, molding and air ducts that
cannot be reached without using a ladder.
3. Monthly Services:
(a) Clean desk plastic as needed.
(b) Vacuum under floor plastic as needed.
(c) Dust all light fixtures.
(d) Dust Venetian blinds -- DO NOT WASH THEM.
(e) Vacuum drapes as they hang on rod (do not remove drapes).
(f) Vacuum all grill work.
(g) Damp mop stairwells.
4. Tenant Furnitute Requirements:
(a) Do not clean leather furniture. Vacuum carefully.
(b) Do not spot clean the cloth on partitions or walls.
(c) Do not lemon oil wood desk fronts unless they are really dry. See
contract manager first.
(d) Clean coat racks, chairs, cupboard fronts, bookcases, tables,
files, counter top, etc.
III. RESTROOM SERVICES
1. Daily Services:
(a) Empty and remove trash.
(b) Enlenish M12lies (towels, toilet paper, soap, bags). (c) Mop floor
with a germicidal cleaner, including toilet and urinal
surfaces.
(d) Clean furniture as needed.
(e) Clean all horizontal surfaces with disinfectant strength germicidal
cleansers.
(f) Everything in the restrooms must be clean.
Page 34 Lease Agreement
<PAGE>
(g) Keep all walls clean. (h) Clean mirrors.
2. Weekly Services:
(a) Clean vents and light covers.
IV. STAIRWAYS AND CORRIDORS LEADING TO STAIRWAYS
1. Daily and as Needed Services:
(a) Remove trash.
(b) Mop floors and/or vacuum carpet.
(c) Clean glass in doors, door jambs, thresholds, baseboards, steps,
step fronts, handrails, I-beams.
2. Bi-Yearly Services:
(a) Wash all walls.
V. WINDOWS
1. Inside Windows:
(a) Clean inside windows quarterly (Jan., April, July, Oct.).
VI. EXTRA CLEANING COSTS TO THE TENANT
1. For special cleaning services required by tenant and not covered in
the contract, Tenant will have the right to solicit desired
extraordinary services from the then existing contractor at its own
expense, i.e. cleaning of the upholstery, carpet cleaning more often
than every three years, vinyl floor stripping, waxing and polishing,
cleaning of artwork and displays, etc. However, should Tenant require
cleaning of the carpets more often, then those expenses win be paid by
the Tenant as the Tenant requests said service.
2. Many wall coverings require very special attention to maintain in an
attractive manner. The Tenants should be careful to choose wall
coverings which tend to not show the dirt, are reasonably maintainable
and resist hand and scuff marks. WaU coverings, which in the
Landlord's opinion will have to be maintained by wallcovering cleaning
professionals and will be cleaned at Tenant's request an expense.
Page 35
<PAGE>
<PAGE>
VII. MISCELLANEOUS
Tenant is entitled to designate the cleaning sequence of the floors
comprising the leased premises. No cleaning supplies will be routinely
deposited in the elevator lobbies or entryway to Tenant's suite.
If the Landlord's cleaning, services are deemed unsatisfactory, Tenant shall
notify the Landlord in writing. The Landlord shall have 60 days to correct any
deficiency, and if at the end of the 60 day period, Tenant is not satisfied,
then Tenant shall have the right to directly contract with a cleaning contractor
to provide cleaning services for its own space. Following the end of the 60day
period aforesaid, Tenant shall additionally give the Landlord 45 days advance
Written notice of the date the Landlords appropriate credit to its proportionate
share of operating expenses and taxes. If after six month Landlord is
dissatisfied with. the cleaning services Tenant has contracted for, Landlord and
Tenant will mutually select a third cleaning service.
Page 36
<PAGE>
EXHIBIT D
RULES AND REGULATIONS
---------------------
1. Landlord may form time to time adopt appropriate systems and procedures
for the security or safety of the Building, any persons occupying, using or
entering the Building, or any equipment, finishing or contents of the Building,
and each tenant shall comply with such systems and procedures. Landlord shall in
no case be liable for damages for any error with regard to the admission to or
exclusion from the Building, of any person. In the event of an invasion, mob,
riot, public excitement or other commotion, Landlord reserves the right to
prevent access to the Building during the continuance of the same by closing of
the doors of the Building or any other reasonable method, for the safety of the
tenants and protection of the Building and property in the Building.
2. Tenant's employees, visitors, and licensees shall not loiter in or
interfere with the use of the Parking Facility or the Complex's driveway or
parking areas, nor consume alcohol in the Common Areas of the Complex or the
Parking Facility. The sidewalks, halls, passages, exits, entrances, elevators,
escalators, and stairways of the Building will not be obstructed by any tenants
or used by any of them for any purpose other than for ingress to and egress form
their respective premises. The halls, passages, exits, entrances, elevators,
escalators, and stairways are not for the general public, and Landlord may
control and prevent access to them by all persons whose presence, in the
reasonable judgement of Landlord, would be prejudicial to the safety, character,
reputation and interests of the Building and its tenants. In determining whether
access will be denied, Landlord may consider attire worn by a person and its
appropriateness for an office building, whether shoes are being worn, use of
profanity, either verbally or on clothing actions of a person (including without
limitation spitting, verbal abusiveness, and the like), and such other matter as
Landlord may reasonably consider appropriate.
3. No sign, placard, picture, name, advertisement or notice visible form
the exterior of any tenant's premises shall be inscribed, painted, affixed or
otherwise displayed by any tenant on any part of the Building without the prior
written consent of Landlord. All approved signs or 0 or lettering on doors will
be printed, painted, affixed or inscribed at the expense of the tenant desiring
such by a person approved by Landlord. Material visible from the outside the
Building will not be permitted. Landlord may remove such material without any
liability, and may charge the expense incurred by such removal to the tenant in
question.
4. No curtains, draperies, blinds, shutters, shades, screens, or other
coverings, hangings or decorations will be attached to, hung or placed in, or
used in connection with any window of the Building, or the Premises.
5. The sashes, sash doors, skylights, windows, heating, ventilating, and
air conditioning vents and doors that reflect or admit light and air into the
halls, passageways or other public places in the Building shall not be covered
or obstructed by any tenant, nor will any bottles, parcels or other articles be
placed on any window sills.
Page 37
<PAGE>
6. No showcases or other articles will be put in front of or affixed to any
part of the exterior of the Building, nor placed in the public halls, corridors
or vestibules without the prior written consent of Landlord.
7. No tenant will permit its premises to be used for lodging or sleeping.
No cooking will be done or permitted by any tenant on its premises, except in
areas of the premises which were specifically constructed for cooking, so long
as such use is in accordance with all applicable federal, state, and city laws,
codes, ordinances, rules and regulations.
8. No tenant will employ any person or persons other than the cleaning,
service of the Landlord for the purpose of cleaning the premises, unless
otherwise agreed by Landlord in writing. If any tenant's actions result in any
increased expense for any required cleaning, Landlord may assess such tenant for
such expenses. Janitorial service will not be furnished on nights to offices
which are occupied after business hours on those nights unless, by prior written
agreement of Landlord, service is extended to a later hour for specifically
designated offices. 9. The toilets, urinals, wash bowls and other plumbing
fixtures will not be used for any purpose other than those for which they were
constructed, and no sweeping, rubbing, rags or other foreign substances will be
thrown in them. All damages resulting from any misuse of the fixtures will be
borne by the tenant who, or whose servants, employees, agents, visitors or
licensees, have caused the damage.
10. No tenant will deface any part of the Premises or the Building. Without
the prior written consent of Landlord, no tenant will lay linoleum or other
similar floor covering so that it comes in direct contact with the floor of such
tenant's premises. If linoleum or other similar floor covering is to be used, an
interlining of builder's deadening felt will be first affixed to the floor by a
paste or other material soluble in water. The use of cement or other similar
adhesive material is expressly prohibited.
11. No tenant will alter, change, replace or re-key any lock or install a
new lock or a knocker on any door of the Premises. Landlord, its agent or
employee will retain a master key to all door locks on the Premises. Any new
door locks required by a tenant or any changes in keying of existing locks will
be installed or changed by Landlord following such tenant's written request to
Landlord and will i be at such tenant's expense. All new locks and re-keyed
locks will remain operable by Landlord's master key. Landlord will furnish to
each tenant, free of charge, two (2) keys to each door lock on its premises, and
two (2) Building access cards. Landlord will have the right to. collect a
reasonable charge for additional keys and cards requested by any tenant. Each
tenant, upon termination of its tenancy, will deliver to Landlord all keys and
access cards for the Premises and Building which have been furnished to such
tenant. Tenant shall keep the doors of the Premises closed and securely locked
when Tenant is not at the Premises.
12. The elevator designated for freight by Landlord will be available for
use by all tenants in the Building during the hours and pursuant to such
procedures as Landlord may determine from time to time. The persons employed to
move Tenant's equipment, material, furniture or other property in or out of the
Building must be acceptable to Landlord; such persons must be a locally
recognized professional mover whose primary business is the performing of
relocation services, and must be bonded and fully insured. A certificate or
Page 38
<PAGE>
other verification of such insurance must be received and approved by Landlord
prior to the start of any moving operations. Insurance must be sufficient, in
Landlord's sole opinion, to cover all personal liability, theft or damage to the
Building, including without limitation floor coverings, doors, walls, elevators,
stairs, foliage and landscaping. All moving operations will be conducted at such
times and in such a manner as Landlord may direct, and all moving will take
place during nonbusiness hours unless Landlord otherwise agrees in writing. The
moving tenant shall be responsible for or the provision of Building security
during all moving operations, and shall be liable for all- losses and damages
sustained by an party as a result of the failure to supply adequate security.
Landlord may prescribe the weight, size, and position of all equipment,
materials, furniture or other property brought into the Building. Heavy objects
will, if considered necessary by Landlord, stand on wood strips of such
thickness as is necessary to distribute the weight properly. Landlord will not
be responsible for loss of or damage to any such property from any cause, and
all damage done to the Building by moving or maintaining such property will be
repaired at the expense of the moving tenant. Landlord may inspect all such
property to be brought into the Building and to exclude from the Building all
such property which violates any of these rules and regulations or the lease of
which these rules and regulations are a part. Supplies, goods, materials,
packages, furniture and all other items of every kind delivered to or taken from
the Premises will be delivered or removed through the entrance and route
designated by Landlord.
13. No tenant will use or keep in the Premises or the Building any
kerosene, gasoline, inflammable, combustible or explosive fluid or material, or
chemical substance other than limited quantities of them reasonably necessary
for the operation or maintenance of office equipment or limited quantities of
cleaning, fluids and solvents required in the normal operation of the Premises.
Without Landlord's prior written approval, no tenant will keep any firearms
within the Premises. No tenant will use or keep, or permit to be used or kept,
any foul or noxious gas or substance in the Premises, or permit or suffer the
Premises to be occupied or used in any manner offensive or objectionable to
Landlord or other occupants of the Building by reason of noise, odors, or
vibrations, nor interfere in any way with other tenants or those having business
in the Building.
14. Landlord may, without notice and without liability to any tenant,
change the name and street address of the Building.
15. Landlord will have the right to prohibit any advertising by Tenant
mentioning the building which, in Landlord's reasonable opinion, tends to impair
the reputation of the Building or its desirability as a Building for offices
and, upon written notice from Landlord, Tenant will discontinue such
advertising.
16. Tenant will not bring any animals or birds into the Building, and will
not permit bicycles or other vehicles inside or on the sidewalks outside the
Building, except in areas designated from time to time by Landlord for such
purposes.
17. All persons entering or leaving the Building at any time other than the
Building's business hours shall comply with such off-hour regulations as
Landlord may establish and
Page 39
<PAGE>
modify from time to time. Landlord may limit or restrict access to the Building
during such periods.
18. Each tenant will store all its trash and garbage within its premises.
No material will be placed in the trash boxes or receptacles if such material is
of such nature that it may not be disposed of in the ordinary and customary
manner of removing and disposing of trash and garbage without being in violation
of any law or ordinance governing such disposal. All garbage and refuse disposal
will be made only through entryways and elevators provided for such purposes and
at such times as Landlord may designate. No furniture, appliances, equipment or
flammable products of any type may be disposed of in the Building trash
receptacles.
19. Canvassing, peddling, soliciting, and distribution of handbills or any
other written materials in the Building are prohibited, and each tenant will
cooperate to prevent same.
20. Each tenant shall keep the doors of the Premises closed and locked, and
shall shut off all water faucets, water apparatus, and utilities before tenant
or tenant's employees leave the Premises, so as to prevent waste or damage, and
for any default or carelessness in this regard Tenant shall be liable for all
injuries sustained by other tenants or occupants of the Building or Landlord. On
multiple-tenancy floors, all tenants will keep the doors to the Building
corridors closed at all times except for ingress and egress.
21. Except as permitted by Landlord by prior written consent, Tenant shall
not mark on, paint signs on, cut, drill into, drive nails or screws into, or in
any way deface the walls, ceilings, partitions or floors of the Premises or of
the Building, and any defacement, damage or injury directly or indirectly caused
by Tenant shall be paid for by Tenant. Pictures or diplomas shall be hung on
tacks or small nails; Tenant shall not use adhesive hooks for such purposes.
22. Tenant shall not grant any concessions, licenses or permission for the
sale or taking of orders for food or services or merchandise in the Premises,
install or permit the installation or use of any machine or equipment for
dispensing food or beverage in the Building nor permit the preparation, serving,
distribution or delivery of food or beverages in the Premises, without the prior
written approval of Landlord and only in compliance with arrangements prescribed
by Landlord. Only persons approved by Landlord shall be permitted to serve,
distribute or deliver food and beverage within the Building or to use the public
areas of the Building for that purpose. No cooking shall be done or permitted by
Tenant on the Premises.
Page 40
<PAGE>
EXHIBIT E
DESCRIPTION OF LAND
-------------------
Page 41
<PAGE>
EXHIBIT F
WORK LETTER AGREEMENT
--------------------
I. Landlord and Tenant Construction Obligations
A. By June 10, 1999, Tenant agrees to deliver to Landlord a detailed space
plan ("Space Plan") containing all information listed in Section II of this Work
Letter Agreement for all tenant improvements ("Tenant Improvements ") required
by Tenant in the Premises. If the Space Plan is not delivered by the date listed
above, then each calendar day of delay in delivery shall constitute on day of
"Tenant Delay" hereunder.
B. Landlord will review the Space Plan upon receipt and upon mutual
approval of the Space Plan, Landlord will notify Tenant, in writing, that the
Space Plan is approved by Landlord and that preparation of working drawings may
begin.
If the Space Plan does not conform to the requirements of Section H below,
Landlord will return the Space Plan to Tenant for corrections or revisions.
Tenant will deliver a corrected Space Plan to Landlord no later than ten (10)
calendar days after the initial Space Plan has been returned to Tenant. If the
corrected Space Plan is not delivered to Landlord within such ten (10) day
period, then each calendar day of delay in delivery shall constitute one day of
Tenant Delay.
C. Upon final mutual approval of the Space Plan, Landlord shall authorize
the preparation of working drawings ("Working Drawings") based on the approved
Space Plan. Tenant shall deliver the Working Drawings, accompanied by Tenant's
written approval thereof, to Landlord no later than ten (10) days after Landlord
authorizes preparation thereof If the approved Working Drawings are not
delivered to Landlord within the aforementioned ten (10) day period, then each
day of delay in delivery shall constitute on day of Tenant Delay.
D. Tenant, at its own expense, may authorize changes in the Tenant
Improvements during construction; provided; however, that such authorization is
directed solely in accordance with the procedures outlined herein by Landlord.
Tenant shall bear the full costs for any and all such changes in the Tenant
Improvements and any delays associated with such changes shall constitute Tenant
Delay.
E. "Net Tenant Delay" shall mean the total number of days of Tenant Delay
minus the total number of days of Landlord Delay. If the Premises are not ready
for occupancy on or before the date specified in Article III of this Lease, and
there exists Net Tenant Delay, Tenant shall pay Landlord, as Additional Rent, a
sum equal to one day's Rent (including Base Rent and all other charges provided
for in this Lease) multiplied by the Net Tenant Delay. Such Additional Rent
shall be paid by Tenant within seven (7) days of receipt of invoice.
Page 42
<PAGE>
F. Tenant has selected and Landlord has approved D&S Construction, Inc., A
Utah Corporation ("Tenant Finish Contractor") to complete the construction of
all Tenant Improvement. Together, Tenant and Tenant Finish Contractor, jointly
and severely, make the following representations, warranties and
acknowledgements:
1. Tenant Finish Contractor is duly licensed in the State of Utah and will
provide to Landlord evidence of such licensure. Tenant Finish Contractor
will provide all required insurance certificates.
2. Tenant Finish Contractor has experience in the construction of
professional office space.
3. David W. McCoy is an officer of Online Investors Advantage and a
shareholder of D&S Construction, Inc.
4. Tenant Finish Contractor will construct the Premises in accordance with
the Lease Agreement and will obtain all necessary building permits and
inspections, including the final certificate of occupancy. Tenant Finish
Contractor will notify Landlord of all City *inspections and will deliver a
copy of each inspection report to Landlord within one day of the
inspection-
5. Landlord, or its representative, Quantum Construction and Development,
L.C. will review and approve the construction of the Tenant Improvements.
Landlord or its representative may enter the Premises during the
construction of the Tenant Improvements in order to inspect
6. All improvements will be constructed using the Building Standard
materials and in accordance with the lease agreement.
7. Landlord will pay 50% of the Construction Allowance 30 days after
building plans are drawn, including any applicable Lien Waivers, and the
remaining 50% to be paid after the final approval by Provo City, the
issuance of a certificate of occupancy and final approval by the Landlord.
8. Tenant Finish Contractor will pay for architectural and engineering fees
related to this work
9. Tenant Finish Contractor shall perform final cleaning of the
construction, including any associated cleaning required in the common
areas of the building.
10. Tenant Finish Contractor will complete the work in an 8-week period of
time, beginning when the permit is issued by Provo City.
II. Tenant Space Plan Must Contain, as a Minimum, the Following Information:
A. Floor plan showing:
1. Partitions: indication location and type of all partitions.
Page 43
<PAGE>
2. Doors: indication location, swing and type of all doors. Also indicating
hardware and providing keying schedule.
3. Standard Electrical Items: indicating the location of all building
standard electrical items listed herein (wall-mounted 110 volt duplex outlets,
single-pole light switches and building standard light fixtures).
4. Standard Telephone Outlets: indicating the location of all building
standard telephone wall outlets, as listed herein.
5. "Above Standard" Electrical Items: indicating the location and type of
all "above standard" electrical items, including lighting.
6. Special Electrical Equipment: indicating the location and type of
equipment that will require special electrical requirements. Providing
manufacturer's specifications of this equipment.
7. Telephone Equipment Location: indicating location of telephone equipment
room, if any, accompanied by written approval by the telephone company and a
copy of the telephone company installation specifications for this equipment.
8. Glass Items: indicating location, dimensions and type of glass
partitions, windows and doors. Including details if not building standard.
9. Heavy Items: indicating location, dimensions, weight per square foot and
description of any exceptionally heavy equipment of filing system exceeding
fifty (50) pounds per square foot live load.
10. Special HVAC Requirements: indicating location and specific
requirements for any special heating or air conditioning beyond that provided by
the building HVAC system.
11. Floor Covering: indicating location, type and color of all floor
covering.
12. Special Wall Covering: indicating location, type and color of all
"above standard" wall coverings.
13. Paint: indicating location, type and color of both building standard
and "above standard" paint finishes.
14. Millwork: indicating location and basic dimensions of all cabinets,
shelving and other carpentry items.
15. Plumbing: indicating location and type of all plumbing items.
Page 44
<PAGE>
16. Appliances: indicating location, type, dimensions and special
requirements of all appliances.
17. Critical Dimensions: indicating all critical dimensions necessary for
construction.
III. Building Standard Tenant improvement Materials and Ouantity Allowable. In
connection with all improvements to be constructed in the Premises, Landlord
shall provide the Building Standards and the Construction Allowance set forth in
Schedule F-1.
It is hereby acknowledged by both Tenant and Landlord that this Exhibit "F"
has been executed as of, and shall become part of the Lease Agreement dated May
25th 1999.
LANDLORD: EsNet Properties, L.C.
BY /s/ David W. Campbell
ITS________________________
TENANT: Online Investors Advantage, Inc.
BY /s/ David McCoy
ITS
Page 45
<PAGE>
SCHEDULE F- I
The Building Standard (herein so called) materials are the following:
I FLOORS
------
1. Concrete floors. Holes for electrical and telephone services
or chases may be cut through concrete floors with the prior
approval of the building manager. Any additional holes
required will be at extra cost to Tenant.
2. Carpet.
Building Standard Carpet shall be equal to Dimension Carpet
"Aiken 30". Cut C, Pile, 100% Nylon, 1/10 gauge, 30 oz.,
directly glue down. Other carpets desired C; by Tenant may be
used with owners approval and at extra cost to Tenant.
3. Vinyl Composition Tile. Vinyl composition tile shall be equal
to Standard. Imperial Texture, 12xl2 1/8" guage. Install as
recommended by manufacturer. Use of this material is limited
to storage, utility and break rooms. Any other areas must be
approved by owner.
II BASE
----
1. Carpet base. Carpet base shall be 4" high with bound top,
same material as carpet flooring (insert color). Mechanically
and glue attached to wall.
2. Rubber base. Rubber base to be equal to Johnsonlite color
integrated wall base rubber. 1/8" guage. 4" high coil.
III PARTITIONS
----------
1. Drywall Partitions. Drywall partitions shall be built with
3-5/8", C shape, 25 guage galvanized sheet steel studs not
more than 16" oc, with top and bottom tracks, assembled as
recommended by manufacturer. Partitions shall be overhead
braced to structure at 8' on center. Drywall shall be 5/8"
gypsum board, taped and finished. (type x at fire rated
partitions.) Finish to be smoothwall ready. for paint or
wall coverings. Inside corners to be taped and finished.
Outside comers shall be reinforced with metal trim, taped
and finished. Partitions interior to the Tenant space shall
be 9'-2" high. Demising partitions between Tenants and
common areas shall extend to the bottom of the concrete
deck. 2. Sound walls. Sound walls interior to the Tenant
finish area are not included in standard Tenant finish
allowance. If requested these sound walls shall be steel
stud walls with 3 inch sound batts in the wall cavity. 5/8"
gypsum board each side.
Page 46
<PAGE>
3. Wall Penetrations. Any penetrations of fire walls and common
walls will be at extra cost.
4. Exterior Wall at Windows. Exterior wall at windows shall be 3.5"
steel studs, 25 c,a. at 16" oc. 3.5" R-13 thermal batts, 5/8"
gypsum board taped and finished 0 smoothwall, with marble stool.
IV CEILINGS.
1. Ceiling Tiles. Ceiling tiles shall be equal to United States
Gypsum Omni Fissured, white, tegular edge, 2x2' lay in panels.
2. Ceiling and. Ceiling grid meeting requirements of ASTM C635,
intermediate duty, non fire rated, exposed T, DX configuration,
components die cut and interlocking with all necessary
accessories. Braced seismically as recommended by manufacturer.
White in color.
V DOORS, FRAMES INTERIOR WINDOWS.
1. Doors. Doors shall be plain sliced wood veneer (Cherry), 1-3/4"
solid core slab, particle board core, fully warranted. Equal to-
Weyerheuser DPC-l. 3-O" x 7-O".
2. Door Frames. Hollow metal frames. Fully welded units, 16 gauge
steel, fabricated with reinforcement plates welded in place.
Prepare frame for silencers and install. Baked primer. Extra cost
optional sidelite frames to be directly adjacent to door frames
built as integral unit, sized for 12" wide 1/4" thick tempered
glass unit. Other optional windows shall be similar in
construction with 3/16" float -glass unless within 24" of a door.
Any interior glazing not included in Tenant finish allowance.
3. Entry Doors. Tenant entry doors from common areas shall be same
as A. Except 3-6" wide x 8'-0" tall. Sidelites shall be same as
B. Total width approximately 8. Door veneer to be plain sliced
Cherry.
VI PAINTING.
1. Walls. The standard paint for gypsum board partitions shall be
one coat latex primer sealer and two coats satin finish latex.
2. Hollow metal frames. Frames shall be pre-primed, paint with two
coats alkyd enamel, semigloss.
Page 47
<PAGE>
3. Doors. Doors shall be stained equal to Fuller 0 Brian Penchrome,
Cherry A 640- 08, with 3 coats polyurethane or come
pre-finished).
VIII GRAPHICS. Only Building standard graphics, approved by the building
management will be permitted in Common Areas. See graphics package provided
by building manager.
IX HARDWARE
1. Tenant Interior Doors. Tenant interior doors shall be hung with 1-1/2 pair
hinges equal to Hager full mortise, standard weight, 4-1/2 x 4-1/2, BB,
Butt hinges, Brushed stainless finish. Locksets shall be schlague D series,
lever handle, bored lock, Brushed stainless finish, keyed to building
master system. Passage sets are standard. Door stops shall be floor or wall
mounted brushed stainless finish, with rubber cushion. Door closers, if
required, shall be Sargent 350 series.
2. Tenant Entry Doors From Common Area. Hardware shall be same as Tenant
Interior Doors except lockset shall be Equal to Schlage L Series Heavy Duty
Mortise Lock, brushed stainless.
X HVAC OUTLINE SPECIFICATIONS
Tenant heating and cooling system description. Cooling is supplied to the
building from a central rooftop cooling unit. Heating is supplied to the
building from a central hot water boiler heating system located in the
lower level of the building.
The Tenant lease spaces are divided into the desired number of
temperature controlled zones. Each temperature controlled zone is
provided with a fan powered variable air volume terminal, referred to
as fan powered terminal hereafter. The fan powered terminals are
located 'in the ceiling plenum near their respective zone.
Cold air is supplied to each fan powered terminal through a supply air
duct system from the central rooftop cooling unit. Hot water is
supplied to a hot water heating coil in each fan powered terminal
through a hot water distribution piping system from a central hot water
boiler heating system. Each fan powered terminal supplies air to its
respective temperature controlled zone through a supply air duct system
and ceiling supply air diffusers. Return air to the fan powered
terminals and the rooftop cooling unit is through the ceiling plenum.
The temperature control system in the building is a direct digital
control system, referred to as DDC system hereafter. A space
temperature sensor is located in each respective temperature
controlled zone. The space temperature sensors are controlled through
a PC Host unit located in the Building Manager's Office. The space
temperature sensors will maintain the respective zone temperature
setting by controlling the amount of cold air required from the
central rooftop cooling unit supplied to the zone fan powered terminal
Page 48
<PAGE>
and the amount of hot water required from the central boiler heating
system supplied to the heating coil in the zone fan powered terminal.
The control of a zone is independent of the control of all other
zones. This means that a zone can be heating while other zones are
cooling or a zone can be cooling, while other zones are heating. Each
respective zone temperature is set at the PC Host control unit. The
temperature sensors located in each respective temperature controlled
zone can be manually reset at the temperature control sensor in the
space, plus or minus 2 degrees farenheit.
X ELECTRICAL OUTLINE SPECIFICATIONS
---------------------------------
I . Light fixtures.
Lithonia Parabolic Trofferft 2PM3 340. 2x4 3 lamps rapid
start, white. Pre anodized aluminum louver, electronic
ballast. Provide I fixture for each 100 square feet of floor
area. Approx. 48 footcandles at 9' ceiling.
Recessed Can down lights. (optional at extra cost). Lithomia
AFV 26TRT 6AR Recessed Can wall washers. (optional at extra
cost). Lithonia ATW 26/32TRT 6AR 120
2. Duplex outlets. Zinc coated steel boxes. All wiring in flex
conduit. Cover plates will be plastic ivory. Provide I
duplex outlet per 100 square feet of floor area.
3. Wall switches. Zinc coated steel boxes. All wiring in flex
conduit. Cover plates shall be plastic ivory. Provide I
switch for each 4 light fixtures.
4. Telephone and computer wiring are not included in Tenant
finish package.
XI FIRE SPRINKLING
---------------
The fire sprinkler riser, mains, lines and heads to protect the
unoccupied Tenant spaces are all existing and in service. In order to
maintain warranty and system integrity, the owner is responsible to
contact Firetrol Protection Systems, Inc. (485-6900) for modifications
to the fire sprinkler system. Based on the Tenant plan, the temporary
fire sprinkler heads will be lowered to the Tenants new ceiling and
spaced per NFPA #13 and the Uniforrn Building Code. The hydraulic
demand will be verified with the fire sprinkler system piping and
water supply. The finished fare sprinkler heads in the Tenants new
ceilings will be Chrome Recessed Heads and Escutcheons. Firetrol will
coordinate the fire sprinkler heads with the lights, diffusers, and
locate the fire sprinkler heads not closer then 6" to acoustical grid.
XII CONSTRUCTION $21.50 per square foot of Net Useable
ALLOWANCE: Area.
Page 49
<PAGE>
EXHIBIT G
RENEWAL OPTION
---------------
Provided that no Event of Default has ever occurred under any Term or
provision contained in this Lease and no condition exists which with the passage
of time or the giving of notice, or both, would constitute an Event of Default
pursuant to this Lease, and provided that Tenant has continuously occupied the
Premises for the Permitted Use during the Lease Term, Tenant (but not any
assignee or subtenant) shall have the right and option (the "Renewal Option") to
renew this Lease, by written notice delivered to Landlord no later than (_)
months prior to the expiration of the initial Lease Term for an additional term
(the "Renewal Term") of months under the same terms, conditions and covenants
contained in the Lease, except that (a) no abatements or other concessions, if
any, applicable to the initial Lease Term shall apply to the Renewal Term, (b)
the Base Rent shall be equal to the market rate for comparable office space
located in the Building as of the end of the initial Lease Term as determined by
Landlord, (c) Tenant shall have no option to renew this Lease beyond the
expiration of the Renewal Term, and (d) all leasehold improvements within the
Premises shall be provided in their then-existing condition (on an "as is"
basis) at the time the Renewal Tenn commences. Failure by Tenant to notify
Landlord in writing of Tenant's election to exercise the Renewal Option herein
granted within the time limits set forth for such exercise shall constitute a
waiver of such Renewal Option. In the event Tenant elects to exercise the
Renewal Option as set forth above, Landlord shall, within ( ) days thereafter,
notify Tenant in writing of the Proposed rental for the Renewal Term (the
"Proposed Renewal Rental"). Tenant shall within days following delivery of the
Proposed Renewal Rental by landlord, notify Landlord in writing of the
acceptance or rejection of the Proposed Renewal Rental. If Tenant accepts
Landlord's proposal, then the Proposed Renewal Rental shall be the rental rate
effect during the Renewal Term. Failure of Tenant to respond in writing during
the aforementioned ( ) day period shall be deemed an acceptance by Tenant of the
Proposed Renewal Rental. Should Tenant reject Landlord's Proposed Renewal Rental
during such day period, then Landlord and Tenant shall negotiate during the
(___) day period commencing upon Tenant's rejection of Landlord's Proposed
Renewal Rental to determine the rental for the Renewal Term. In the event
Landlord and Tenant are unable to agree to a rental for the Renewal Term during
such day period, then the Renewal Option shall terminate and be null and void,
and the Lease shall, pursuant to its terms and provisions, terminate at the end
of the original Lease Term.
Upon exercise of the Renewal Option by Tenant and subject to the conditions
set forth hereinabove, the Lease shall be extended for the period of such
Renewal Term without the necessity of the execution of any Ruther instrument or
document, although, if requested by either party, Landlord and Tenant shall
enter into a written agreement modifying and supplementing the Lease in
accordance with the provisions hereof. Any termination of the Lease during the
initial Lease Term shall terminate all renewal rights hereunder. The renewal
rights of Tenant hereunder shall not be severable from the Lease, nor may such
rights be assigned or otherwise conveyed in connection with any permitted
assignment of the Lease. Landlord's consent to any assignment of the Lease shall
not be construed as allowing an assignment of such rights to any assignee.
Page 50
<PAGE>
CHECK REQUEST FOR LEASE
DATE May 24, 1999
TENANT Online Investor Advantage, Inc.
ADDRESS 5252 N. Edgewood Dr.
CITY/STATE/ZIP Provo, Utah 84604
CONTACT PERSON FOR TENANT
TENANTS PHONE NUMBER
MONTHLY EXPENSES MONTH MONTHLY
July THEREAFTER
July THEREAFTER
2000
BASE RENTAL AMOUNT (MONTH ONE) $4,156.91 $4,156.91
OPERATING EXPENSES $1,564.23 $1,564.23
TOTALS $5,721.14 $5,721.14
PLEASE MAKE ALL CHECKS PAYABLE TO: EsNet Properties, L.C.
(MONTHLY RENTAL CHECKS SHOULD BE MAILED TO THE LANDLORD)
LANDLORD'S ADDRESS EsNet Properties, L.C.
5152 N. Edgewood Dr.
Provo, Utah 84604
LANDLORD'S PHONE NUMBER (801) 434-4111
P.S. PAYMENTS FOR TAXES, INSURANCE, AND CAM FEES ARE ESTIMATES ONLY AND MAY
BE ADJUSTED PER INVOICE
<PAGE>
Exhibit H
On Line Investor Advantage
5252 North Edgewood Drive
Provo, Utah 84604
Base Rental Term
Square Price/ Annual No. Monthly
Year Footage Sq Foot Rental Months Rental
- -------------------------------------------------------------------------------
1 3,340 $20.12 $67,200.80 12 $5,600.07
$8,064.10
Letter of Credit Guaranty $75,264.90 Cost of LC $752.65
2 3,340 $14.94 $49,882.92 12 $4,156.91
3 3,340 $15.38 $51,379.41 12 $4,281.62
4 3,340 $15.84 $52,920.79 12 $4,410.07
5 3,340 $16.32 $54,508.41 12 $4,542.37
Sub Totals $21.51 $359,221.32 60 $5,987.02
Option Term
6 3,340 $16.81 $56,143.67 12 $4,678.64
7 3,340 $17.31 $57,827.98 12 $4,819.00
8 3,340 $17.83 $59,562.82 12 $4,963.57
9 3,340 $18.37 $61,349.70 12 $5,112.47
10 3,340 $18.92 $63,190.19 12 $5,265.85
Sub Totals $17.85 $298,074.35 60 $4,967.91
TOTAL $19.78 $657,295.67 120 $5,477.46
<PAGE>
Exhibit I
This is an addition to the Lease Agreement entered into on May 25, 1999 between
Online Investor Advantage. Inc. as the Lessee (the "Tenant"), and EsNet
Properties. L.C. as the Lessor (the "Landlord"). The following items are hereby
incorporated as part of the Lease Agreement, and to the extent that they modify
or conflict with any provisions of the Lease Agreement, including all prior
additions, these terms shall control. All other terms of the Lease Agreement,
including all prior additions, not modified shall remain the same:
1. Tenant has the right to move within Riverwoods Research & Business Park at
any time during the term of this lease, while still retaining all
responsibilities, obligations, and liabilities of this Lease, under the
following requirements:
(a) Landlord has sole discretion and final approval of Tenant's move.
(b) The space moved into must be owned by EsNet Properties, L.C.
(c) If the space moved into is to be new construction, the building
must be built by Quantum Construction & Development, L.C.
LANDLORD: Esnet Properties, L.C.
BY /s/ David W. Campbell
ITS
TENANT: Online Investors Advantage, Inc.
BY /s/ David McCoy
ITS
<PAGE>
Exhibit J
(Online Investor Advantage, Inc.)
Lease Agreement between EsNet Properties, L.C. ("Landlord") and Online Investor
Advantage, Inc. ("Tenant") dated the 25th day of May 1999.
1
Letters of Credit:
- ------------------
In Lieu of Tenant paying Landlord regular monthly rental payments during the
first 12 months of the Lease Term, Tenant shall upon execution of the Lease
deposit with Landlord a letter of credit in the amount of $$75,264.90 Seventy
Five Thousand, Two Hundred Sixty Four dollars and 90 cents and otherwise in a
form and issued by a financial institution satisfactory to Landlord (the "Letter
of Credit"). This letter of credit is the amount of rents from commencement and
a prepayment of the rents for the balance of the first year, including 12%
interest paid on the first year's rent. If Tenant fails to pay to Landlord the
full amount due as rental consideration for the first 12 months of occupancy by
April 15, 2000, Landlord may draw down the full amount of the existing letter of
credit and hold cash as rental consideration pursuant to the provisions of the
Lease. In the event that Landlord makes any draw upon a Letter of Credit, Tenant
shall vacate the Premises within five (5) days of such draw pursuant to the
provisions of the Lease. The term of the Letter of Credit shall be at least
thirty (30) days longer than the April 15, 2000 due date.
In the event that the Tenant pays the amount due, without Landlord having to
draw down the Letter of Credit, Tenant shall then deposit with Landlord a
Security Deposit in an amount equal to two (2) months of the then current base
rent amount.
LANDLORD: EsNet Properties, L.C.
BY /s/ David W. Campbell
ITS
TENANT: Online Investors Advantage, Inc.
BY /s/ David McCoy
ITS
<PAGE>
AGENCY DISCLOSURE
This is a legally binding document. If it is not understood, consult with
legal counsel.
Names of Lessee(s): Online Investors Advantage
Agent representing Lessee: Justin Johnston
Name of Brokerage: D&B Real Estate Inc. (the "Company")
- -------------------------------------------------------------------------------
Name of Lessor(s): EsNet Properties, L.C.
Agent representing Lessor: Donald L. Blackwelder
The Lessee and the Lessor are both presently using the services of the
Company in a possible real estate transaction involving real property located
at: 5252 N. Edgewood Dr., Provo, Utah 84604 (referred to below as the
"Property").
AS THE LESSEE AND THE LESSOR PROCEED WITH THIS TRANSACTION, IT IS IMPORTANT
THAT THEY EACH UNDERSTAND THEIR PROFESSIONAL RELATIONSHIP WITH THE REAL ESTATE
AGENTS(S) AND WITH THE COMPANIES. WHAT FOLLOWS IS A BRIEF BUT VERY IMPORTANT
EXPLANATION OF THE NATURE OF AGENCY RELATIONSHIPS BETWEEN THE LESSOR, THE
LESSEE, THE COMPANY AND THE REAL ESTATE AGENTS WORKING IN THIS TRANSACTION.
1. Principal or Branch Broker. Every real estate agent must affiliate with
a real estate broker. The broker is referred to as a Principal Broker or a
Branch Broker (if the brokerage has a branch office). The broker is responsible
for operation of the brokerage and for the professional conduct of all agents.
2. Right of Agents to Represent Lessor and/or Lessee- An agent may
represent through the brokerage, a Lessor who wants to Lease out property or a
Lessee who wants to Lease property. On occasion, an agent will represent both
Lessor and Lessee in the same transaction. When an agent represents a Lessor,
the agent is a "Selles Agent"; when representing a Lessee, the agent is a
"Buyers Agent"; and when representing both Lessor and Lessee, the agent is a
"Limited Agent"
3. Sellers Agent. A Seller's Agent works to assist the Lessor in locating a
Lessee and in negotiating a transaction suitable to the Lessees specific needs.
A Seller's Agent has fiduciary duties to the Lessor which include loyalty, full
disclosure, confidentiality, diligence, obedience, reasonable care, and holding
safe monies entrusted to the agent.
4. Buyer's Agent A Buyers Agent works to assist the Lessee in locating and
negotiating the acquisition of a property suitable to that Lessee's specific
needs. A Buyees Agent has the same fiduciary duties to the Lessee that the
Seller's Agent has to the Lessor.
5. Limited Agent A Limited Agent represents both Lessor and Lessee in the
same transaction and works to assist in negotiating a mutually acceptable
transaction. A Limited Agent has fiduciary duties to both Lessor and Lessee.
However, those duties are "limited" because the agent cannot provide to both
parties undivided loyalty and full disclosure of all information known to the
agent For this reason, a Limited Agent must remain neutral in the representation
of a Lessor and Lessee, and may not disclose to either party information likely
to weaken the bargaining position of the other, such as, the highest price the
Lessee will pay or the lowest price the Lessor will accept A Limited Agent must,
however, disclose to both parties material information known to the Limited
Agency regarding a defect in the Property and/or the ability of each party to
fulfill agreed upon obligations.
6. In-House Lease. If the Lessee and the Lessor are both represented by one
or more agents in the same brokerage, that transaction is commonly referred to
as an "In-House Lease." Consequently, most In-House Leases involve limited
agency because Lessor and Lessee are represented by the same brokerage.
7. Conflicts with the In-House Lease. There are conflicts associated with
an In-House Lease; for example, agents affiliated with the same brokerage
discuss with each other the needs of their respective Lessees or Lessors. Such
discussions could inadvertently compromise the confidentiality of discussions
between agents and access to confidential client and transaction files.
<PAGE>
8. Authorization for Limited Agency. The Lessor and Lessee are advised that
they are not required to accept a limited agency situation in the Company.
However, it is the business practice of the Company to participate in In-House
Leases. By signing this agreement, Lessee and Lessor consent to a limited agency
within the Company as provided below:
___ A. One Agent. The Lw3.e and the Lessor consent to (Name of Agent); and the
Principal/Branch Broker representing both the Lame and the Lessor as a
Limited Agent as described above.
___ B. Two Agents. The Lessee and the Lessor consent to Donald L Blackwelde
(Seller's Agent) continuing to represent the Lessor; and Justin Johnston
(Buyer's Agent) continuing to represent the Lessee; and the
Principal/Brunch Broker acting as a Limited Agent as described above.
/s/ May 25, 1999
LESSEE: Online Investors Advantage Date
/s/ May 25, 1999
LESSOR: EsNet Properties Date
The Company: /s/
Justin Johnston May 25, 1999
(Authorized Agent)
P.S. PAYMENTS FOR TAXES, INSURANCE, AND CAM FEES ARE ESTIMATES ONLY AND MAY BE
ADJUSTED PER INVOICE
LEASE AGREEMENT
This is a legal and binding contract. Before signing, read the entire document
including the general printed provisions and attachments. If you have any
questions before signing, consult your attorney and/or accountant.
THIS LEASE AGREEMENT (hereinafter the "Lease") is made and entered into as
of the 7th day of October, 98 by and between DC Mason, Ltd., (801) 224-5456
whose address is 161 West 3960 North Provo, Utah 84604 (hereinafter "Landlord")
and ON-LINE INVESTOR ADVANTAGE, INC. 901-229-2794 whose address is 443 South
Commerce Road, Orem, Utah 84058 (hereinafter "Tenant")
W I T N E S S E T H:
In consideration of the rents, covenant and agreements hereinafter set
forth, Landlord and Tenant mutually agree as follows:
ARTICLE 1: PREMISES
Landlord hereby leases and demises to Tenant and Tenant hereby leases from
Landlord that certain real property located in Utah County, State of Utah and
more particularly described, 852 North 1430 West Unit #3 Westpoint Business Park
Orem, Utah 84057, (hereinafter the "Property"), together with all buildings and
other improvements now or hereafter located thereon and affixed thereto
(hereinafter collectively "Improvements"). and any and all privileges,
easements, and appurtenances belonging thereto or granted herein. The Property
and the Improvements are hereinafter collectively referred to as the "Premises".
ARTICLE II: TERM COMMENCEMENT
2.1 Term of Lease. This Lease shall be for a term of Three (3) years
commencing on November 1, 1998, (hereinafter the "Commencement Date") including
one free months of rent to be taken Dec. 1998 and ending at 12:00 p.m. on
October 31, 2001 unless sooner terminated pursuant to the terms, covenants and
conditions of this Lease or pursuant to law.
2.2 Delivery of Possession. Tenant acknowledges that Landlord is currently
completing construction of the Premises. In the event that Landlord is not able
to deliver possession of the Premises to Tenant on the Commencement Date because
construction of the Premises has not yet been completed, Landlord shall not be
liable to Tenant and Tenant may not terminate this Lease or any of Tenant's
rights or obligations hereunder, provided, however, that in the event Landlord
is unable- to deliver possession of the Premises to Tenant on or before the date
which is sixty (60) days after the Commencement Date, Tenant's sole remedy shall
be to terminate this Lease and all of Landlord's and Tenant's respective rights
and obligations hereunder by written notice from Tenant to Landlord. Such notice
must be given, if at all, on or before the date which is seventy-five (75) days
after the Commencement Date. Notwithstanding anything to the contrary in this
Lease, Tenant shall riot be obligated to pay rent to Landlord for any fractional
months or months during which Landlord is unable to deliver possession of the
Premises to Tenant pursuant to the provisions of this Section 2.2.
2.3 Lease Year. The term "Lease Year" as used in this Lease shall mean a
period of twelve (12) consecutive calendar months during the term of this Lease.
The first Lease Year shall begin on the Commencement Date if the Commencement
Date occurs on the first day of a calendar month; if not the first Lease Year
shall begin on the first day of the calendar month next following the
Commencement Date. Each succeeding Lease Year shall begin at the expiration of
die immediately preceding Lease Year.
ARTICLE III: RENT
3.1 Payment of Monthly Base Rent. As Monthly Base Rent for the Premises,
Tenant shall pay to Landlord, in advance on or before the first day of each
calendar month during the term of this Lease, an amount equal to the "Monthly
Base Rent" as defined in Section 3.2.
Page 1
<PAGE>
3.2 Monthly Base Rent. The "Monthly Base Rent" payable during each Lease
Year shall be determined in accordance with the following:
(a.) Refer To Exhibit B
ARTICLE IV: LATE CHARGES AND INTEREST
If Tenant fails to pay any Monthly Ban Rent when such Monthly Base Rent is
due and payable in accordance with Article III of this Lease or if Tenant fails
to pay any additional amounts or charges of any character which are payable
under this Lease, Landlord, at Landlord's election, my assess and collect a late
fee charge equal to five percent (5%) of each payment of rent not received
within five (5) days from the date such rent payment is due.
Furthermore, and in addition to any late charges payable pursuant to the
provisions of this Article, to the extent that any payment of Monthly Base Rent
or any other amount payable to Landlord by Tenant pursuant to any provision of
this Lease is more than thirty (30) days past due, Tenant shall pay Landlord
interest at the rate of eighteen percent (18 %) per annum on all such past due
amounts.
ARTICLE V: SECURITY DEPOSIT
Concurrently with Tenant's execution of this Lease, Tenant shall deposit
with Landlord the sum of Eleven Hundred Dollars ($1100.00) (hereinafter the
"Security Deposit"). The Security Deposit shall be held by Landlord for the
faithful performance by Tenant of all of the terms, covenants, and conditions of
this Lease to be kept and performed by Tenant during the term of this Lease. If
Tenant defaults with respect to my provision of this Lease. If Tenant defaults
with respect to any provision of this Lease, including but not limited to the
provisions relating to the Payment of Monthly Base Rent, and any costs,
expenses, and charges payable under the provisions of this Lease, Landlord may,
but shall not be obligated to use, apply or retain all or a part of the Security
Deposit for the payment of any amount which Landlord may spend by reason of
Tenant's default or to compensate Landlord for any other loss or damage which
Landlord may suffer by reason of Tenant's default. If any portion of the
Security Deposit is so used or applied, Tenant shall, within ten (10) days after
written demand, deposit with Landlord an amount sufficient to restore the
Security Deposit to its original amount; and Tenant's failure to do so shall be
a material breach of this Lease. Landlord shall not be required to keep the
Security Deposit separate from Landlord's general funds, and Tenant shall not be
entitled to interest on the Security Deposit. If Tenant shall fully and
faithfully perform every provision of this Lease to be performed by Tenant, the
Security Deposit or any balance thereof shall be returned to Tenant or, at
Landlord's option, to the last permitted assignee of Tenant's interest under
this Lease within thirty (30) days of the expiration of the term of this Lease
and after Tenant or Tenant's permitted assignee has vacated the Premises or
within fifteen (15) days of receipt of Tenant's new mailing address, whichever
is later. In the event of termination of landlord's interest in this Lease,
Landlord shall transfer the Security Deposit to Landlord's successor in interest
whereupon Tenant agrees to release Landlord from liability for the return of the
Security Deposit or any accounting therefore.
ARTICLE VI: QUIET ENJOYMENT
Landlord hereby covenants to Tenant that, subject to Tenant's compliance
with the terms and provisions of this Lease, Tenant shall peaceably and quietly
hold and enjoy the full possession and use of the Premises during the term of
this Lease.
ARTICLE VII: TAXES, ASSESSMENTS, PROPERTY INSURANCE, COMMON AREA MAINTENANCE
AND OTHER CHARGES
7.1 Taxes and Assessments. Tenant shall pay to Landlord all real estate
taxes, assessments (general and special), and other charges which may be levied,
assessed or charged against the Premises, accruing or becoming due and payable
during the term of this Lease and any extension thereof at least ten (10) days
before such taxes, assessments, or other charges become delinquent. The charges
shall be as follows (these are estimates only and are subject to annual
increases): $46.00 for Real Estate Taxes, and $40.00 for Common Area Charges
(CAM) due at the first of every month.
Page 2
<PAGE>
7.2 Right to Contest Taxes. Tenant, at its sole cost, shall have the right
to contest, in accordance with the provisions of the laws relating to such
contests, any real estate taxes, assessments, or other charges against the
premises and the failure of Tenant to pay such taxes, assessments, or charges
shall not constitute a default by tenant so long as Tenant complies with the
provisions of this Section 7.2. Prior to initiating any contest or proceeding,
Tenant shall give Landlord written notice of such contest or proceeding and
shall either deposit with Landlord, or furnish good and sufficient undertaking
and sureties designating landlord as the beneficiary thereof, in such amount as
Landlord deems to be sufficient, considering the amount of such taxes, charges,
assessments, any potential penalties and interest thereon, and any potential
expenses that might be incurred by Landlord with respect thereto. Landlord shall
not be required to join in any proceeding or contest brought by Tenant unless
the provisions of any law require that the proceeding or contest be brought by
or in the name of Landlord or any owner of the Premises. In that case, Landlord
shall join in the proceeding or contest or permit such proceeding or contest to
be brought in its name as long as Landlord is not required to bear any cost.
Tenant, on final determination of the proceeding or contest, shall immediately
pay or discharge any decision or judgment rendered, together with all costs,
charges, interest and penalties incidental to the decision or judgment.
ARTICLE VIII: UTILITIES
Tenant shall be solely responsible for, and pay when due, all charges for
water, gas, heat, light~ power, telephone, and other utilities or services used
by or supplied to Tenant or to the Premises, together with any taxes thereon.
during the term of this Lease.
ARTICLE IX INSURANCE
9.1 Tenant's Insurance Coverage.
(a) Tenant shall, at all times during the term of this Lease, and at
Tenant's own cost and expense, procure and continue in force the following
insurance coverage: Comprehensive liability insurance with limits of not
less than $500,000.00 per person and $500,000.00 per occurrence insuring
against any and all liability of the insured with respect to the Premises
or arising out of the maintenance, use or occupancy thereof, and property
damage liability irmirance with a limit of not less than $500,000.00 per
accident or occurrence.
(b) Landlord shall, at all times during the term of this Lease, and at
Tenant's cost and expense, procure and continue in force the following
insurance coverage Insurance covering any buildings and all improvements on
the Premises, including Tenant's leasehold improvements and personal
property in or upon the Premises in an amount not less than one hundred
percent (100%) of full replacement cost, providing protection against any
peril generally included within the classification "Fire and Extended
Coverage", together with insurance against sprinkler damage, vandalism and
malicious mischief and a standard inflation guard endorsement. Tenant
hereby assigns Landlord any and all proceeds payable with respect to such
policies except to the extent such proceeds are payable with respect to any
property that would remain the property of Tenant upon the termination of
this Lease; provided, however, that to the extent required pursuant to the
provisions of Article XIV, such proceeds shall be applied to the repair and
restoration of the Premises.
9.2 Insurance Policies. The minimum limits of insurance policies as set
forth in Section 9.1 shall in no event limit the liability of Tenant hereunder.
The insurance policies shall name Landlord as an additional insured and shall be
with companies having a rate of not less than an "A" company rating and a
Financial Rating of Class VI in "Best's Insurance Reports." Tenant shall furnish
from the insurance companies or cause the insurance companies to furnish to
Landlord certificate of coverage. No such policy shall be cancelable or subject
to reduction of coverage or other modification or cancellation except after
thirty (30) days prior written notice to Landlord by the insurer. All such
policies shall be written as primary policies, not contributing with and not in
excess of any coverage which Landlord may carry. Tenant shall at least twenty
(20) days prior to the expiration of such policies furnish Landlord with
renewals or binders. If Tenant does not procure and maintain such insurance,
Landlord may, but is not obligated to, procure such insurance on Tenant's behalf
and all sums paid by Landlord shall bear interest at the rate of eighteen
Page 3
<PAGE>
percent (18%) and shall be immediately due and payable. Tenant shall have the
right to provide such insurance coverage pursuant to blanket policies obtained
by Tenant provided such blanket policies expressly afford coverage to the
Premises and to Landlord as required by this Lease.
9.3 Waiver of Subrogation. To the extent permitted under the insurance
policies obtained by Landlord, if any, and Tenant Landlord and Tenant: each
hereby waive any and all right of recovery against the other or against the
officers, employees, agents and representatives of the other, on account of loss
or damage occasioned to such waiving party or its property or the property of
others under its control to the extent that such loss or damage is insured under
any fire and extended coverage insurance policy which either may have in force
at the time of such loss or damage.
ARTICLE X: USE OF PREMISES
10.1 Use. The Premises shall be used and occupied by Tenant solely for the
general office and distribution of software materials, and for no other purpose
without the prior written consent of Landlord, which consent may be withheld by
Landlord in Landlord's sole discretion.
10.2 Suitability. Tenant acknowledges that neither Landlord nor any agent
of Landlord has made any representation or warranty with respect to the Premises
or the Improvements or with respect to the suitability of either for the conduct
of Tenant's business, nor has Landlord agreed to undertake any modification,
alteration or improvement to the Premises except as specifically provided in
this Lease. The continued possession of the Premises by Tenant shall
conclusively establish that the Premises and the Improvements are at the date of
possession in satisfactory condition. Landlord shall not be responsible for any
latent defects or deficiencies in the construction of the Premises or the
Improvements or any irnprovements or fixtitres; therein.
10.3 Prohibited Uses.
(a) Tenant shall not do or permit anything to be done in or about the
Premises, nor bring or keep anything therein which will cause a
cancellation of any inatrarice policy covering the Premises, nor shall
Tenant sell or permit to be kept, used or sold in or about the Premises any
articles which may be prohibited by a standard form policy of fire
insurance unless Tenant provides additional insurance coverage extending
protection to cover all risks associated with these articles.
(b) Tenant shall not use the Premises or permit anything to be done in
or about the Premises which will in any way conflict with any law, statute,
ordinance or governmental rule or regulation or requirement of duly
constituted public authorities now in force or which may hereafter be
enacted, promulgated or created. Tenant shall, at Tenant's sole cost and
expense, promptly comply with all laws, statutes, ordinances and
governmental rules, regulations or requirements now in force or which may
hereafter be in force and with the requirements of any board of fire
underwriters or other similar body now or hereafter constituted relating to
or affecting the use or occupancy of die Premises, including structural
changes that relate to or affect the use
(c) Tenant shall comply with all requirements of any recorded
restrictive covenants or bylaws of any association affecting the Premises.
Tenant acknowledges receipt of a copy of the Declaration of Covenants,
Conditions and Restrictions and a copy of the Bylaws of the Condominium
Owners' Association affecting the Premises.
(d) Tenant shall not permit smoking on the Premises at any time.
Page 4
<PAGE>
ARTICLE XI: MAINTENANCE AND REPAIRS
11.1 Tenant Maintenance and Repairs. During the Term of the Lease, Tenant,
at Tenant's expense, shall keep the Premises in good order and condition and
shall maintain and shall make any and all repairs and replacements to die
interior surfaces of the Premises (including, but not limited to, floor
coverings, window coverings, and wall coverings), all windows and glass which
are part of the Premises, all light fixtures, and all doors to the Premises.
Tenant is required to have plastic chair mats underneath the desks in order to
protect floor coverings. Tenant shall be liable for floor covering replacement
if the mats are not used. Tenant shall, at all times, and at Tenant's expense,
keep the Premises in a neat, clean and sanitary condition and shall comply with
all valid federal, state, county and city laws and ordirianes and all rules and
regulations of any duly constituted authority, present or future, affecting or
respecting the use or occupancy of the Premises by Tenant. Tenant, at Tenant's
expense, shall also repair any structural damage to the Premises caused by
Tenant or Tenant's employees, agents, contractors, invitees, licensees,
customers, or clients.
11.2 Landlord Maintenance and Repairs. Subject to the provisions of Article
XIV below, Landlord shall, during the Term of this Lease, maintain and make
necessary strucutral repairs to the Premises not included as Tenant's
responsibility pursuant to the provisions of Section 11.1, 14.3, and repairs to
heating, ventilation or air conditioning equipment servicing the Premises;
provided, however, that damage to such equipment caused by Tenant shall be
repaired at Tenant's expense. Tenant shall promptly notify Landford in writing
of any condition requiring maintenance or repair and Tenant shall also
immediately notify Landlord by telephone in the case of an emergency. Landlord
shall make the repairs required under this section within a reasonable time
after receiving written notice by Tenant Noting in this section shall be
construed to excuse Tenant from any obligations under this Lease, including
without limitation, the payment of any rent.
ARTICLE XII: HAZARDOUS SUBSTANCES
12.1 Environmental Compliance. Tenant (a) shall at all times comply with,
or cause to be complied with, any "Environmental Law" (hereinafter defined)
governing the Premises or the use thereof by Tenant or any of Tenant's
employees, agents, contractors, invitees, licensees, customers, or clients, (b)
shall not use, store, generate, treat, transport, or dispose of, or permit any
of Tenant's employees, agents, contractors, invitees, licensees, cusmmers, or
clients to use, store, generate, treat, transport, or dispose of, any "Hazardous
Substance" (hereinafter defined) on the Premises without first obtaining
Lessor's written approval, (c) shall promptly and completely respond to, and
clean up, in accordance with applicable laws and regulations, any Release (as
hereinafter defined) occurring on the Premises as a direct result of actions of
Tenant or Tenants employees or authorized agents; and (d) shall pay all costs
incurred as a result of any failure by Tenant to comply with any Environmental
Law, which failure results in a Release or other change in the environmental
state, condition, and quality of the Premises necessitating action under
applicable Environmental Laws, including with limitation the costs of any
Environmental Cleanup Work (hereinafter defined) and the preparation of any
closure or other required plans (all of the foregoing obligations of Temant
under this Section 12.1 are hereinafter collectively "Tenant's Environmental
Obligations"). Landlord hereby releases and indemnifies Tenant from and against
any and all claims, damages, or liabilities (including, without limitation,
atrorneys' fees and reasonable investigative and discovery costs) resulting from
the environmental condition or quality of the Premises prior to the Commencement
date or from actions of Landlord or its agents or employees. The provisions of
this Article XII shall survive the expiration or other termination of this
Lease.
12.2 Definitions. As used in this Lease (a) "Hazardous Substance" shall
mean (1) any "hazardous waste", "hazardous substance", and any other hazardous,
radioactive, reactive, flammable, infectious, solid wastes, toxic or dangerous
substances or materials, or related materials, as defined in, regulated by, or
which form the basis of liability now or hereafter under any Environmental Law;
(2) asbestos, (3) polychlorinated biphenyls (PCBs), (4) petroleum products or
materials; (5) underground storage ranks, whether empty or filled or partially
filled with any substance; (6) flammable explosives, (7) any substance the
presence of which on the Premises is or becomes prohibited by Environmental Law;
(8) urea formaldehyde foam insulation; and (9) any substance which under
Page 5
<PAGE>
Environmental Law requires special handling or notification in its use,
collection, storage, treatment or disposal; (b) "Environmental Cleanup Work"
shall mean an obligation to perform work, cleanup, removal, repair, remediation
construction, alteration, demolition, renovation or installation in or in
connection with the Premises in order to comply with any Environmetital Law; (c)
"Environmental Law" shall mean any federal, state or local law, regulation,
ordinance or order, whether currently existing or hereafter enacted, concerning
the environmental state, condition or quality of the Premises or use,
generation, transport, treatment, removal, or recovery of Hazardous Substances,
including building materials, and including, but not limited to, the following:
(1) the Solid Waste Disposal Act as amended by the Resource Conservation and
Recovery Act of 1976 (42 U.S.C. Section 6901, et seq.), as amended, and all
regulations promulgated thereunder; (2) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C. Section 9601, et
seq.), as amended, and all regulations promulgated thereunder; (3) the Hazardous
Materials Transportation Act (49 U.S.C. Section 1801, et seq.), as amended, and
all regulations promulgated thereunder (4) the Toxic Substances Control Act (15
U.S.C. Section 2601, et seq.), as amended, and all regulations promulgated
thereunder; (5) the Clean Air Act (42 U.S.C. Section 7401, et seq.), as amended,
and all regulations promulgated thereunder; (6) the Federal Water Pollution
Control Act (33 U.S.C. Section 1251, et seg.), as amended, and all regulations
promulgated thereunder and (7) the Occupational Safety and Health Act (29 U.S.C.
Section 651, et seq.), as amended, and all regulations promulgated thereunder
and (d) "Release" means any actual or threatened spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
presence, dumping, migration on or from the Premises or adjacent property, or
disposing of Hazardous Substances into the environment.
ARTICLE XIII: FIXTURES AND ALTERATIONS
13.1 Alterations. Tenant shall present to Landlord plans and specifications
for the installation of improvements and/or fixtures at the time approval is
sought from Landlord. Any physical change and all rearrangements and/or
additions which are made by Tenant with the approval of Landlord shall be made
at Tenant's expense. Such alterations, decorations, additions and Improvements
shall not be removed from the Premises during the term of this Lease without the
prior written consent of Landlord. Upon expiration of this Lease all such
alterations, decorations, additions and improvements shall at once become the
Property of Landlord.
13.2 Conditions and Limitations. Landlord may impose as a condition to
granting any consent required by Section 13.1, such requirements, restrictions
and limitations as Landlord may deem necessary in Landlord's sole discretion,
including without limitation, the manner in which the work is done, the
contractors by whom it is performed, and the time during which the work is
accomplished.
13.3 Contractors and Materialmen. If any fixtures, alterations or
improvements am allowed by Landlord, Tenant shall promptly pay all contracts and
materialmen, so as to eliminate the possibility of a lien attaching to the
Improvements or the Land, and should any such lien be made or filed by reason of
any fault of Tenant, Tenant shall bond against or discharge the same within ten
(10) days after written request by Landlord. Landlord shall have the right, but
not the obligation, to pay and discharge any such lien that attaches to the
Premises and Tenant shall reimburse Landlord for any such sums paid together
with interest at the rate of eighteen percent (18%) within thirty (30) days
after written demand by Landlord.
ARTICLE XIV: DAMAGE OR DESTRUCTION
14.1 Landlord to Repair Improvements. Subject to the provisions of Sections
11.1; 14.2 and 14.3, if during the term of this Lease any of the Improvements
are damaged or destroyed by fire or other casualty, Landlord shall repair or
restore the Improvements. The work of repair or restoration, which shall be
completed with due diligence, shall be commenced within a reasonable time after
the damage or loss occurs. To the extent that such damage or destruction
interferes with Tenant's ability to use the Premises, as determined by Landlord,
rent shall be abated after the damage or destruction of the Improvements until
the repair or restoration of the Improvements has been completed.
Page 6
<PAGE>
14.2 Landlord's Option to Terminate Lease. Notwithstanding anything to the
contrary in this Article XIV, in the event that any of the Improvements are
damaged or destroyed by fire or other casualty, Landlord shall have the right to
terminate this Lease, which termination shall be deemed to be effective as of
the date of such casualty, upon the occurrence of any of the following events:
(a) Insurance proceeds payable with respect to such damage or
destruction are not sufficient to pay for the repair and/or
restoration of the Improvements;
(b) Repair and restoration of the Improvements cannot be completed
within sixty (60) days after the occurrence of the casualty causing
such damage or destruction.
(c) More than thirty percent (30%) of the Improvements have been
damaged or destroyed by such casualty.
Landlord's option to terminate the Lease pursuant to the provisions of this
Section 14.2 must be exercised within thirty (30) days of the date of the
casualty causing such damage or destruction by written notice from Landlord to
Tenant. In the event that Landlord elects to terminate the Lease pursuant to
this Section 14.2, Tenant shall immediately surrender possession of the
Premises to Landlord and shall assign to landlord (or if the same has already
been received by Tenant pay to Landlord) all of Tenant's right, title, and
interest in and to the insurance proceeds payable with respect to the Premises.
14.3 Tenant's Option to Terminate Lease. If no default by Tenant under this
Lease has occurred and is then continuing and if no event has occurred and is
then continuing which, with the giving of notice or lapse of time, or both,
would become such a default, Tenant shall, if the Improvements are damaged or
destroyed by fire or other casualty and repair or restoration of the
Improvements cannot be completed within sixty (60) days following the occurrence
of the casualty causing such damage or destruction, have the option of
terminating this Lease by written notice to Landlord, which termination shall be
deemed to be effective as of the date of the casualty. Tenant's option to
terminate the Lease pursuant to the provisions of this Section 14.3 must be
exercised within thirty (30) days of the date of the casualty causing such
damage or destruction. In the event that Tenant elects to terminate this Lease
pursuant to this Section 14.3, Tenant shall immediately surrender possession of
the Premises to Landlord and shall assign to landlord (or if the same has
already been received by Tenant, pay to Landlord) all of Tenant's right title,
and interest in and to the insurance proceeds payable with respect to the
Premises.
ARTICLE XV: CONDEMNATION
If all or any part of the Premises is taken or appropriated for public or
quasi-public use by right of eminent domain with or without litigation or
transferred by agreement in connection with such public or quasi-public use,
Landlord and Tenant shall each have the right within thirty (30) days of receipt
of notice of taking, to terminate this Lease as of the date possession is taken
by the condemning authority: provided, however, that before Tenant may terminate
this Lease by reason of taking or appropriation, such taking or appropriation
shall be of such an extent and nature as to substantially handicap, impede or
impair Tenant's use of the Premises. No award for any partial or entire taking
shall be apportioned, and Tenant hereby assigns to Landlord any award which may
be made in such taking or condemnation, together with any and all rights of
Tenant now or hereafter arising in or to the award or any portion thereof,
provided, however, that nothing contained herein shall be deemed to give
Landlord any interest in or to require Tenant to assign to Landlord any award
made to Tenant for the taking of personal property and fixtures belonging to
Tenant, for the interruption of or damage to Tenant's business and for Tenant's
unamortized cost of leasehold improvements. In the event of a partial taking
which does not result in a termination of this Lease, rent shall be abated in
the proportion which the part of the Premises so made unusable bears to the
rented area of the Premises immediately prior to the taking. No temporary taking
of the Premises or Tenant's right therein or under this Least shall terminate
this Lease or give Tenant any right to any abatement of rent thereunder, and any
award made to Tenant by reason of any such temporary taking shall belong
entirely to Tenant and Landlord shall not be entitled to any portion thereof.
Page 7
<PAGE>
ARTICLE XVI: ASSIGNMENT AND SUBLETTING
16.1 Landlord's Consent Required. Tenant shall not assign, transfer,
mortgage, pledge, hypothecate or encumber this Lease or any interest therein,
either voluntarily or involuntarily by operation of law or otherwise, and Tenant
shall not sublet the Premises or any part thereof, without the prior written
consent of Landlord and any attempt to do so without such consent being first
had and obtained shall be void and shall constitute a breach of this Lease, such
consent shall riot be unreasonably withheld.
16.2 No Release of Tenant. No consent by Landlord to any assignment or
subletting by Tenant shall relieve Tenant of any obligation to be performed by
Tenant under this Lease, whether occurring before or after such consent
assignment or subletting. The consent by Landlord to any assignment or
subletting shall not relieve Tenant from the obligation to obtain Landlord's
express written consent to any other assignment or subletting. The acceptance of
rent by Landlord from any other person or legal entity shall not be deemed to be
a waiver by Landlord of any provision of this Lease or to be a consent to any
assignment, subletting or other transfer. Consent to one assignment, subletting
or other transfer shall not be deemed to constitute consent to any subsequent
assignment, subletting or other transfer.
16.3 Increased Expenses. Tenant shall pay the amounts of any increase in
costs or expenses incident to the occupancy of the Premises by such assignee or
subtenant including but not limited to, reasonable attorney's fees incurred in
connection with giving such consent.
ARTICLE XVII: SUBORDINATION, ATTORNMENT AND ESTOPPEL CERTIFICATES
17.1 Subordination. This Lease at Landlord's option shall be subject and
subordinate: to the lien of any mortgages or deeds of trust in any amount or
amounts whatsoever now or hereafter placed on or against the Premises, the
Improvements, or on or against Landlord's interest or estate therein, without
the necessity of the execution and delivery of any further instruments on the
part of Tenant to effectuate such subordination. Notwithstanding anything to the
contrary in this Article XVII, this Lease shall remain in full force and effect
for the full term hereof, including any extensions, so long as Tenant is not in
default hereunder.
17.2 Subordination Agreements. Tenant shall execute and deliver upon demand
without charge therefore, such further instruments evidencing such subordination
of this Lease to the lien of any such mortgages or deeds of trust as may be
required by Landlord.
17.3 Attornment. In the event of any foreclosure or the exercise of the
power of sale under any mortgage or deed of trust made by Landlord covering the
Premises or the Building, Tenant shall attorn to the purchaser upon any such
foreclosure or sale and recognize such purchaser as the Landlord under this
Lease, provided said purchaser expressly agrees in writing to be bound by the
terms of this Lease.
17.4 Esstopel Certificates. Tenant shall, from time to time and within ten
(10) days from receipt of prior written notice from Landlord, execute,
acknowledge and deliver to Landlord a statement in writing (a) certifying that
this Lease is unmodified and in full force and effect or, if modified, stating
the nature of such modification and certifying that this Lease, as so modified,
is in full force and effect and the date to which the rent and other charges am
paid in advance, if any, (b) certifying that the Lease and any modifications of
this Lease constitute the entire agreement between Landlord and Tenant with
respect to the Premises and, except as set forth in this Lease and any
modification of this Lease, Tenant does not claim any right, title, or interest
in or to the Premises or any part thereof, (c) acknowledging that there are not,
to Tenant's knowledge, any uncured defaults on the part of Landlord hereunder,
or specifying such defaults, if any are claimed, and (d) certifying such other
matters with respect to the Lease and/or the Premises as Landlord may reasonably
request. 17.5 Failure to Deliver Certificate. If Tenant fails to deliver such
statement within the time period referred to in Section 17.4 above, it shall be
deemed conclusive upon Tenant that the (a) this Lease is unmodified and in full
force and effect (b) this Lease constitutes the entire agreement between
Landlord and Tenant with respect to the Premises and, except as set forth in
this Lease, Tenant does not claim any right, title, or interest in or to the
Premises, or any part thereof, (c) there are no uncured defaults in Landlord's
performance of Landlord's obligations under this Lease, and (d) not more than
one month's Monthly Base Rent has been paid in advance.
Page 8
<PAGE>
17.6 Transfer of Landlord's Interest. In the event of a sale or conveyance
by Landlord of Landlord's interest in the Premises other than a transfer for
security purposes only, Landlord shall be relieved from and after the date
specified in any such notice of transfer of all obligations and liabilities to
Tenant which accrue after such sale or conveyance on the part of Landlord,
provided that any funds in the possession of Landlord at the time of transfer in
which Tenant has an interest shall be delivered to the successor Landlord. This
Lease shall not be affected by any such sale or transfer and Tenant shall attorn
to the purchaser or other transferee provided that all of Landlord's obligations
accruing hereunder from and after such sale or transfer are assumed in writing
by such purchaser or transferee.
ARTICLE XVIII: DEFAULT AND REMEDIES
18.1 Default. The occurrence of any of the following shall constitute a
material default and breach of this Lease by Tenant:
(a) Any failure by Tenant to pay the Monthly Base Rent, or any other
monetary sums required to be paid under this Lease, where such failure
continues for five (5) days after written notice thereof by Landlord
to Tenant,
(b) Any material false statement made by Tenant to Landlord or its
agents in any document delivered to Landlord in connection with the
negotiation of this Lease.
(c) The abandonment or vacation of the Premises by Tenant;
(d) A failure by Tenant to observe and perform any other term covenant
or condition of this Lease to be observed or performed, by Tenant,
where such failure continties for thirty (30) days after written
notice thereof by Landlord to Tenant: provided, however, that if the
nature of the default is such that the default cannot reasonably be
cured within the thirty (30) day period, Tenant shall not be deemed to
be in default if Tenant shall within the thirty (30) day period
commence action to cure the default and thereafter diligently
prosecute the same to completion;
(e) The making by Tenant of any general assignment or general
arrangement for the benefit of creditors; the filing by or against
Tenant of a petition to have Tenant adjudged a bankrupt or of a
petition fbr reorganization or arrangement under any law relating to
bankruptcy (unless, in the case of a petition filed against Tenant.
the same is dismissed within sixty (60) days); the appointment of a
trustee or receiver to take possession of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in
this Lease, where possession is not restored to Tenant within thirty
(30) days; or the attachment, execution, or other judicial seizure of
substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease, where such seizure is not discharged
within thirty (30) days.
18.2 Nonexclusive Remedies. In the event of any such material default or
breach by Tenant, Landlord shall have, in addition to any other remedies
provided in this Lease, the following nonexchisive remedies:
(a) At Landlord's option and without waiving any default by Tenant,
Landlord shall have the right to continue this Lease in full force and
effect and to collect all Monthly Base Rent, and any other amounts to
be paid by Tenant under this Lease as and when due. During any period
that Tenant is in default. Landlord shall have the right, pursuant to
legal proceedings or pursuant to any notice provided for by law, to
enter and take possession of the Premises, without terminating this
Lease, for the purpose of reletting the Premises or any part thereof
and making any alterations and repairs that may be necessary or
desirable in connection with such reletting. Any such reletting or
Page 9
<PAGE>
relettings may be for such term or terms (including periods that
exceed the balance of the term of this Lease), and upon such other
terms, covenants and conditions as Landlord may in Landlord's sole
discretion deem advisable. Upon each and any such reletting, the rent
or rents received by Landlord from such reletting shall be applied as
follows: (1) to the payment of any indebtedness (other than rent) due
hereunder from Tenant to Landlord; (2) to the payment of costs and
expenses of such reletting, including brokerage fees, reasonable
attorney's fees, court costs, and costs of any alterations or repairs;
(3) to the payment of any Monthly Base Rent and any other amounts due
and unpaid hereunder; and (4) the residue, if any, shall be held by
Landlord and applied in payment of future Monthly Base Rent and any
other amounts as they become due and payable hereunder. If the rent or
rents received during any month and applied as provided above shall be
insufficient to cover all such amoun including the Monthly Base Rent
and any other amounts to be paid by Tenant pursuant to this Lease for
such month, Tenant shall pay to Landlord any deficiency; such
deficiencies shall be calculated and paid monthly. No entry or taking
possession of the Premises by Landlord shall be construed as an
election by Landlord to terminate this Lease, unless Landlord gives
written notice of such election to Tenant or unless such termination
shall be decreed by a court of competent jurisdiction. Notwithstanding
any reltting by Landlord without termination, Landlord may at any time
thereafter terminate this Lease for such previous default by giving
written notice thereof to Tenant.
(b) Terminate Tenant's right to Possession by notice to Tenant, in
which case this Lease shall terminate and Tenant shall immediately
surrender possession of the Premises to Landlord. In such event
Landlord shall be entitled to recover from Tenant all damages incurred
by Landlord by reason of Tenant's default including without limitation
the following: (1) all unpaid rent which has been earned at the time
of such termination plus (2) the amount by which the unpaid rent which
would have been earned after termination until the time of award
exceeds the amount of such rental loss that is proved could have been
reasonably avoided; plus (3) any other amount necessary to compensate
Landlord for all the detriment proximately caused by Tenant's failure
to perform Tenant's obligations under this Lease, or in addition to or
in lieu of the foregoing such damages as may be permitted from time to
time under applicable State law. Upon any such re-entry Landlord shall
have the right to make any reasonable repairs, alterations or
modifications to the Premises, which Landlord in Landlord's sole
discretion deems reasonable and necessary.
ARTICLE XIX: ENTRY BY LANDLORD
Landlord shall, during the term of this Lease, have the right in enter the
Premises at reasonable times and upon reasonable notice to Tenant, to inspect or
to show to prospective tenants or purchasers, or to make necessary repairs. For
purposes of this section, twenty-four (24) hours is deemed to be reasonable
notice. In the event of an emergency, however, Landlord shall not be required to
give Tenant such notice, provided that Landlord furnishes Tenant with the reason
for the emergency entry within three days of such entry.
ARTICLE XX: INDMNITY
Tenant shall indemnify and hold Landlord harmless from any and all claims
of liability for any injury or damage to any person or property whatsoever
occurring in, on or about the Premises or any part thereof during the term of
this Lease. Tenant shall further indemnify and hold Landlord harmless from and
against any and all claims arising from any breach or default in the performance
of any obligation on Tenant's part to be performed under the terms of this
Lease, or ansing from any act or negligence of Tenant, or any of Tenanes agents,
contractors, employees, licensees or invitees and from and against all costs,
reasonable attorney's fees, expenses and liabilities incurred in the defense of
any such claim or any action or proceeding brought thereon. Tenant shall not,
however, be liable for damage or injury occasioned by the negligence or
intentional acts of Landlord and Landlord's designated agents or employees.
Tenant's obligations under this Article XX shall survive the expiration or other
termination of this Lease.
Page 10
<PAGE>
ARTICLE XXI: SURRENDER
21.1 Surrender. Upon the expiration or other termination of this Lease,
Tenant shall quit and surrender to Landlord the Premises, together with the
Improvements and all other property affixed to the Premises, excluding Tenant's
fixtures, in good order and condition, ordinary wear and tear excepted. Tenant
shall, prior to the expiration or other termination of this Lease remove all
personal property belonging to Tenant and failing to do so, LandIord may cause
all of said personal property to be removed at the cost and expense of Tenant.
Tenant's obligation to observe and perform this covenant shall survive the
expiration or other termination of this Lease. In the alternative, Landlord may,
at Landlord's option, treat any and all items not removed by Tenant on or before
the date of expiration or of the termination of this Lease as having been
relinquished by Tenant and such items shall become the property of Landlord with
the same force and effect as if Tenant had never owned or otherwise bad any
interest in such items.
21.2 Hazardous Substances. No spill, deposit, emission, leakage or other
release of Hazardous Substance in the soils, ground waters or waters shall be
deemed to result in either (a) wear and tear that would be normal for the term
of the Lease, or (b) a casualty to the Premises. Tenant shall be responsible to
promptly and completely cleanup any Release occurring on the Premises during the
term of the Lease which directly results form the actions of Tenant or its
employees or authorized agents. Tenant shall surrender the Premises free of any
contamination or other damage caused by such a Release during the term of the
Lease. Tenant's obligation to cleanup the Premises pursuant to the provisions of
this Article XXI shall survive the expiration or other termination of this
Lease.
ARTICLE XXII: OPTION TO PURCHASE
22.1 Grant of Option. This section does not apply to this Lease.
ARTICLE XXIII: MISCELLANEOUS
23.1 Signs. Tenant, at its own cost may place and maintain a sign
advertising Tenant's business in the window of the Premises so long as the sign
complies with the rules and regulations of the Condominium Owners' Association
for the Premises.
23.2 Parking Spaces. Tenant shall be entitled to the use of 4 unreserved
parking spaces appurtenant to the Premises for the benefit of Tenant, its
employees, agents, and invitees for the Term of the Lease.
23.3 Entire Agreement. This instrument along with any exhibits and
attachmaents hereto constitutes the entire agreement between Landlord and Tenant
relative to the Premises and this Lease and the exhibits and attachments may be
altered, amended or revoked only by an instrument in writing signed by both
Landlord and Tenant. All prior or contemporaneous oral agreements between and
among Landlord and Tenant and their agents or representatives relative to the
leasing of the Premises art merged in or revoked by this Lease.
23.4 Severability. If any term or provision of this Lease shall, to any
extent, be determined by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of this Lease shall not be affected thereby, and
each term and provision of this Lease shall be valid and be enforceable to the
fullest extent permitted by law.
23.5 Costs Of Suit. If Tenant or Landlord shall bring any action for any
relief against the other, declaratory or otherwise, arising out of this Lease,
including any suit by L andlord for the recovery of rent or possession of the
Premises, the losing party shall pay the successful party a reasonable sum for
amorricy. s fees whether or riot such action is prosecuted to judgmenL
23.6 Time and Remedies. Time is of the essence of this Lease and every
provision hereof. All rights and remedies of the parties shall be cumulative and
nonexclusive of any other remedy at law or in equity.
Page 11
<PAGE>
23.7 Binding Effect Successors and Choice of Law. All time provisions of
this Lease are to be construed as both covenants and conditions as though the
words importing such coveriants and conditions were used in each separate
Section of this Lease. Subject to any provisions restricting assignment or
subletting by Tenant as set forth in Article XVI, all of the terms hereof shall
bind and inure to the benefit of the parties hereto and their respective heirs,
legal representatives, successors and assigns. This Lease shall be governed by
the laws of the State of Utah.
23.8 Waiver. No term, covenant or condition of this Lease shall be deemed
waived, except by written consent of the party against whom the waiver is
claimed, and any waiver of the breach of any term, covenant or condition shall
not be deemed to be a waiver of any preceding or succeeding breach of the same
or any other term, covenant or condition. Acceptance by Landlord of any
performance by Tenant after the time the same shall have become due shall not
constitute a waiver by Landlord of the breach or default of any term, covenant
or condition unless otherwise expressly agreed to by Landlord in writing.
23.9 Holding Over. If Tenant remains in possession of all or any part of
the Premises after the expiration of the term of this Lease, with or without the
express or implied consent of Landlord, such tenancy shall be from month to
month only, and not a renewal hereof or an extension for any further term, and
in such case, rent and other sums due hereunder shall be payable at one hundred
fifty percent (150%) of the Monthly Base Rent in effect immediately prior to
such holdover period.
23.10 Recording. No copy of this lease will be recorded on behalf of either
party, but in lieu thereof, Landlord and Tenant agree that each will, upon the
request of the other, execute, in recordable form, a "short form" of the Lease,
which "short form" shall contain a description of the Premises, the term of the
Lease, the parties to the Lease. The "short form" of the Lease shall not modify
the terms of the Lease or be used in interpreting the Lease and in the event of
any inconsistency between this Lease and the "short form" of the Lease, the
terms and conditions of this Lease shall control.
23.11 Reasonable Consent. Except as limited elsewhere in this Lease,
wherever in this Lease Landlord or Tenant is required to give consent or
approval to any action on the part of the other, such consent or approval shall
not be unreasonably withheld. In the event of failure to give any such consent,
the other party shall be entitled to specific performance at law and shall have
such other remedies as are reserved to such party under this Lease.
23.12 Notice. Any notice required to be given under this Lease shall be
given in writing and shall be delivered in person or by registered or certified
mail, postage prepaid, and addressed to the addresses for Landlord and Tenant
set forth above. Such notice shall be deemed delivered when personally delivered
or upon deposit of the notice in the United States mail in the manner provided
above.
23.13 No Partnership. Landlord does not, as a result of entering into this
Lease, in any way or for any purpose become a partner of Tenant in the conduct
of Tenant's business, or otherwise, or joint venturer or a member of a joint
enterprise with Tenant.
23.14 Exhibits: This lease agreement has two exhibits attached and made a
part thereof.
23.15 Special Conditions: The tenant shall be given one month's rent free.
IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and
year first above written.
LANDLORD: DC MASON, LTD.
BY: /S/ Dean Mason
---------------------------------------
DEAN MASON
ITS: GENERAL PARTNER
BY: /S/ Cleo Mason
---------------------------------------
CLEO MASON
ITS: GENERAL PARTNER
TENANT: ON-LINE INVESTOR ADVANTAGE, INC.
/S/ David McCoy
---------------------------------------
DAVID MCC0Y
VICE PRESIDENT
Page 12
<PAGE>
"EXHIBIT A"
[Building Schematic]
<PAGE>
Exhibit B
ON-LINE INVESTOR ADVANTAGE, INC.
Wespoint Business Park
852 N. 1430 W. Unit #3
Orem, Utah 84057
Base Rental Schedule
Base Term
Year Square Price/ Annual No. Monthly
Footage Sq Foot Rental Months Rental
- -------------------------------------------------------------------------------
1 1,940 $6.24 $12,100.00 11.0 $1,100.00
2 1,940 $7.01 $13,596.00 12.0 $1,133.00
3 1,940 $7.22 $14,003.88 12.0 $1,166.99
Sub Totals $6.62 $39,699.88 35.0 $1,134.28
<PAGE>
CHECK REQUEST FOR LEASE
DATE October 8, 1998
TENANT ON-LINE INNTSTOR, INC.
ADDRESS 852 N. 1430 W. Unit #3
CITY/STATE/ZIP Orem, Utah 84057
CONTACT PERSON FOR TENANT DAVID MCCOY
TENANTS PHONE NUMBER
MONTHLY EXPENSES
MONTH MONTH MONTHLY
NOVEMBER December THEREAFTER
1998 1998
BASE RENTAL AMOUNT (MONTH ONE) $1,100.00 $0.00 $1,100.00
ESTIMATED TAX PAYMENT $46.00 $46.00 $46.00
COMMON AREA MAINTENANCE $40.00 $40.00 $40.00
SECURITY DEPOSIT $1,100.00 $0.00 $0.00
TOTALS $2,286.00 $86.00 $1,186.00
PLEASE MAKE ALL CHECKS PAYABLE DC MASON, LTD.
(THE FIRST CHECK NEEDS TO BE DELIVERED TO THE OFFICE SO WE CAN ATTACH IT
TO THE LEASE)
(SUBSEQUENT MONTHLY RENTAL CHECKS SHOULD BE MAILED TO THE LANDLORD)
LANDLORD'S ADDRESS DC Mason, Ltd.
161 W. 3960 N.
Provo, Utah 84604
LANDLORD'S PHONE NUMBER (801) 224-5456
<PAGE>
AGENCY DISCLOSURE
This is a legally binding document. If it is not understood, consult
with legal counsel.
Names of Lessee(s): ON-LINE IVESTOR ADVANTAGE INC.
Agent representing Lessee: JUSTIN D. JOHNSTON
Name of Brokerage: D & B COMMERCIAL PRORERTY (the "Companies")
Name of Lessors(s): DC MASON, LTD.
Agent representing Lessor: JUSTIN D. JOHNSTON
The Lessee and the Lessor am both presently using the services of the Companies
in a possible real estate transaction involving real property located at: 852
NORTH 1430 WEST (WESTPOINT BUSINESS PARK UNIT #3), OREM, UTAH 84058 (referred to
below as the "Property-). AS THE LESSEE AND THE LESSOR PROCEED WITH THIS
TRANSACTION, IT IS IMPORTANT THAT THEY EACH UNDERSTAND THEIR PROFESSIONAL
RELATIONSHIP WITH THE REAL ESTATE AGENTS(S) AND WITH THE COMPANIES. WHAT FOLLOWS
IS A BRIEF BUT VERY IMPORTANT EXPLANATION OF THE NATURE OF AGENCY RELATIONSHIPS
BETWEEN THE LESSOR, THE LESSEE, THE COMEPANY, AND THE REAL ESTATE AGENTS WORKING
IN THIS TRANSACTION.
1. Principal or Branch Broker. Every real estate agent must affiliate with
a real estate broker. The broker is referred to as a Principal Broker or a
Branch Broker (if the brokerage has a branch office). The broker is responsible
for operation of the brokerage and for the professional conduct of all agents.
2. Right of Agents to Represent Lessor and/or Lessee. An agent may
represent, through the brokerage, a Lessor who wants to Lease out property or a
Lessee who wants to Lease property. On occasion, an agent will represent both
Lessor and Lessee in the same transaction. When an agent represents a Lessor,
the agent is a "Seller's Agent"; when representing a Lessee, the agent is a
"Buyer's Agent"; and when representing both Lessor and Lessee, the agent is a
"Limited Agent".
3. Seller's Agent. A Seller's Agent works to assist the Lessor in locating
a Lessee and in negotiating a transaction suitable to the Lessor's specific
needs. A Seller's Agent has fiduciary duties to the Lessor which include
loyalty, full disclosure, confidentiality, diligence, obedience, reasonable
care, and holding safe monies entrusted to the agent.
4. Buyer's Agent. A Buyer's Agent works to assist the Lessee in locating
and negotiating the acquisition of a property suitable to that Lessee's specific
needs. A Buyer's Agent has the same fiduciary duties to the Lessee that the
Seller's Agent has to the Lessor.
5. Limited Agent. A Limited Agent represents both Lessor and Lessee in the
same transaction and works to assist in negotiating a mutually acceptable
transaction. A Limited Agent has fiduciary duties to both Lessor and Lessee.
However, those duties are "limited" because the agent cannot provide to both
parties undivided loyalty and full disclosure of all information known to the
agent. For this reason, a Limited Agent must remain neutral in the
representation of a Lessor and Lessee, and may not disclose to either party
information likely to weaken the bargaining position of the other; such as, the
highest price the Lessee will pay or the lowest price the Lessor will accept. A
Limited Agent must, however, disclose to both parties material information known
to the Limited Agency regarding a defect in the Property and/or the ability of
each party to fulfill agreed upon obligations.
6. In-House Lease. If the Lessee and the Lessor are both represented by one
or more agents in the same brokerage, that transaction is commonly referred to
as an "In-House Lease". Consequently, most In-House Leases involve limited
agency because Lessor and Lessee are represented by the same brokerage.
7. Conflicts with the In-House Lease. There are conflicts associated with
an In-House Lease; for example, agents affiliated with the same brokerage
discuss with each other the needs of their respective Lessees or Lessors. Such
discussions could inadvertently compromise the confidentiality of discussions
between agents and access to confidential client and transaction files.
<PAGE>
8. Authorization for Limited Agency. The Lessor and Lessee are advised that
they are not required to accept a limited agency situation in the Company.
However, it is the business practice of the Company to participate in In-House
Leases. By signing this agreement, Lessee and Lessor consent to a limited agency
within the Company as provided below:
[X] A. One Agent. The Lessee and the Lessor consent to JUSTIN D. JOHNSTON (Name
of Agent); and the Principal/Branch Broker representing both the Lessee and
the Lessor as a Limited Agent as described above.
[ ] B. Two Agents. The Lessee and the Lessor consent to (Lessor's Agent)
continuing to represent the Lessor; and (Lessee's Agent) continuing to
represent the Lessee; and the Principal/Branch Broker acting as a Limited
Agent as described above.
/S/ David W. McCoy /S/ Dean Mason, General Partner
October 6, 1998 October 6, 19998
LESSEE: ON-LINE INVESTOR ADVANTAGE INC. LESSOR: DC MASON, LTD.
The Company: /S/ Justin D. Johnston October 6, 1998
JUSTIN D. JOHNSTON Date
(Authorized Agent)
LEASE AGREEMENT
ARTICLE ONE: BASIC TERMS
This Article One contains the Basic Terms of this Lease between the Landlord and
Tenant named below. Other Articles, Sections and Paragraphs of the Lease
referred to in this Article One explain and define the Basic Terms and are to be
read In conjunction with the Basic Terms.
Section 1.01. Date of Lease: July 1, 1999
Section 1.02. Landlord (include legal entity): Gordon Jacobson
Address of Landlord: 515 S. Orem Blvd.
Section 1.03. Tenant (include legal entity):
Address of Tenant:
Section 1.04. Property: The Property is part of a multi-tenant real
property development known as Turnberry Office Park Unit #15 2118 840 S.Orem Ut,
84058 and described or depicted In Exhibit "A" (the "Project"). The Project
includes the land, the buildings and all other improvements located on the land,
and the common areas described in Paragraph 4.05(a). The Property is (include
street address, approximate square footage and description)
Section 1.05. Lease Term: 0 years months beginning on or such other date as
is specified in this Lease, and ending on Month to Month with 60 day notice to
vacate.
Section 1.06. Permitted Uses: (See Article Five) Any permitted use in
current zone of Orem.
Section 1.07. Tenant's Guarantor: (if none, so state)
Section 1.08. Brokers: (See Article Fourteen) (if none, so state)
Landlord's Broker: None Tenant's Broker: None
Section 1.09. Commission Payable to Landlord's Broker: (See Article
Fourteen) $ None
Section 1.10. Initial Security Deposit: (See Section 3.03) Last month
rent/deposit 1900.00
Section 1.11. Vehicle Parking Spaces Allocated to Tenant: (See Section
4.05) 7 unassigned
Section 1.12. Rent and Other Charges Payable by Tenant:
(a) BASE RENT: Nineteen Hundred Dollars ($1900.00 ) per month, for the
first months, as provided in Section 3.01, and shall be increased on the first
day of the month(s) after the Commencement Date, either (i) as provided in
Section 3.02, or (ii). (If (ii) is completed, then (i) and Section 3.02 are
inapplicable.)
(b) OTHER PERIODIC PAYMENTS: (i) Real Property Taxes above the "Base
Real Property Taxes" (See Section 4.02); (ii) Utilities (See Section 4.03);
(iii) Increased Insurance Premiums above "Base Premiums" (See Section 4.04);
(iv) Tenant's Initial Pro Rata Share of Common Area Expenses included(See
Section 4.05); (v) impounds for Tenant's Share of Insurance Premiums and
Property Taxes (See Section 4.08); (vi) Maintenance, Repairs and Alterations
(See Article Six).
Section 1.13. Costs and Charges Payable by Landlord: (a) Base Real Property
Taxes (See Section 4.02); (b) Base Insurance Premiums (See Section 4.04(c)); (c)
Maintenance and Repair (See Article Six).
Section 1.14. Landlord's Share of Profit on Assignment or Sublease: (See
Section 9.05) included percent ( %) of the Profit (the "Landlord's Share").
Section l.15. Riders: The following Riders are attached to and made a part
of this Lease: (if none, so state) None.
Initials _____
<PAGE>
ARTICLE TWO: LEASE TERM
Section 2.01. Lease of Property For Lease Term. Landlord leases the
Property to Tenant and Tenant leases the Property from Landlord for the Lease
Term. The Lease Term is for the period stated in Section 1.05 above and shall
begin and end on the dates specified in Section 1.05 above, unless the beginning
or end of the Lease Term is changed under any provision of this Lease. The
"Commencement Date" shall be the date specified in Section 1.05 above for the
beginning of the Lease Term, unless advanced or delayed under any provision of
this Lease.
Section 2.02. Delay in Commencement. Landlord shall not be liable to Tenant
if Landlord does not deliver possession of the Property to Tenant on the
Commencement Date. Landlord's non-delivery of the Property to Tenant on that
date shall not affect this Lease or the obligations of Tenant under this Lease
except that the Commencement Date shall be delayed until Landlord delivers
possession of the Property to Tenant and the Lease Term shall be extended for a
period equal to the delay in delivery of possession of the Property to Tenant,
plus the number of days necessary to end the Lease Term on the last day of a
month. If Landlord does not deliver possession of the Property to Tenant within
sixty (60) days after the Commencement Date, Tenant may elect to cancel this
Lease by giving written notice to Landlord within ten (10) days after the sixty
(60) day period ends. If Tenant gives such notice, the Lease shall be cancelled
and neither Landlord nor Tenant shall have any further obligations to the other.
If Tenant does not give such notice, Tenant's right to cancel the Lease shall
expire and the Lease Term shall commence upon the delivery of possession of the
Property to Tenant. If delivery of possession of the Property to Tenant is
delayed, Landlord and Tenant shall, upon such delivery, execute an amendment to
this Lease setting forth the actual Commencement Date and expiration date of the
Lease. Failure to execute such amendment shall not affect the actual
Commencement Date and expiration date of the Lease.
Section 2.03. Early Occupancy. If Tenant occupies the Property prior to the
Commencement Date, Tenant's occupancy of the Property shall be subject to all of
the provisions of this Lease. Early occupancy of the Property shall not advance
the expiration date of this Lease. Tenant shall pay Base Rent and all other
charges specified in this Lease for the early occupancy period.
Section 2.04. Holding Over. Tenant shall vacate the Property upon the
expiration or earlier termination of this Lease. Tenant shall reimburse Landlord
for and indemnify Landlord against all damages which Landlord incurs from
Tenant's delay in vacating the Property. If Tenant does not vacate the Property
upon the expiration or earlier termination of the Lease and Landlord thereafter
accepts rent from Tenant, Tenant's occupancy of the Property shall be a
"month-to-month" tenancy, subject to all of the terms of this Lease applicable
to a month-to-month tenancy, except that the Base Rent then is effect shall be
increased by twenty-five percent (25%).
ARTICLE THREE: BASE RENT
Section 3.01. Time and Manner of Payment. Upon execution of this Lease,
Tenant shall pay Landlord the Base Rent in the amount stated in Paragraph
1.12(a) above for the first month of the Lease Term. On the first day of the
second month of the Lease Term and each month thereafter, Tenant shall pay
Landlord the Base Rent, in advance, without offset, deduction or prior demand.
The Base Rent shall be payable at Landlord's address or at such other place as
Landlord may designate in writing.
Section 3.02. Cost of Living Increases. The Base Rent shall be increased on
each date (the "Rental Adjustment Date") stated in Paragraph 1.12(a) above in
accordance with the increase in the United States Department of Labor, Bureau of
Labor Statistics, Consumer Price Index for All Urban Consumers (all items for
the geographical Statistical Area in which the Property is located on the basis
of 1982-1984 = 100) (the "index") as follows:
(a) The Base Rent (the "Comparison Base Rent") in effect immediately
before each Rental Adjustment Date shall be increased by the percentage
that the index has increased from the date (the "Comparison Date") on which
payment of the Comparison Base Rent began through the month in which the
applicable Rental Adjustment Date occurs. The Base Rent shall not be
reduced by reason of such computation. Landlord shall notify Tenant of each
2
<PAGE>
increase by a written statement which shall include the index for the
applicable Comparison Date, the index for the applicable Rental Adjustment
Date, the percentage increase between those two indices, and the new Base
Rent. Any increase in the Base Rent provided for in this Section 3.02 shall
be subject to any minimum or maximum increase, if provided for in Paragraph
1.12(a).
(b) Tenant shall pay the new Base Rent from the applicable Rental
Adjustment Date until the next Rental Adjustment Date. Landlord's notice
may be given after the applicable Rental Adjustment Date of the increase,
and Tenant shall pay Landlord the accrued rental adjustment for the months
elapsed between the effective date of the increase and Landlord's notice of
such increase within ten (10) days after Landlord's notice. If the format
or components of the index are materially changed after the Commencement
Date, Landlord shall substitute an index which is published by the Bureau
of Labor Statistics or similiar agency and which is most nearly equivalent
to the index in effect on the Commencement Date. The substitute index shall
be used to calculate the increase in the Base Rent unless Tenant objects to
such index in writing within fifteen (15) days after receipt of Landlord's
notice. If Tenant objects, Landlord and Tenant shall submit the selection
of the substitute index for binding arbitration in accordance with the
rules and regulations of the American Arbitration Association at its office
closest to the Property. The costs of arbitration shall be borne equally by
Landlord and Tenant.
Section 3.02 Security Deposit; Increases.
(a) Upon the execution of this Lease, Tenant shall deposit with
Landlord a cash Security Deposit in the amount set forth in Section 1.10
above. Landlord may apply all or part of the Security Deposit to any unpaid
rent or other charges due from Tenant or to cure any other defaults of
Tenant. If Landlord uses any part of the Security Deposit, Tenant shall
restore the Security Deposit to its full amount within ten (10) days after
Landlord's written request. Tenant's failure to do so shall be a material
default under this Lease. No interest shall be paid on the Security
Deposit. Landlord shall not be required to keep the Security Deposit
separate from its other accounts and no trust relationship is created with
respect to the Security Deposit.
(b) Each Time the Base Rent is increased, Tenant shall deposit
additional funds with Landlord sufficient to increase the Security Deposit
to an amount which bears the same relationship to the adjusted Base Rent as
the initial Security Deposit bore to the initial Base Rent.
Section 3.04. Termination; Advance Payments. Upon termination this Lease
under Article Seven (Damage or Destruction), Article Eight (Condemnation) or any
other termination not resulting from Tenant's default, and after Tenant has
vacated the Property in the manner required by this Lease, Landlord shall refund
or credit to Tenant (or Tenant's successor) the unused portion of the Security
Deposit, any advance rent or other advance payments made by Tenant to Landlord,
and any amounts paid for real property taxes and other reserves which apply to
any time periods after termination of the Lease.
ARTICLE FOUR: OTHER CHARGES PAYABLE BY TENANT
Section 4.01. Additional Rent. All charges payable by Tenant other than
Base Rent are called "Additional Rent." Unless this Lease provides otherwise,
Tenant shall pay all Additional Rent then due with the next monthly installment
of Base Rent. The term "rent" shall mean Base Rent and Additional Rent.
Section 4.02. Property Taxes.
(a) Real Property Taxes. Landlord shall pay the "Base Real Property
Taxes" on the Property during the Lease Term. Base Real Property Taxes are
real property taxes applicable to the Property as shown on the tax bill for
the most recent tax fiscal year ending prior to the Commencement Date.
However, if the structures on the Property are not completed by the tax
lien date of such tax fiscal year, the Base Real Property Taxes are the
taxes shown on the first tax bill showing the full assessed value of the
Property after completion of the structures. Tenant shall pay Landlord the
3
<PAGE>
amount, if any, by which the real property taxes during the Lease Term
exceed the Base Real Property Taxes. Subject to Paragraph 4.02(c), Tenant
shall make such payments within fifteen (15) days after receipt of
Landlord's statement showing the amount and computation of such increase.
Landlord shall reimburse Tenant for any real property taxes paid by Tenant
covering any period of time prior to or after the Lease Term.
(b) Definition of "Real Property Tax. "Real property tax" means: (i)
any fee, license fee, license tax, business license fee, commercial rental
tax, levy, charge, assessment, penalty or tax imposed by any taxing
authority against the Property; (ii) any tax on the Landlord's right to
receive, or the receipt of, rent or income from the Property or against
Landlord's business of leasing the Property; (iii) any tax or charge for
fire protection, streets, sidewalks, road maintenance, refuse or other
services provided to the Property by any governmental agency; (iv) any tax
imposed upon this transaction or based upon a reassessment of the Property
due to a change of ownership, as defined by applicable law, or other
transfer of all or part of Landlord's interest in the Property; and (v) any
charge or fee replacing any tax previously included within the definition
of real property tax. "Real property tax" does not, however, include
Landlord's federal or state income, franchise, inheritance or estate taxes.
(c) Joint Assessment. If the Property is not separately assessed,
Landlord shall reasonably determine Tenant's share of the real property tax
payable by Tenant under Paragraph 4.02(a) from the assessor's worksheets or
other reasonably available information. Tenant shall pay such share to
Landlord within fifteen (15) days after receipt of Landlord's written
statement.
(d) Personal Property Taxes.
(i) Tenant shall pay all taxes charged against trade fixtures,
furnishings, equipment or any other personal property belonging
to Tenant. Tenant shall try to have personal property taxed
separately from the Property.
(ii) It any of Tenant's personal property is taxed with the Property.
Tenant shall pay Landlord the taxes for the personal property
within fifteen (15) days after Tenant receives a written
statement from Landlord for such personal property taxes.
Section 4.03. Utilities. Tenant shall pay, directly to the appropriate
supplier, the cost of all natural gas, heat, light, power, sewer service,
telephone, water, refuse disposal and other utilities and services supplied to
the Property. However, if any services or utilities are jointly metered with
other property, Landlord shall make a reasonable determination of Tenant's
proportionate share of the cost of such utilities and services and Tenant shall
pay such share to Landlord within fifteen (15) days after receipt of Landlord's
written statement.
Section 4.04. Insurance Policies.
(a) Liability Insurance. During the Lease Term, Tenant shall maintain
a policy of commercial general liability insurance (sometimes known as
broad form comprehensive general liability insurance) insuring Tenant
against liability for bodily injury, property damage (including loss of use
of property) and personal injury arising out of the operation, use or
occupancy of the Property. Tenant shall name Landlord as an additional
insured under such policy. The initial amount of such insurance shall be
One Million Dollars ($1,000,000) per occurrence and shall be subject to
periodic increase based upon inflation, increased liability awards,
recommendation of Landlord's professional insurance advisers and other
relevant factors. The liability insurance obtained by Tenant under this
Paragraph 4.04(a) shall (i) be primary and non-contributing; (ii) contain
cross-liability endorsements; and (iii) insure Landlord against Tenant's
performance under Section 5.05, if the matters giving rise to the indemnity
under Section 5.05 result from the negligence of Tenant. The amount and
coverage of such insurance shall not limit Tenant's liability nor relieve
Tenant of any other obligation under this Lease. Landlord may also obtain
comprehensive public liability insurance in an amount and with coverage
determined by Landlord insuring Landlord against liability arising out of
ownership, operation, use or occupancy of the Property. The policy obtained
by Landlord shall not be contributory and shall not provide primary
insurance.
4
<PAGE>
(b) Property and Rental Income Insurance. During the Lease Term,
Association shall maintain policies of insurance covering loss of or damage
to the Property in the full amount of its replacement value. Such policy
shall contain an inflation Guard Endorsement and shall provide protection
against all perils included within the classification of fire, extended
coverage, vandalism, malicious mischief, special extended perils (all
risk), sprinkler leakage and any other perils which Landlord deems
reasonably necessary. Landlord shall have the right to obtain flood and
earthquake insurance if required by any lender holding a security interest
in the Property. Landlord shall not obtain insurance for Tenant's fixtures
or equipment or building improvements installed by Tenant on the Property.
During the Lease Term, Landlord shall also maintain a rental income
insurance policy, with loss payable to Landlord, in an amount equal to one
year's Base Rent, plus estimated real property taxes and insurance
premiums. Tenant shall be liable for the payment of any deductible amount
under Landlord's or Tenant's insurance policies maintained pursuant to this
Section 4.04, in an amount not to exceed Ten Thousand Dollars ($10,000).
Tenant shall not do or permit anything to be done which invalidates any
such, insurance policies.
(c) Payment of Premiums.
(i) Landlord shall pay the "Base Premiums" for the insurance policies
maintained by Landlord under Paragraph 4.04(b). If the Property
has been previously fully occupied, the "Base Premiums" are the
insurance premiums paid during or applicable to the last twelve
(12) months of such prior occupancy. If the Property has not been
previously fully occupied or has been occupied for less than
twelve (12) months, the Base Premiums are the lowest annual
premiums reasonably obtainable for the required insurance for the
Property as of the Commencement Date.
(ii) Tenant shall pay Landlord the amount. If any, by which the
insurance premiums for all policies maintained by Landlord under
Paragraph 4.04(b) have increased over the Base Premiums, whether
such increases result from the nature of Tenant's occupancy, any
act or omission of Tenant, the requirement of any lender referred
to in Article Eleven (Protection of Lenders), the increased value
of the Property or general rate increases. However, if Landlord
substantially increases the amount of insurance carried or the
percentage of insured value after the period during which the
Base Premiums were calculated, Tenant shall only pay Landlord the
amount of increased premiums which would have been charged by the
insurance carrier if the amount of insurance or percentage of
insured value had not been substantially increased by Landlord.
This adjustment in the amount due from Tenant shall be made only
once during the Lease Term. Thereafter, Tenant shall be obligated
to pay the full amount of any additional increases in the
insurance premiums, including increases resulting from any
further increases in the amount of insurance or percentage of
insured value. Subject to Section 4.05, Tenant shall pay Landlord
the increases over the Base Premiums within fifteen (15) days
after receipt by Tenant of a copy of the premium statement or
other evidence of the amount due. If the insurance policies
maintained by Landlord cover improvements or real property other
than the Property, Landlord shall also deliver to Tenant a
statement of the amount of the premiums applicable to the
Property showing, in reasonable detail, how such amount was
computed. If the Lease Term expires before the expiration of the
insurance period, Tenant's liability shall be pro rated on an
annual basis.
(d) General Insurance Provisions.
(i) Any insurance which Tenant is required to maintain under this
Lease shall include a provision which requires the insurance
carrier to give Landlord not less than thirty (30) days' written
notice prior to any cancellation or modification of such
coverage.
5
<PAGE>
(ii) If Tenant fails to deliver any policy, certificate or renewal to
Landlord required under this Lease within the prescribed time
period or if any such policy is cancelled or modified during the
Lease Term without Landlord's consent, Landlord may obtain such
insurance, in which case Tenant shall reimburse Landlord for the
cost of such insurance within fifteen (15) days after receipt of
a statement that indicates the cost of such insurance.
(iii)Tenant shall maintain all insurance required under this Lease
with companies holding a "General Policy Rating" of A-12 or
better, as set forth in the most current issue of "Best Key
Rating Guide". Landlord and Tenant acknowledge the insurance
markets are rapidly changing and that insurance in the form and
amounts described in this Section 4.04 may not be available in
the future. Tenant acknowledges that the insurance described in
this Section 4.04 is for the primary benefit of Landlord. It at
any time during the Lease Term, Tenant is unable to maintain the
insurance required under the Lease. Tenant shall nevertheless
maintain insurance coverage which is customary and commercially
reasonable in the insurance industry for Tenant's type of
business, as that coverage may change from time to time. Landlord
makes no representation as to the adequacy of such insurance to
protect Landlord's or Tenant's interests. Therefore, Tenant shall
obtain any such additional property or liability insurance which
Tenant deems necessary to protect Landlord and Tenant.
(iv) Unless prohibited under any applicable insurance policies
maintained, Landlord and Tenant each hereby waive any and all
rights of recovery against the other, or against the officers,
employees, agents or representatives of the other, for loss of or
damage to its property or the property of others under its
control, if such loss or damage is covered by any insurance
policy in force (whether or not described in this Lease) at the
time of such loss or damage. Upon obtaining the required policies
of insurance, Landlord and Tenant shall give notice to the
insurance carriers of this mutual waiver of subrogation.
Section 4.05. Common Areas; Use, Maintenance and Costs.
(a) Common Areas. As used in this Lease, "Common Areas" shall mean all
areas within the Project which are available for the common use of tenants
of the Project and which are not leased or held for the exclusive use of
Tenant or other tenants, including, but not limited to, parking areas,
driveways, sidewalks, loading areas, access roads, corridors, landscaping
and planted areas. Landlord, from time to time, may change the size,
location, nature and use of any of the Common Areas, convert Common Areas
into leaseable areas, construct additional parking facilities (including
parking structures) in the Common Areas, and increase or decrease Common
Area land and/or facilities. Tenant acknowledges that such activities may
result in inconvenience to Tenant. Such activities and changes are
permitted if they do not materially affect Tenant's use of the Property.
(b) Use of Common Areas. Tenant shall have the nonexclusive right In
common with other tenants and all others to whom Landlord has granted or
may grant such rights) to use the Common Areas for the purposes intended,
subject to such reasonable rules and regulations as Landlord may establish
from time to time. Tenant shall abide by such rules and regulations and
shall use its best effort to cause others who use the Common Areas with
Tenant's express or implied permission to abide by Landlord's rules and
regulations. At any time, Landlord may close any Common Areas to perform
any acts in the Common Areas as, in Landlord's judgment, are desirable to
improve the Project, Tenant shall not Interfere with the rights of
Landlord. other tenants or any other person entitled to use the Common
Areas.
(c) Specific Provision re: Vehicle Parking. Tenant shall be entitled
to use the number of vehicle parking spaces in the Project allocated to
Tenant in Section 1.11 of the Lease without paying any additional rent.
Tenant's parking shall not be reserved and shall be limited to vehicles no
larger than standard size automobiles or pickup utility vehicles. Tenant
shall not cause large trucks or other large vehicles to be parked within
6
<PAGE>
the Project or on the adjacent public streets. Temporary parking of large
delivery vehicles in the Project may be permitted by the rules and
regulations established by Landlord. Vehicles shall be parked only in
striped parking spaces and not in driveways, loading areas or other
locations not specifically designated for parking. Handicapped spaces shall
only be used by those legally permitted to use them. If Tenant parks more
vehicles in the parking area than the number set forth in section 1. 11 of
this Lease, such conduct shall be a material breach of this Lease. In
addition to Landlord's other remedies under the Lease, Tenant shall pay a
daily charge determined by Landlord for each such additional vehicle.
(d) Maintenance of Common Areas. Landlord shall maintain the Common
Areas in good order, condition and repair and shall operate the Project, in
Landlord's sole discretion, as a first-class industrial/commercial real
property development. Tenant shall pay Tenant's pro rate share (as
determined below) of all costs incurred by Landlord for the operation and
maintenance of the Common Areas. Common Area costs include, but are not
limited to, costs and expenses for the following: gardening and
landscaping; utilities, water and sewage charges; maintenance of signs
(other than tenants signs); premiums for liability, property damage, fire
and other types at casualty insurance on the Common Areas and worker's
compensation insurance; all property taxes and assessments levied on or
attributable to the Common Areas and all Common Area improvements; all
personal property taxes levied on or attributable to personal property used
in connection with the Common Areas; straightline depreciation an personal
property owned by Landlord which is consumed in the operation or
maintenance of the Common Areas; rental or lease payment paid by Landlord
for rented or leased personal of the Common Areas; fees for required
licenses and permits; repairing. resurfacing, repaving, maintaining,
painting, lighting, cleaning, refuse removal, security and similar items;
reserves for roof replacement and exterior painting and other appropriate
reserves; and a reasonable allowance to Landlord for Landlord's supervision
of the Common Areas (not to exceed five percent (5%) of the gross rents of
the Project for the calendar year). Landlord may cause any or all of such
services to be provided by third parties and the cost at such services
shall be included in Common Area costs. Common Area costs shall not include
depreciation of real property which forms part of the Common Areas.
(e) Tenant's Share and Payment. Tenant shall pay Tenant's annual pro
rata share of all Common Area costs (prorated for any fractional month)
upon written notice from Landlord that such costs are due and payable, and
in any event prior to delinquency. Tenant's pro rate share shall be
calculated by dividing the square foot area of the Property, as set forth
in Section 1.04 of the Lease, by the aggregate square foot area of the
Project which is leased or held for lease by tenants, as of the date on
which the computation is made. Tenant's initial pro rate share is set out
in Paragraph 1.13(b). Any changes in the Common Area costs and/or the
aggregate area of the Project leased or hold for lease during the Lease
Term shall be effective on the first day of the month after such change
occurs. Landlord may, at Landlord's election, estimate in advance and
charge to Tenant as Common Area costs, all real property taxes for which
Tenant is liable under Section 4.02 of the Lease, all insurance premiums
for which Tenant is liable under Section 4.04 of the Lease, all maintenance
and repair costs for which Tenant is liable under Section 6.04 of the
Lease, and all other Common Area costs payable by Tenant hereunder. At
Landlord's election, such statements of estimated Common Area costs shall
be delivered monthly, quarterly or at any other periodic intervals to be
designated by Landlord. Landlord may adjust such estimates at any time
based upon Landlord's experience and reasonable anticipation of costs. Such
adjustments shall be effective as of the next rent payment date after
notice to Tenant. Within sixty (60) days after the end of each calendar
year of the Lease Term. Landlord shall deliver to Tenant a statement
prepared in accordance with generally accepted accounting principles
setting forth, in reasonable detail, the Common Area costs paid or incurred
by Landlord during the preceding calendar year and Tenant's pro rate share.
Upon receipt of such statement, there shall be an adjustment between
Landlord and Tenant, with payment to or credit given by Landlord (as the
case may be) so that Landlord shall receive the entire amount of Tenant's
share of such costs and expenses for such period.
7
<PAGE>
Section 4.06. Late Charges. Tenant's failure to pay rent promptly may cause
Landlord to incur unanticipated costs. The exact amount of such costs are
impractical or extremely difficult to ascertain. Such costs may include, but are
not limited to, processing and accounting charges and late charges which may be
imposed on Landlord by any ground lease, mortgage or trust deed encumbering the
Property. Therefore, if Landlord does not receive any rent payment within ten
(10) days after it becomes due, Tenant shall pay Landlord a late charge equal to
ten percent (10%) of the overdue amount. The parties agree that such late charge
represents a fair and reasonable estimate of the costs Landlord will incur by
reason of such late payment.
Section 4.07. Interest on Past Due Obligations. Any amount owed by Tenant to
Landlord which is not paid when due shall bear interest at the rate of fifteen
percent (15%) per annum from the due date of such amount. However, interest
shall not be payable on late charges to be paid by Tenant under this Lease. The
payment of interest an such amounts shall not excuse or cure any default by
Tenant under this Lease. If the interest rate specified in this Lease is higher
than the rate permitted by law, the interest rate is hereby decreased to the
maximum legal interest rate permitted by law.
Section 4.08. Impounds for Insurance Premiums and Real Property Taxes. If
requested by any ground lessor or lender to whom Landlord has granted a security
interest in the Property, or if Tenant is more than ten (10) days late in the
payment of rent more than once in any consecutive twelve (12) month period,
Tenant shall pay Landlord a sum equal to one-twelfth (1/12) of the annual real
property taxes and insurance premiums payable by Tenant under this Lease,
together with each payment of Base Rent. Landlord shall hold such payments in a
non-interest bearing impound account. If unknown, Landlord shall reasonably
estimate the amount of real property taxes and insurance premiums when due.
Tenant shall pay any deficiency of funds in the impound account to Landlord upon
written request, if Tenant defaults under this Lease, Landlord may apply any
funds in the impound account to any obligation then due under this Lease.
ARTICLE FIVE: USE OF PROPERTY
Section 5.01. Permitted Uses. Tenant may use the Property only for the
Permitted Uses set forth in Section 1.06 above.
Section 5.02. Manner of Use. Tenant shall not cause or permit the Property
to be used in any way which constitutes a violation of any law, ordinance, or
governmental regulation or order, which annoys or interferes with the rights of
tenants of the Project, or which constitutes a nuisance or waste. Tenant shall
obtain and pay for all permits, including a Certificate of Occupancy, required
for Tenant's occupancy of the Property and shall promptly take all actions
necessary to comply with all applicable statutes, ordinances, rules,
regulations, orders and requirements regulating the use by Tenant of the
Property, including the Occupational Safety and Health Act.
Section 5.03. Hazardous Materials. As used in this Lease, the term
"Hazardous Material" means any flammable items, explosives, radioactive
materials, hazardous or toxic substances, material or waste or related
materials, including any substances defined as or included in the definition of
"hazardous substances", "hazardous wastes", "hazardous materials" or "toxic
substances" now or subsequently regulated under any applicable federal, state or
local laws or regulations, including without limitation petroleum-based
products, paints, solvents, lead, cyanide, DDT, printing inks, acids,
pesticides, ammonia compounds and other chemical products, asbestos, PCBs and
similar compounds, and including any different products and materials which are
subsequently found to have adverse effects on the environment or the health and
safety of persons. Tenant shall not cause or permit any Hazardous Material to be
generated, produced, brought upon, used, stored, treated or disposed of in or
about the Property by Tenant, its agents, employees, contractors, sublessess or
invitees without the prior written consent of Landlord. Landlord shall be
entitled to take into account such other factors or facts as Landlord may
reasonably determine to be relevant in determining whether to grant or withhold
consent to Tenant's proposed activity with respect to Hazardous Material. In no
event, however, shall Landlord be required to consent to the installation or use
of any storage tanks on the Property.
8
<PAGE>
Section 5.04. Signs and Auctions. Tenant shall not place any signs on the
Property without Landlord's prior written consent. Tenant shall not conduct or
permit any auctions or sheriff's sales at the Property.
Section 5.05. Indemnity. Tenant shall indemnity Landlord against and hold
Landlord harmless from any and all costs, claims or liability arising from: (a)
Tenant's use of the Property, (b) the conduct of Tenant's business or anything
also done or permitted by Tenant to be done in or about the Property, including
any contamination of the Property or any other property resulting from the
presence or use of Hazardous Material caused or permitted by Tenant; (c) any
breach or default in the performance of Tenant's obligations under this Lease;
(d) any misrepresentation or breach of warranty by Tenant under this Lease; or
(e) other acts or omissions of Tenant. Tenant shall defend Landlord against any
such cost, claim or liability at Tenant's expense with counsel reasonably
acceptable to Landlord or, at Landlord's election, Tenant shall reimburse
Landlord for any legal less or costs incurred by Landlord in connection with any
such claim. As a material part of the consideration to Landlord, Tenant assumes
all risk of damage to properly or injury to persons in or about the Property
arising from any cause, and Tenant hereby waives all claims in respect thereof
against Landlord, except for any claim arising out of Landlord's gross
negligence or willful misconduct. As used in this Section, the term "Tenant"
shall include Tenant's employees, agents, contractors and invitees, if
applicable.
Section 5.06. Landlord's Access. Landlord or its agents may enter the
Property at all reasonable times to show the Property to potential buyers,
investors or tenants or other parties; to do any other act or to inspect and
conduct tests in order to monitor Tenant's compliance with all applicable
environmental laws and all laws governing the presence and use of Hazardous
Material; or for any other purpose Landlord deems necessary. Landlord shall give
Tenant prior notice of such entry, except in the case of an emergency. Landlord
may place customary "For Sale" or "For Lease" signs on the Property.
Section 5.07. Quiet Possession. If Tenant pays the rent and complies with
all other terms of this Lease, Tenant may occupy and enjoy the Property for the
full Lease Term, subject to the provisions of this Lease.
ARTICLE SIX- CONDITION OF PROPERTY; MAINTENANCE, REPAIRS AND ALTERATIONS
Section 6.01. Existing Conditions. Tenant accepts the Property in its
condition as of the execution of the Lease, subject to all recorded matters,
laws, ordinances, and governmental regulations and orders. Except as provided
herein, Tenant acknowledges that neither Landlord nor any agent of Landlord has
made any representation as to the condition of the Property or the suitability
of the Property for Tenant's intended use. Tenant represents and warrants that
Tenant has made its own inspection of and inquiry regarding the condition of the
Properly and is not relying on any representations of Landlord or any Broker
with respect thereto. If Landlord or Landlord's Broker has provided a Property
information Sheet or other Disclosure Statement regarding the Property, a copy
is attached as an exhibit to the Lease.
Section 6.02. Exemption of Landlord from Liability. Landlord shall not be
liable for any damage or injury to the person, business (or any loss of income
therefrom), goods, wares, merchandise or other property of Tenant, Tenant's
employees, invitees, customers or any other person in or about the Property,
whether such damage or injury is caused by or results from: (a) fire, steam,
electricity, water, gas or rain; (b) the breakage, leakage, obstruction or other
defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or
lighting fixtures or any other cause; (c) conditions arising in or about the
Property or upon other portions of the Project, or from other sources or places;
or (d) any act or omission of any other tenant of the Project. Landlord shall
not be liable for any such damage or injury even though the cause of or the
means of repairing such damage or injury are not accessible to Tenant. The
provisions of this Section 6.02 shall not, however, exempt Landlord from
liability for Landlord's gross negligence or willful misconduct.
Section 6.03. Landlord's Obligations. Subject to the provisions of Article
Seven (Damage or Destruction) and Article Eight (Condemnation), and except for
damage caused by any act or ommission of Tenant, or Tenant's employees, agents,
contractors or invitess, Landlord shall keep the foundation, roof and structural
portions of exterior walls of the improvements on the Property in good order,
9
<PAGE>
condition and repair. However, Landlord shall not be obligated to maintain or
repair windows, doors, plate glass or the surfaces of walls. Landlord shall not
be obligated to make any repairs under this Section 6.03 until a reasonable time
after receipt of a written notice from Tenant of the need for such repairs.
Tenant waives the benefit of any present or future law which might give Tenant
the right to repair the Property at Landlord's expense or to terminate the Lease
because of the condition of the Property.
Section 6.04. Tenant's Obligations.
(a) Except as provided in Section 6.03, Article Seven (Damage or
Destruction) and Article Eight (Condemnation), Tenant shall keep all
portions of the Property (including structural, nonstructural, interior,
systems and equipment) in good order, condition and repair (including
interior repainting and refinishing, as needed). If any portion of the
Property or any system or equipment in the Property which Tenant is
obligated to repair cannot be fully repaired or restored. Tenant shall
promptly replace such portion of the Properly or system or equipment in the
Property, regardless of whether the benefit of such replacement extends
beyond the Lease Term; but if the benefit or useful life of such
replacement extends beyond the Lease Term (as such term may be extended by
exercise of any options), the useful life of such replacement shall be
prorated over the remaining portion of the Lease Term (as extended), and
Tenant shall be liable only for that portion of the cost which is
applicable to the Lease Term (as extended). Tenant shall maintain a
preventive maintenance contract providing for the regular inspection and
maintenance of the heating and air conditioning system by a licensed
heating and air conditioning contractor. Landlord shall have the right,
upon written notice to Tenant, to undertake the responsibility for
preventive maintenance of the heating and air conditioning system at
Tenant's expense. In addition, Tenant shall, at Tenant's expense, repair
any damage to the roof, foundation or structural portions of walls caused
by Tenant's acts or omissions. It is the intention of Landlord and Tenant
that, at all times during the Lease Term, Tenant shall maintain the
Property in an attractive, first-class and fully operative condition.
(b) Tenant shall fulfill all of Tenant's obligations under this
Section 6.04 at Tenant's sole expense. If Tenant fails to maintain, repair
or replace the Property as required by this Section 6.04, Landlord may,
upon ten (10) days' prior notice to Tenant (except that no notice shall be
required in the case of an emergency), enter the Property and perform such
maintenance or repair (including replacement, as needed) on behalf of
Tenant. In such case, Tenant shall reimburse Landlord for all costs
incurred in performing such maintenance or repair immediately upon demand.
Section 6.05. Alterations, Additions, and Improvements.
(a) Tenant shall not make any alterations, additions, or improvements
to the Property without Landlord's prior written consent, except for
non-structural alterations which do not exceed Ten Thousand Dollars
($10,000) in cost cumulatively over the Lease Term and which are not
visible from the outside of any building of which the Property is part.
Landlord may require Tenant to provide demolition and/or lien and
completion bonds in form and amount satisfactory to Landlord. Tenant shall
promptly remove any alterations, additions, or improvements constructed in
violation of this Paragraph 6.05(a) upon Landlord's written request. All
alterations, additions, and improvements shall be done in a good and
workmanlike manner, in conformity with all applicable laws and regulations,
and by a contractor approved by Landlord. Upon completion of any such work,
Tenant shall provide Landlord with "as built" plans, copies of all
construction contracts, and proof of payment for all labor and materials.
(b) Tenant shall pay when due all claims for labor and material
furnished to the Property. Tenant shall give Landlord at least twenty (20)
days' prior written notice of the commencement of any work on the Property,
regardless of whether Landlord's consent to such work is required. Landlord
may elect to record and post notices of non-responsibility on the Property.
10
<PAGE>
Section 8.08. Condition upon Termination. Upon the termination of the
Lease, Tenant shall surrender the Property to Landlord, broom clean and in the
same condition as received except for ordinary wear and tear which Tenant was
not otherwise obligated to remedy under any provision of this Lease. However,
Tenant shall not be obligated to repair any damage which Landlord is required to
repair under Article Seven (Damage or Destruction). In addition, Landlord may
require Tenant to remove any alterations, additions or improvements (whether or
not made with Landlord's consent) prior to the expiration of the Lease and to
restore the Property to its prior condition, all at Tenant's expense. All
alterations, additions and improvements which Landlord has not required Tenant
to remove shall become Landlord's property and shall be surrendered to Landlord
upon the expiration or earlier termination of the Lease, except that Tenant may
remove any of Tenant's machinery or equipment which can be removed without
material damage to the Property. Tenant shall repair, at Tenant's expense, any
damage to the Property caused by the removal of any such machinery or equipment.
In no event, however, shall Tenant remove any of the following materials or
equipment (which shall be deemed Landlord's property) without Landlord's prior
written consent: any power wiring or power panels; lighting or lighting
fixtures; wall coverings; drapes, blinds or other window coverings; carpets or
other floor coverings; heaters, air conditioners or any other heating or air
conditioning equipment; fencing or security gates; or other similar building
operating equipment and decorations.
ARTICLE SEVEN: DAMAGE OR DESTRUCTION
Section 7.01. Partial Damage to Property.
(a) Tenant shall notify Landlord in writing immediately upon the
occurrence of any damage to the Property. If the Property is only partially
damaged (i.e., less than fifty percent (50%) of the Property is
untenantable as a result of such damage or less than fifty percent (50%) of
Tenant's operations are materially impaired) and if the proceeds received
by Landlord from the insurance policies described in Paragraph 4.04(b) are
sufficient to pay for the necessary repairs, this Lease shall remain in
effect and Landlord shall repair the damage as soon as reasonably possible.
Landlord may elect (but is not required) to repair any damage to Tenant's
fixtures, equipment, or improvements.
(b) If the insurance proceeds received by Landlord are not sufficient
to pay the entire cost of repair, or if the cause of the damage is not
covered by the insurance policies which Landlord maintains under Paragraph
4.04(b), Landlord may elect either to (i) repair the damage as soon as
reasonably possible, in which case this Lease shall remain in full force
and effect, or (ii) terminate this Lease as of the date the damage
occurred. Landlord shall notify Tenant within thirty (30) days after
receipt of notice of the occurrence of the damage whether Landlord elects
to repair the damage or terminate the Lease. If Landlord elects to repair
the damage, Tenant shall pay Landlord the "deductible amount" (if any)
under Landlord's insurance policies and, if the damage was due to an act or
omission of Tenant, or Tenant's employees, agents, contractors or invitees,
the difference between the actual cost of repair and any insurance proceeds
received by Landlord. If Landlord elects to terminate the Lease, Tenant may
elect to continue this Lease in full force and effect, in which case Tenant
shall repair any damage to the Property and any building in which the
Property is located. Tenant shall pay the cost of such repairs. except that
upon satisfactory completion of such repairs, Landlord shall deliver to
Tenant any insurance proceeds received by Landlord for the damage repaired
by Tenant. Tenant shall give Landl6rd written notice of such election
within ten (10) days after receiving Landlord's termination notice.
(c) If the damage to the Property occurs during the last six (6)
months of the Lease Term and such damage will require more than thirty (30)
days to repair, either Landlord or Tenant may elect to terminate this Lease
as of the date the damage occurred, regardless of the sufficiency of any
insurance proceeds. The party electing to terminate this Lease shall give
written notification to the other party of such election within thirty (30)
days after Tenant's notice to Landlord of the occurrence of the damage.
11
<PAGE>
Section 7.02. Substantial or Total Destruction. If the Property is
substantially or totally destroyed by any cause whatsoever (i.e., the damage to
the Property is greater than partial damage as described in Section 7.01), and
regardless of whether Landlord receives any insurance proceeds, this Lease shall
terminate as of the date the destruction occurred. Notwithstanding the preceding
sentence, if the Property can be rebuilt within six (6) months after the date of
destruction, Landlord may elect to rebuild the Property at Landlord's own
expense, in which case this Lease shall remain in full force and effect.
Landlord shall notify Tenant of such election within thirty (30) days after
Tenant's notice of the occurrence of total or substantial destruction. If
Landlord so elects, Landlord shall rebuild the Property at Landlord's sole
expense, except that if the destruction was caused by an act or omission of
Tenant, Tenant shall pay Landlord the difference between the actual cost of
rebuilding and any insurance proceeds received by Landlord.
Section 7.03. Temporary Reduction of Rent. If the Property is destroyed or
damaged and Landlord or Tenant repairs or restores the Property pursuant to the
provisions of this Article Seven, any rent payable during the period of such
damage, repair and/or restoration shall be reduced according to the degree, if
any, to which Tenant's use of the Property is impaired. However, the reduction
shall not exceed the sum of one year's payment of Base Rent, insurance premiums
and real property taxes. Except for such possible reduction in Base Rent,
insurance premiums and real property taxes, Tenant shall not be entitled to any
compensation, reduction, or reimbursement from Landlord as a result of any
damage, destruction, repair, or restoration of or to the Property.
Section 7.04. Waiver. Tenant waives the protection of any statute, code or
judicial decision which grants a tenant the right to terminate a lease in the
event of the substantial or total destruction of the leased property. Tenant
agrees that the provisions of Section 7.02 above shall govern the rights and
obligations of Landlord and Tenant in the event of any substantial or total
destruction to the Property.
ARTICLE EIGHT: CONDEMNATION
If all or any portion of the Property is taken under the power of eminent
domain or sold under the threat of that power (all of which are called
"Condemnation"), this Lease shall terminate as to the part taken or sold on the
date the condemning authority takes title or possession, whichever occurs first.
If more than twenty percent (20%) of the floor area of the building in which the
Property is located, or which is located on the Property, is taken either
Landlord or Tenant may terminate this Lease as of the date the condemning
authority takes title or possession, by delivering written notice to the other
within ten (10) days after receipt of written notice of such taking (or in the
absence of such nofice, within ten (10) days after the condemning authority
takes title or possession). It neither Landlord nor Tenant terminates this
Lease, this Lease shall remain in effect as to the portion of the Property not
taken, except that the Base Rent and Additional Rent shall be reduced in
proportion to the reduction in the floor area of the Property. Any Condemnation
award or payment shall be distributed in the following order (a) first, to any
ground lessor, mortgages or beneficiary under a deed of trust encumbering the
Property, the amount of its interest in the Property; (b) second, to Tenant,
only the amount of any award specifically designated for loss of or damage to
Tenant's trade fixtures or removable personal property; and (c) third, to
Landlord, the remainder of such award, whether as compensation for reduction in
the value of the leasehold, the taking of the fee, or otherwise. If this Lease
is not terminated, Landlord shall repair any damage to the Property caused by
the Condemnation, except that Landlord shall not be obligated to repair any
damage for which Tenant has been reimbursed by the condemning authority. If the
severance damages received by Landlord are not sufficient to pay for such
repair, Landlord shall have the right to. either terminate this Lease or make
such repair at Landlord's expense.
ARTICLE NINE: ASSIGNMENT AND SUBLETTING
Section 9.01. Landlord's Consent Required. No portion of the Property or of
Tenant's interest in this Lease may be acquired by any other person or entity,
whether by sale, assignment, mortgage, sublease, transfer, operation of law, or
act of Tenant, without Landlord's prior written consent, except as provided in
Section 9.02 below. Landlord has the right to grant or withhold its consent as
provided in Section 9.05 below. Any attempted transfer without consent shall be
void and shall constitute a non-curable breach of this Lease. If Tenant is a
partnership, any cumulative transfer of more than twenty percent (20%) of the
partnership interests shall require Landlord's consent. If Tenant is a
corporation, any change in the ownership of a controlling interest of the voting
stock of the corporation shall require Landlord's consent.
12
<PAGE>
Section 9.02. Tenant Affiliate. Tenant may assign this Lease or sublease the
Property, without Landlord's consent, to any corporation which controls, is
controlled by or is under common control with Tenant, or to any corporation
resulting from the merger of or consolidation with Tenant ("Tenant's
Affiliate"). In such case, any Tenant's Affiliate shall assume in writing all of
Tenant's obligations under this Lease.
Section 9.03. No Release of Tenant. No transfer permitted by this Article
Nine, whether with or without Landlord's consent, shall release Tenant or change
Tenant's primary liability to pay the rent and to perform all other obligations
of Tenant under this Lease. Landlord's acceptance of rent from any other person
is not a waiver of any provision of this Article Nine. Consent to one transfer
is not a consent to any subsequent transfer. If Tenant's transferee defaults
under this Lease, Landlord may proceed directly against Tenant without pursuing
remedies against the transferee. Landlord may consent to subsequent assignments
or modifications of this Lease by Tenant's transferee, without notifying Tenant
or obtaining its consent. Such action shall not relieve Tenant's liability under
this Lease.
Section 9.04. Offer to Terminate. If Tenant desires to assign the Lease or
sublease the Property. Tenant shall have the right to offer, in writing, to
terminate the Lease as of a date specified in the offer. If Landlord elects in
writing to accept the offer to terminate within twenty (20) days after notice of
the offer, the Lease shall terminate as of the date specified and all the terms
and provisions of the Lease governing termination shall apply. It Landlord does
not so elect, the Lease shall continue in effect until otherwise terminated and
the provisions of Section 9.05 with respect to any proposed transfer shall
continue to apply.
Section 9.05. Landlord's Consent.
(a) Tenant's request for consent to any transfer described in Section
9.01 shall set forth in writing the details of the proposed transfer,
including the name, business and financial condition of the prospective
transferee financial details of the proposed transfer (e.g., the. term of
and the rent and security deposit payable under any proposed assignment or
sublease), and any other information Landlord deems relevant. Landlord
shall have the right to withhold consent. It reasonable, or to grant
consent, based on the following factors: (i) the business of the proposed
assignee or subtenant and the proposed use of the Property; (ii) the net
worth and financial reputation of the proposed assignee or subtenant; (iii)
Tenant's compliance with all of its obligations under the Lease; and (iv)
such other factors as Landlord may reasonably deem relevant. If Landlord
objects to a proposed assignment solely because of the net worth and/or
financial reputation of the proposed assignee, Tenant may nonetheless
sublease (but not assign), all or a portion of the Property to the proposed
transferee, but only on the other terms of the proposed transfer.
(b) If Tenant assigns or subleases, the following shall apply:
(i) Tenant shall pay to Landlord as Additional Rent under the Lease
the Landlord's Share (stated in Section 1.14) of the Profit
(defined below) on such transaction as and when received by
Tenant, unless Landlord gives written notice to Tenant and the
assignee or subtenant that Landlord's Share shall be paid by the
assignee or subtenant that Landlord's Share shall be paid by the
assignee or subtenant to Landlord directly. The "Profit" means
(A) all amounts paid to Tenant for such assignment or sublease,
including "key" money, monthly rent in excess of the monthly rent
payable under the Lease, and all fees and other consideration
paid for the assignment or sublease, including fees under any
collateral agreements, less (B) costs and expenses directly
incurred by Tenant in connection with the execution and
performance of such assignment or sublease for real estate
broker's commissions and costs of renovation or construction of
13
<PAGE>
tenant improvements required under such assignment or sublease.
Tenant is entitled to recover such costs and expenses before
Tenant is obligated to pay the Landlord's Share to Landlord. The
Profit in the case of a sublease of less than all the Property is
the rent allocable to the subleased space as a percentage on a
square footage basis.
(ii) Tenant shall provide Landlord a written statement certifying all
amounts to be paid from any assignment or sublease of the
Property within thirty (30) days after the transaction
documentation is signed, and Landlord may inspect Tenant's books
and records to verify the accuracy of such statement. On written
request, Tenant shall promptly furnish to Landlord copies of all
the transaction documentation, all of which shall be certified by
Tenant to be complete, true and correct. Landlord's receipt of
Landlord's Share shall not be a consent to any further assignment
or subletting. The breach of Tenant's obligation under this
Paragraph 9.05(b) shall be a material default of the Lease.
Section 9.06. No Merger. No merger shall result from Tenant's sublease of
the Property under this Article Nine, Tenant's surrender of this Lease or the
termination of this Lease in any other manner in any such event, Landlord may
terminate any or all subtenancies or succeed to the interest of Tenant as
sublandlord under any or all subtenancies.
ARTICLE TEN: DEFAULTS; REMEDIES
Section 10.01. Covenants and Conditions. Tenant's performance of each of
Tenant's obligations under this Lease is a condition as well as a covenant.
Tenant's right to continue in possession of the Property is conditioned upon
such performance. Time is of the essence in the performance of all covenants and
conditions.
Section 10.02. Defaults. Tenant shall be in material default under this
Lease:
(a) If Tenant abandons the Property or if Tenant's vacation of the
Property results in the cancellation of any insurance described in Section
4.04;
(b) If Tenant fails to pay rent or any other charge when due;
(c) If Tenant fails to perform any of Tenant's non-monetary
obligations under this Lease for a period of thirty (30) days after written
notice from Landlord; provided that if more than thirty (30) days are
required to complete such performance, Tenant shall not be in default if
Tenant commences such performance within the thirty (30) day period and
thereafter diligently pursues its completion. However, Landlord shall not
be required to give such notice if Tenant's failure to perform constitutes
a noncurable breach of this Lease. The notice required by this Paragraph is
intended to satisfy any and all notice requirements imposed by law on
Landlord and is not in addition to any such requirement.
(d) (i) If Tenant makes a general assignment or general arrangement
for the benefit of creditors; (ii) a petition for adjudication of
bankruptcy or for reorganization or rearrangement is filed by or against
Tenant and is not dismissed within thirty (30) days; (iii) if a trustee or
receiver is appointed to take possession of substantially all of Tenant's
assets located at the Property or of Tenant's interest in this Lease and
possession is not restored to Tenant within thirty (30) days; or (iv) if
substantially all of Tenant's assets located at the Property or of Tenant's
interest in this Lease is subjected to attachment, execution or other
judicial seizure which is not discharged within thirty (30) days. If a
court of competent jurisdiction determines that any of the acts described
in this subparagraph (d) is not a default under this Lease, and a trustee
is appointed to take possession (or if Tenant remains a debtor in
possession) and such trustee or Tenant transfers Tenant's interest
hereunder, then Landlord shall receive, as Additional Rent, the excess, if
any, of the rent (or any other consideration) paid in connection with such
assignment or sublease over the rent payable by Tenant under this Lease.
14
<PAGE>
(e) If any guarantor of the Lease revokes or otherwise terminates, or
purports to revoke or otherwise terminate, any guaranty of all or any
portion of Tenant's obligations under the Lease. Unless otherwise expressly
provided, no guaranty of the Lease is revocable.
Section 10.03. Remedies. On the occurrence of any material default by
Tenant, Landlord may, at any time thereafter, with or without notice or demand
and without limiting Landlord in the exercise of any right or remedy which
Landlord may have:
(a) Terminate Tenant's right to possession of the Property by any
lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Property to Landlord. In such
event, Landlord shall be entitled to recover from Tenant all damages
incurred by Landlord by reason of Tenant's default, including (i) the worth
at the time of the award of the unpaid Base Rent, Additional Rent and other
charges which Landlord had earned at the time of the termination; (ii) the
worth at the time of the award of the amount by which the unpaid Base Rent,
Additional Rent and other charges which Landlord would have earned after
termination until the time of the award exceeds the amount of such rental
loss that Tenant proves Landlord could have reasonably avoided; (iii) the
worth at the time of the award of the amount by which the unpaid Base Rent,
Additional Rent and other charges which Tenant would have paid for the
balance of the Lease Term after the time of award exceeds the amount of
such rental loss that Tenant proves Landlord could have reasonably avoided;
and (iv) any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations
under the Lease or which in the ordinary course of things would be likely
to result therefrom, including, but not limited to, any costs or expenses
Landlord incurs in maintaining or preserving the Property after such
default, the cost of recovering possession of the Property, expenses of
retailing, including necessary renovation or alteration of the Property,
Landlord's reasonable attorneys' fees incurred in connection therewith, and
any real estate commission paid or payable. As used in subparts (i) and
(ii) above, the "worth at the time of the award" is computed by allowing
interest on unpaid amounts at the rate of fifteen percent (15%) per annum,
or such lesser amount as may then be the maximum lawful rate. As used in
subpart (iii) above, the "worth at the time of the award" is computed by
discounting such amount at the discount rate of the Federal Reserve Bank of
San Francisco at the time of the award, plus one percent (1%). If Tenant
has abandoned the Property, Landlord shall have the option of (i) retaking
possession of the Property and recovering from Tenant the amount specified
in this Paragraph 10.03(a), or (ii) proceeding under Paragraph 10.03(b);
abandoned the Property. In such event, Landlord shall be entitled to
enforce all of Landlord's rights and remedies under this Lease, including
the right to recover the rent as it becomes due;
(c) Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decisions of the state in which the Property is
located.
Section 10.04. Repayment of "Free" Rent. If this Lease provides for a
postponement of any monthly rental payments, a period of "free" rent or other
rent concession, such postponed rent or "free" rent is called the "Abated Rent".
Tenant shall be credited with having paid all of the Abated Rent on the
expiration of the Lease Term only if Tenant has fully, faithfully, and
punctually performed all of Tenant's obligations hereunder, including the
payment of all rent (other than the Abated Rent) and all other monetary
obligations and the surrender of the Property in the physical condition required
by this Lease. Tenant acknowledges that its right to receive credit for the
Abated Rent is absolutely conditioned upon Tenant's full, faithful and punctual
performance of its obligations under this Lease. If Tenant defaults and does not
cure within any applicable grace period, the Abated Rent shall immediately
become due and payable in full and this Lease shall be enforced as if there were
no such rent abatement or other rent concession. In such case Abated Rent shall
be calculated based an the full initial rent payable under this Lease.
15
<PAGE>
Section 10.05. Automatic Termination. Notwithstanding any other term or
provision hereof to the contrary, the Lease shall terminate an the occurrence of
any act which affirms the Landlord's intention to terminate the Lease as
provided in Section 10.03 hereof, including the filing of an unlawful detainer
action against Tenant. On such termination, Landlord's damages for default shall
include all costs and fees, including reasonable attorneys' fees that Landlord
incurs in connection with the filing, commencement, pursuing and/or defending of
any action in any bankruptcy court or other court with respect to the Lease; the
obtaining of relief from any stay in bankruptcy restraining any action to evict
Tenant; or the pursuing of any action with respect to Landlord's right to
possession of the Property. All such damages suffered (apart from Base Rent and
other rent payable hereunder) shall constitute pecuniary damages which must be
reimbursed to Landlord prior to assumption of the Lease by Tenant or any
successor to Tenant in any bankruptcy or other proceeding.
Section l0.06. Cumulative Remedies. Landlord's exercise of any right or
remedy shall not prevent it from exercising any other right or remedy.
ARTICLE ELEVEN: PROTECTION OF LENDERS
Section ll.01. Subordination. Landlord shall have the right to subordinate
this Lease to any ground lease, deed of trust or mortgage encumbering the
Property, any advances made on the security thereof and any renewals,
modifications, consolidations, replacements or extensions thereof, whenever made
or recorded. Tenant shall cooperate with Landlord and any lender which is
acquiring a security interest in the Property or the Lease. Tenant shall execute
such further documents and assurances as such lender may require, provided that
Tenant's obligations under this Lease shall not be increased in any material way
(the performance of ministerial acts shall not be deemed material), and Tenant
shall not be deprived of its rights under this Lease. Tenant's right to quiet
possession of the Property during the Lease Term shall not be disturbed if
Tenant pays the rent and performs all of Tenant's obligations under this Lease
and is not otherwise in default. If any ground lessor, beneficiary or mortgages
elects to have this Lease prior to the lien of its ground lease, deed of trust
or mortgage and gives written notice thereof to Tenant, this Lease shall be
deemed prior to such ground lease, deed of trust or mortgage whether this Lease
is dated prior or subsequent to the date of said ground lease, deed of trust or
mortgage or the date of recording thereof.
Section 11.02. Attornment. If Landlord's interest in the Property is
acquired by any ground lessor, beneficiary under a deed of trust, mortgagee, or
purchaser at a foreclosure sale, Tenant shall attorn to the transferee of or
successor to Landlord's interest in the Property and recognize such transferee
or successor as Landlord under this Lease. Tenant waives the protection of any
statute or rule of law which gives or purports to give Tenant any right to
terminate this Lease or surrender possession of the Property upon the transfer
of Landlord's interest.
Section 11.03. Signing of Documents. Tenant shall sign and deliver any
instrument or documents necessary or appropriate to evidence any such attornment
or subordination or agreement to do so. If Tenant fails to do so within ten (10)
days after written request, Tenant hereby makes, constitutes and irrevocably
appoints Landlord, or any transferee or successor of Landlord, the
attorney-in-fact of Tenant to execute and deliver any such instrument or
document.
Section 11.04. Estoppel Certificates.
(a) Upon Landlord's written request, Tenant shall execute,
acknowledged and deliver to Landlord a written statement certifying: (i)
that none of the terms or provisions of this Lease have been changed (or if
they have been changed, stating how they have been changed); (ii) that this
Lease has not been cancelled or terminated; (iii) the last date of payment
of the Base Rent and other charges and the time period covered by such
payment; (iv) that Landlord is not in default under this Lease (or, if
Landlord is claimed to be in default, stating why); and (v) such other
representations or information with respect to Tenant or the Lease as
Landlord may reasonably request or which any prospective purchaser or
encumbrancer of the Property may require. Tenant shall deliver such
statement to Landlord within ten (10) days after Landlord's request.
Landlord may give any such statement by Tenant to any prospective purchaser
or encumbrancer of the Property. Such purchaser or encumbrancer may rely
conclusively upon such statement as true and correct.
16
<PAGE>
(b) If Tenant does not deliver such statement to Landlord within such
ten (10) day period, Landlord, and any prospective purchaser or
encumbrancer, may conclusively presume and rely upon the following facts:
(i) that the terms and provisions of this Lease have not been changed
except as otherwise represented by Landlord; (ii) that this Lease has not
been cancelled or terminated except as otherwise represented by Landlord;
(iii) that not more than one month's Base Rent or other charges have been
paid in advance; and (iv) that Landlord is not in default under the Lease,
in such event, Tenant shall be stopped from denying the truth of such
facts.
Section 11.05. Tenant's Financial Condition. Within ten (10) days after
written request from Landlord, Tenant shall deliver to Landlord such financial
statements as Landlord reasonably requires to verity the net worth of Tenant or
any assignee, subtenant, or guarantor of Tenant. In addition, Tenant shall
deliver to any lender designated by Landlord any financial statements required
by such lender to facilitate the financing or refinancing of the Property.
Tenant represents and warrants to Landlord that each such financial statement is
a true and accurate statement as of the date of such statement. All financial
statements shall be confidential and shall be used only for the purposes set
forth in this Lease.
ARTICLE TWELVE: LEGAL COSTS
Section 12.01. Legal Proceedings. If Tenant or Landlord shall be in breach
or default under this Lease, such party (the "Defaulting Party") shall reimburse
the other party (the "Nondefaulting Party") upon demand for any costs or
expenses that the Nondefaulting Party incurs in connection with any breach or
default of the Defaulting Party under this Lease, whether or not suit is
commenced or judgment entered. Such costs shall include legal fees and costs
incurred for the negotiation of a settlement, enforcement of rights or
otherwise. Furthermore, if any action for breach of or to enforce the Provisions
of this Lease is commenced, the court in such action shall award to the party in
whose favor judgment is entered, a reasonable sum as attorneys' fees and costs.
The losing party in such action shall Pay such attorneys' fees and costs. Tenant
shall also indemnity Landlord against and hold Landlord harmless from all costs,
expenses, demands and liability Landlord may incur if Landlord becomes or is
made a party to any claim or action (a) instituted by Tenant against any third
party, or by any third party against Tenant, or by or against any person holding
any interest under or using the Property by license of or agreement with Tenant;
(b) for foreclosure of any lien for labor or material furnished to or for Tenant
or such other person; (c) otherwise arising out of or resulting from any act or
transaction of Tenant or such other Person; or (d) necessary to protect
Landlord's interest under this Lease in a bankruptcy proceeding, or other
proceeding under Title 11 of The United States Code, as amended. Tenant shall
defend Landlord against any such claim or action at Tenant's expense with
counsel reasonably acceptable to Landlord or, at Landlord's election, Tenant
shall reimburse Landlord for any legal fees or costs Landlord incurs in any such
claim or action.
Section 12.02. Landlord's Consent. Tenant shall pay Landlord's reasonable
attorneys' fees incurred in connection with Tenant's request for Landlord's
consent under Article Nine (Assignment and Subletting), or in connection with
any other act which Tenant proposes to do and which requires Landlord's consent.
ARTICLE THIRTEEN: MISCELLANEOUS PROVISIONS
Section 13.01. Non-Discrimination. Tenant Promises, and it is a condition
to the continuance of this Lease, that there will be no discrimination against,
or segregation of, any person or group of persons on the basis of race, color,
sex, creed, national origin or ancestry in the leasing, subleasing,
transferring, occupancy, tenure or use of the Property or any portion thereof.
17
<PAGE>
Section 13.02. Landlord's Liability; Certain Duties.
(a) As used in this Lease, the term "Landlord" means only the current
owner or owners of the fee title to the Property or Project or the
leasehold estate under a ground lease of the Property or Project at the
time in question. Each Landlord is obligated to perform the obligations of
Landlord under this Lease only during the time such Landlord owns such
interest or title. Any Landlord who transfers its title or interest is
relieved of all liability with respect to the obligations of Landlord under
this Lease to be performed on or after the date of transfer. However, each
Landlord shall deliver to its transferee all funds that Tenant previously
paid if such funds have not yet been applied under the terms of this Lease.
(b) Tenant shall give written notice of any failure by Landlord to
perform any of its obligations under this Lease to Landlord and to any
ground lessor, mortgagee or beneficiary under any deed of trust encumbering
the Property whose name and address have been furnished to Tenant in
writing. Landlord shall not be in default under this Lease unless Landlord
(or such ground lessor. mortgagee or beneficiary) fails to cure such
non-performance within thirty (30) days after receipt of Tenant's notice.
However, if such non-performance reasonably requires more than thirty (30)
days to cure, Landlord shall not be in default if such cure is commenced
within such thirty (30) day period and thereafter diligently pursued to
completion.
(c) Notwithstanding any term or provision herein to the contrary, the
liability of Landlord for the performance of its duties and obligations
under this Lease is limited to Landlord's interest in the Property and the
Project, and neither the Landlord nor its partners, shareholders, officers
or other principals shall have any personal liability under this Lease.
Section 13.03. Severability. A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is illegal or
unenforceable shall not cancel or invalidate the remainder of such provision or
this Lease, which shall remain in full force and effect.
Section 13.04. Interpretation. The captions of the Articles or Sections of
this Lease are to assist the parties in reading this Lease and are not a part of
the terms or provisions of this Lease. Whenever required by the context of this
Lease, the singular shall include the plural and the plural shall include the
singular. The masculine, feminine and neuter genders shall each include the
other. In any provision relating to the conduct, acts or omissions of Tenant,
the term "Tenant" shall include Tenant's agents, employees, contractors,
invitees, successors of others using the Property with Tenant's expressed or
implied permission.
Section 13.05 Incorporation of Prior Agreements; Modifications. This Lease
is the only agreement between the parties pertaining to the lease of the
Property and no other agreements are effective. All amendments to this Lease
shall be in writing and signed by all parties. Any Other attempted amendment
shall be void.
Section 13.06 Notices. All notices required or permitted under this Lease
shall be in writing and shall be personally delivered or sent by certified mail,
return receipt requested, postage prepaid. Notices to Tenant shall be delivered
to the address specified in Section 1.03 above, except that upon Tenant's taking
possession of the Property, the Property shall be Tenant's address for notice
purposes. Notices to Landlord shall be delivered to the address specified in
Section 1.02 above. All notices shall be effective upon delivery. Either party
may change its notice address upon written notice to the other party.
Section 13.07 Waivers. All waivers must be in writing and signed by the
waiving party. Landlord's failure to enforce any provision of this Lease or its
acceptance of rent shall not be a waiver and shall not prevent Landlord from
enforcing that provision or any other Provision of this Lease in the future. No
statement on a payment check from Tenant or in a letter accompanying a payment
check shall be binding on Landlord. Landlord may, with or without notice to
Tenant, negotiate such check without being bound to the conditions of such
statement
Section 13.08. No Recordation. Tenant shall not record this Lease without
prior written consent from Landlord. However, either Landlord or Tenant may
require that a "Short Form", memorandum of this lease executed by both parties
be recorded. The party requiring such recording shall pay all transfer taxes and
recording fees.
Section 13.09. Binding Effect; Choice of Law. This Lease binds any party
who legally acquires any rights or interest in this Lease from Landlord or
Tenant. However, Landlord shall have no obligation to Tenant's successor unless
the rights or interests of Tenant's successor are acquired in accordance with
the terms of this Lease. The laws of the state in which the Property is located
shall govern this Lease.
18
<PAGE>
Section l3.10. Corporate Authority; Partnership Authority. If Tenant is a
corporation, each person signing this Lease on behalf of Tenant represents and
warrants that he has full authority to do so and that this Lease binds the
corporation. Within thirty (30) days after this Lease is signed, Tenant shall
deliver to Landlord a certified copy of a resolution of Tenant's Board of
Directors authorizing the execution of this Lease or other evidence of such
authority reasonably acceptable to Landlord. If Tenant is a partnership, each
person or entity signing this Lease for Tenant represents and warrants that he
or it is a general partner of the partnership, that he or it has full authority
to sign for the partnership and that this Lease binds the partnership and all
general partners of the partnership. Tenant shall give written notice to
Landlord of any general partner's withdrawal or addition. Within thirty (30)
days after this Lease is signed, Tenant shall deliver to Landlord a copy of
Tenant's recorded statement of partnership or certificate of limited
partnership.
Section 13.11. Joint and Several Liability. All parties signing this Lease
as Tenant shall be jointly and severally liable for all obligations of Tenant.
Section 13.12 Force Majeurs. If Landlord cannot perform any of its
obligations due to events beyond Landlord's control, the time provided for
performing such obligations shall be extended by a period of time equal to the
duration of such events. Events beyond Landlord's control include, but are not
limited to, acts of God, war, civil commotion, labor disputes, strikes, fire,
flood or other casualty, shortages of labor or material, government regulation
or restriction and weather conditions.
Section 13.13. Execution of Lease. This Lease may be executed in
counterparts and, when all counterpart documents are executed, the counterparts
shall constitute a single binding instrument. Landlord's delivery of this Lease
to Tenant shall not be deemed to be an offer to lease and shall not be binding
upon either party until executed and delivered by both parties.
Section 13.14. Survival. All representations and warranties of Landlord and
Tenant shall survive the termination of this Lease.
ARTICLE FOURTEEN: BROKERS
Section 14.01. Broker's Fee. When this Lease is signed by and delivered to
both Landlord and Tenant. Landlord shall pay a real estate commission to
Landlord's Broker named in Section 1.08 above, if any, as provided in the
written agreement between Landlord and Landlord's Broker, or the sum stated in
Section 1.09 above for services rendered to Landlord by Landlord's Broker in
this transaction. Landlord shall pay Landlord's Broker a commission if Tenant
exercises any option to extend the Lease Term or to buy the Property, or any
similar option or right which Landlord may grant to Tenant, or if Landlord's
Broker is the procuring cause of any other lease or sale entered into between
Landlord and Tenant covering the Property. Such commission shall be the amount
set forth in Landlord's Broker's commission schedule in effect as of the
execution of this Lease. If a Tenant's Broker is named in Section 1.08 above,
Landlord's Broker shall pay an appropriate portion of its commission to Tenant's
Broker it so provided in any agreement between Landlord's Broker and Tenant's
Broker. Nothing contained in this Lease shall impose any obligation on Landlord
to pay a commission or fee to any party other than Landlord's Broker.
Section 14.02. Protection of Brokers. If Landlord sells the Property, or
assigns Landlord's interest in this Lease, the buyer or assignee shall, by
accepting such conveyance of the Property or assignment of the Lease, be
conclusively deemed to have agreed to make all payments to Landlord's Broker
thereafter required of Landlord under this Article Fourteen. Landlord's Broker
shall have the right to bring a legal action to enforce or declare rights under
this provision. The prevailing party in such action shall be entitled to
reasonable attorneys' fees to be paid by the losing party. Such attorneys' fees
shall be fixed by the court in such action. This Paragraph is included in this
Lease for the benefit of Landlord's Broker.
Section 14.03. Broker's Disclosure of Agency. Landlord's Broker hereby
discloses to Landlord and Tenant and Landlord and Tenant hereby consent to
Landlord's Broker acting in this transaction as the agent of (check one):
__ Landlord exclusively; or
__ both Landlord and Tenant.
19
<PAGE>
Section 14.04. No Other Brokers. Tenant represents and warrants to Landlord
that the brokers named in Section 1.08 above are the only agents, brokers,
finders or other parties with whom Tenant has dealt who are or may be entitled
to any commission or fee with respect to this Lease or the Property.
ADDITIONAL PROVISIONS MAY BE SET FORTH IN A RIDER OR RIDERS ATTACHED HERETO
OR IN THE BLANK SPACE BELOW. IF NO ADDITIONAL PROVISIONS ARE INSERTED. PLEASE
DRAW A LINE THROUGH THE SPACE BELOW.
Landlord and Tenant have signed this Lease at the place and on the dates
specified adjacent to their signatures below and have initialled all Riders
which are attached to or incorporated by reference in this Lease.
"LANDLORD"
Signed on June 22, 1999 /s/ Gordon Jacobsen
at_________________________
By:
Its:
By:
Its:
"TENANT"
Signed on June 22, 1999 Online Investors Advantage
at /s/ George Wright
By:
Its:
By:
Its:
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.
THIS PRINTED FORM LEASE HAS BEEN DRAFTED BY LEGAL COUNSEL AT THE DIRECTION OF
THE SOUTHERN CALIFORNIA CHAPTER OF THE SOCIETY OF INDUSTRIAL AND OFFICE REALTORS
INC. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE SOUTHERN CALIFORNIA
CHAPTER OF THE SOCIETY OF INDUSTRIAL AND OFFICE REALTORS, INC. ITS LEGAL
COUNSEL, THE REAL ESTATE BROKERS NAMED HEREIN, OR THEIR EMPLOYEES OR AGENTS, AS
TO THE LEGAL SUFFICIENCY, LEGAL EFFECT OR TAX CONSEOUENCES OF THIS LEASE OR OF
THIS TRANSACTION. LANDLORD AND TENANT SHOULD RETAIN LEGAL COUNSEL TO ADVISE THEM
ON SUCH MATTERS AND SHOULD RELY UPON THE ADVICE OF SUCH LEGAL COUNSEL.
20
EMPLOYMENT AGREEMENT AND STOCK OPTION
SENIOR EXECUTIVE
This EMPLOYMENT agreement and stock option for a senior executive
("Agreement') is made effective the 30th day of May, 1997, and entered into at
Son Diego, California, by and between Best Way, Inc., a Nevada corporation d/b/a
BestWay USA Inc., located at 462 Stevens Ave, Suite 106, Solana Beach,
California 92075 hereinafter referred to as the Employer,, and Allen D. Hardman
624 Camino Catalina, Solana Beach, CA 92075, hereinafter referred to as the
Employee, in consideration of the mutual Promises made herein, agree as follows:
ARTICLE 1. TERM OF EMPLOYMENT
Specified Term
1.01 The Company hereby employs Executive, and Executive hereby accepts
employment with Company for a period of five (5) years, beginning on July 1,
1997.
Automatic Renewal
1.02 After completion of the initial term set forth in Section 1.01, above,
and each twelve month anniversary thereafter, this Agreement shall automatically
renew for an additional one (1) year period, unless written notice of the intent
not to renew this Agreement is tendered by either the Company or Executive to
the other party no less than sixty (60) days prior to the expiration of this
Agreement.
Earlier Termination
1.03 This Agreement may be terminated earlier as hereinafter provided.
ARTICLE 2. DUTIES AND OBLIGATIONS OF EXECUTIVE
Title and Description of Duties
2.01 Executive shall serve as Vice President of Operations and shall at
all times be subject, to the direction of the President, and to the policies
established by the Board of Directors; of Company. In that capacity, Executive
shall do and perform all services, acts or things necessary or advisable to
fulfill the duties of said position, including without limitation:
(a) Overall planning, forecasting, budgeting, training,
organization coordination, control and direction of the day-to-day operations of
Company.
<PAGE>
(b) Oversee expansion of Fountain Fresh beverage center installations as
quickly as is reasonably and profitably possible, and using all reasonable best
efforts to ensure said equipment is installed on time, in a workmanlike manner,
within budget, and with an ongoing effort to reduce installation costs.
(c) Establish a service program to ensure Fountain Fresh beverage centers
are operating at the best reasonable performance with the goal to maximize
sales, of consumables.
Loyal and Conscientious Performance of Duties
2.02 Executive agrees that tot the best of his ability and experience he
will at all times loyally and conscientiously perform all of the duties and
obligations required of him, either expressly or implicitly, by the terms of
this Agreement.
Devotion of Entire Time to Company's Business
2.03 (a) Executive shall devote his entire productive time, ability, and
attention to the business of Company during the term of the Agreement.
(b) During the term of this Agreement, Executive shall not engage in any
other business duties or pursuits whatsoever. Furthermore, during the term of
this Agreement, Executive shall not, whether directly or indirectly, render any
services of a commercial or professional nature to any other person or
organization, whether for compensation or otherwise, without the prior written
consent of Company's President. However, the expenditures of reasonable. amounts
of time for educational, charitable, or professional activities shall not be
deemed a breach of this Agreement, if those activities do not materially
interfere with the services under this Agreement, and shall not require the
prior written consent of Company's President.
(c) This Agreement shall not be interpreted to prohibit Executive from
making passive personal investments or conducting private business affairs, if
those activities do not materially interfere with the services required under
this Agreement However, except for those activities, Executive shall not,
directly or indirectly, acquire, hold, or retain any interest in any business
competing with, or similar in nature to, the business of Company.
Competitive Activities
(d) During the tem of this Agreement, Executive shall not directly or
indirectly, either as an employee, employer, consultant, agent, principal,
partner, stockholder, corporate officer, director, or in any other individual or
representative capacity, engage or participate in any business that is in
competition in any manner whatsoever with the business of Company.
2
<PAGE>
(e) Executive shall not for a period of one (1) year immediately following
the termination of employment with Company, either directly or indirectly (1)
Make known to any person, firm, or corporation the names or addresses of any of
company's clients or any other information pertaining to them; or, (2) Call on,
solicit or take away, or attempt to call on, solicit, or take away any of
Company's clients on whom Executive called or with whom Executive became
acquainted during their employment with Company, either on their behalf or that
of another person, firm, or corporation.
Uniqueness of Executive's Services
2.04 Executive hereby represents and agrees the services to be performed
under the terms of this Agreement are of a special, unique, unusual,
extraordinary, and intellectual character that gives them a peculiar value, the
loss of which cannot be reasonably or adequately compensated in damages in an
action at law. Executive, therefore, expressly agrees that Company, in addition
to any other rights or remedies which Company may possess, shall be entitled to
injunctive and other equitable relief to prevent or remedy a breach of this
Agreement by Executive.
Indemnification for Negligence or Misconduct
2.05 Executive shall indemnify and hold Company harmless from all liability
for loss, damage, or injury to persons or property resulting from the negligence
or misconduct of Executive.
Trade Secrets
2.06 (a) The parties acknowledge agree that during the term of this
Agreement and in the course of the discharge of his duties hereunder, Executive
shall have access to, and become acquainted with, information concerning the
operation of Company, including without limitation financial, personnel, sales.
planning, and other information which is owned by Company and regularly used in
the operation of Company's business, and that this information constitutes
Company's trade secrets.
(b) Executive agrees that he shall not disclose any such trade secrets,
directly or indirectly, to any other person or use them in any way, either
during the term of this Agreement or at any other time thereafter, except as is
required in the course of his employment with Company,
(c) Executive further agrees all files, records, documents, equipment, and
similar items relating to Company's business, whether prepared by Executive or
others, are and shall remain, exclusively the property of Company.
3
<PAGE>
ARTICLE 3. OBLIGATIONS OF COMPANY
General Description
3.01 Company shall provide Executive with the compensation, incentives,
benefits, and business expense reimbursement specified elsewhere in this
Agreement.
Office and Staff
3.02 Company shall provide Executive with office equipment and supplies,
mid other facilities and services, suitable to Executive's position and adequate
for the performance of his duties.
Indemnification of Executive
3.03 Company shall defend, indemnify mid hold harmless Executive from and
against any and all liabilities, claims, expenses (including expert witnesses'
fees), reasonable attorneys' fees, damages, causes of action, suits or judgments
sustained by Executive in direct consequence of his discharge of his duties on
Company's behalf. Company further agrees to defend, indemnify and hold harmless
Executive from and against any and all liabilities, claims, expenses (including
expert witness fees), reasonable attorneys fees, damages, causes of action,
suits or judgments arising out of or resulting from any activities he undertakes
at the request of the Company concerning Fountain Fresh International, a Utah
corporation d/b/a BetterStuff, Inc., located at 2030 North Redwood Road, Suite
70, Salt Lake City, Utah 84116.
ARTICLE 4. COMPENSATION
4.01 (a) As compensation for the services to be rendered by Executive
hereunder. Company shall pay Executive an annual salary of one hundred twenty
thousand and no/100 dollars ($120,000.00), payable not less than once per month.
(b) Executive's base salary shall be reviewed annually on or about each
anniversary of the date of this Agreement. If the Company's Board of Directors;
in its sole discretion determines Executive's performance has been effective,
then a salary increase shall be granted in amount not less than the cost of
living increase, if any, for the greater Son Diego area as published in the most
recent issue of the San Diego Union Tribune newspaper.
Tax Withholding
4.02 Company shall have the right to deduct or withhold from the
compensation due to Executive hereunder any and all sums required for federal
income and Social Security, taxes, and all state or local taxes now applicable,
or that may be enacted and become applicable in the future.
4
<PAGE>
ARTICLES 3. STOCK OPTION
Option Granted
5.01 Company hereby grants Executive an option to purchase one hundred
thousand (100,000) shares of the common stock of Best Way, Inc., a Nevada
corporation, at a purchase price of $2.00. It is acknowledged and understood by
Executive that this stock option does not qualify as an incentive stock option
as defined in I.R.C ss. 422(b).
Time of Exercise of Option
5.02 Executive's right to exercise his option to purchase the one hundred
thousand (100,000) shares shall vest in equal installments of twenty five
thousand (25,000) shares each on the following dates:
25,000 Shares After completion of 1 year of employment
25,000 Shares After completion of 2 years of employment
25,000 Shares After completion of 3 years of employment
25,000 Shares After completion of 4 years of employment
Executive may exercise his option to purchase the one hundred thousand (100,000)
shares on the vesting date or at any time thereafter, and from time to time
until termination of the option as provided in paragraph 5.07, below, so long as
at all times beginning with the date of the grant of this option and ending
three (3) months prior to the date of exercise, or twelve (12) months prior to
the date of exercise, if the Executive is disabled within the meaning of United
States Internal Revenue Code Section 22 subd. (e)(3), Executive remains
employed. For purposes of this Agreement, "employment" means that Executive is
employed by Company, a parent or subsidiary corporation of Company, or a
corporation, or a parent or subsidiary corporation of such a corporation issuing
or assuming a stock option in a transaction to which United States Internal
Revenue Code Section 425, subd. (a), applies.
Method of Exercise
5.03 This option shall be exercised by written notice delivered to Company
at its principal place of business, stating the number of shares for which the
option is being exercised. The. notice must be accompanied by a check for the
amount of the purchase price.
5
<PAGE>
Capital Adjustments
5.04 (a) The existence of this option shall not affect in any way the right
or power of Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations, or other changes in Company's
capital structure or its business, or any merger or consolidation of Company or
any issue of bonds, debentures, preferred or prior preference stocks ahead of or
affecting the common stock or the rights thereof, or the issuance of any
securities convertible into any common stock or of any rights, options, or
warrants to purchase any common stock, or the dissolution or liquidation of
Company, any sale or transfer of all or any part of its assets or business, or
any other corporate act or proceedings of Company, whether of a similar
character or otherwise.
(b) The shares with respect to which this option is granted am sham-i of
the common stock of Best Way, Inc., a Nevada corporation d/b/a BestWay USA Inc.,
as presently constituted but if and whenever, prior to the delivery by Company
of all the shares of the stock with respect to which this option is granted,
Company shall effect a subdivision or consolidation of shares other capital
readjustment, the payment of a stock dividend, or other increase or reduction of
the number of shares of the stock outstanding, the number of shares of stock
then remaining subject to this option shall: (1) In the event of an increase in
the number of outstanding shares be proportionately increased, and the cash
consideration payable per share shall be proportionately reduced; and, (2) In
the event of a reduction in the number of outstanding shares, be proportionately
reduced, and the cash consideration payable per share shall be proportionately
increased.
Merger and Consolidation
5.05 (a) Following the merger of one or more corporations into Company or
any consolidation of Company and one or more corporations in which Company is
the surviving corporation, the exercise of this option shall apply to the shares
of the surviving corporation.
(b) Notwithstanding any other provision of this Agreement, this option
shall terminate on the dissolution or liquidation of Company, or on any merger
or consolidation in which Company is not the surviving corporation.
Transfer of Option
5.06 During Executive's lifetime, this option shall be exercisable only by
Executive. This option shall not be transferable by Executive other than by the
laws of descent and distribution upon Executive's death. In the event of
Executives death during employment or during the applicable period after
termination of employment specified in paragraph 5.02, above, Executive's
personal representatives may exercise any portion of this option that remains
unexercised at the Executive's death, provided that any such exercise must be
made, if at all, during the period within one year after Executives death, and
subject to the option termination date specified in paragraph 5.07(c), below.
6
<PAGE>
Termination of Option
5.07 This option shall terminate on the earliest of the following dates:
(a) The expiration of three (3) months from the date of Executive's
termination of employment, as defined in paragraph 5.02, above, except for
termination due to death or permanent and total disability; or,
(b) The expiration of twelve (12) months from the date on which Executive's
employment, as defined in paragraph 5.02, above, is terminated due to permanent
and total disability as defined in United States Internal Revenue Code Section
22, subd. (e)(3); or,
(c) . On December 31st of the ninth year after this .Agreement is executed,
which is December 31, 2006.
Rights as Shareholder
5.08 Executive will not be deemed to be a. holder of any shares pursuant to
the exercise of this option until he pays the: option price and a stock
certificate is delivered to him for those shares, No adjustment shall be made
for dividends or other rights for which the record date is prior to the date the
stock certificate is delivered.
ARTICLE 6. BENEFITS
Annual Vacation
6.01 Executive shall be entitled to fifteen (15) days vacation time each
year with pay. Executive may be absent from his employment for vacation only at
such times as mutually agreed upon between Executive and Company's President. In
the event that Executive is unable for any reason to take the total amount of
vacation time authorized herein during any year, he may accrue that time and add
it to vacation time for any following year, or at Executives option, may instead
receive a cash payment in an amount equal to the amount of annual salary
attributable to that. period of time.
Paid Holidays
6.02 Executive shall be entitled to eight paid holidays per year, as
follows: New Year's Day, Memorial Day, July 4th, Labor Day, Thanksgiving Day and
the day after Thanksgiving, Christmas Day, and one floating day.
7
<PAGE>
Use of Company-Supplied Automobile
6.03 (a) During the term of employment hereunder, Executive shall be
entitled to the full use of an automobile of Company's choice at Company's
expense.
(b) The Company also agrees to pay all operating expenses of any nature
whatsoever with regard to the aforementioned automobile, and to procure and
maintain in force an automobile liability insurance policy on the automobile,
with coverage including Executive, for bodily injury or death, and for property
damage.
Group Medical Insurance
6.04 The Company agrees to include Executive and his spouse under Company's
group medical insurance coverage at Company's cost.
Moving Expenses
6.05 The Company will reimburse Executive for all reasonable expenses
incurred for the following:
(a) Moving the household goods and personal effects of Executive and
Executive's spouse from Executive's then residence to the new place of residence
selected by Executive.
(b) Traveling, including lodging, for a single one-way trip by Executive
and Executive's spouse from Executive's prior residence to the new place of
residence selected by Executive.
(c) Temporary housing for Executive and Executive's spouse in the Solana
Beach, California, area for a period not to exceed sixty (60) days from the date
of this Agreement.
(d) As an advance on moving expenses, immediately following execution of
this Agreement, Company shall pay to Employee the sum of fifteen thousand and
no/100 dollars ($15.000.00) to cover moving expenses incurred by Employee in
moving from St. Louis., Missouri to Solana Beach, California. Within thirty (30)
days following the move, Executive shall submit detailed documentation to
Company substantiating the actual expenses incurred. If Executive's actual
moving expenses are less than the $15,000.00 advance, the difference shall be
deemed an advance to Executive against future travel expenses. and deducted
accordingly, If Executive's actual moving expenses are greater than the
$15,000.00 advance, the Company shall reimburse Executive within fifteen (15)
after receipt of documentation of the expenses incurred.
8
<PAGE>
ARTICLE 7. BUSINESS EXPENSES
7.01 (a) Company shall promptly reimburse Executive for all reasonable
business expenses incurred by Executive in promoting the business of Company,
including expenditures for entertainment, gift, and travel.
(b) Each expenditure shall reimbursable only if it is of a nature
qualifying it as a proper deduction on the federal and state income tax return
of Company.
(c) Each such expenditure shall be reimbursable only if Executive furnishes
to Company adequate records and other documentary evidence required by federal
and state statutes and regulations issued by the appropriate taxing authorities
for the substantiation of that expenditure as an income tax deduction.
ARTICLE 8. TERMINATION OF EMPLOYMENT
Termination for Cause
8.01 (a) Company reserves the right to terminate this Agreement if
Executive: (1) willfully breaches or habitually neglects the duties which he is
required to perform under the terms of this Agreement, or, (2) Commits acts of
dishonesty, fraud, misrepresentation, or other acts of moral turpitude that
would prevent the effective performance of his duties.
(b) Company may, at its option, terminate this Agreement for the reasons
stated in this section by giving written notice of termination to Executive
without prejudice to any other remedy to which Company may be entitled either at
law, in equity, or under this Agreement.
(c) Termination under this section shall be considered "for cause" for the
purposes of this Agreement
Termination Upon Stated Events
8.02 (a) This Agreement shall be terminated upon the death of the
Executive.,
(b) Company reserves the right to terminate this Agreement not less than
sixty (60) days after Executive suffers any physical or mental disability that
would prevent the performance of his duties under this Agreement. Such a
termination shall be affected by giving ten (10) days written notice of
termination to Executive.
(c) Termination under this section shall not be considered "without cause"
for the purposes of this Agreement.
9
<PAGE>
Termination Without Cause
8.03 (a) Company reserves the right to terminate this Agreement immediately
upon the occurrence of circumstances which make it impossible or impracticable
for the business of Company to be continued.
(b) Executive renders services which are unsatisfactory to Company, and
Company shall be the sole judge as to whether the services of Executive are
satisfactory.
(d) Termination under this section shall not be considered "for cause" but
shall be considered "without cause" for the purposes of this Agreement.
Severance Pay Upon Termination Without Cause
8.04 (a) In the event Executive is terminated by the Company without cause
during the first three (3) years of employment under this Agreement, Company
shall pay Executive severance pay equal to three (3) months of Executive's
monthly base salary in effect at the time of termination.
(b) In the event Executive is terminated by the Company without cause after
the first three (3) years of employment under this Agreement Company shall pay
Executive severance pay equal to six (6) months of Executive's monthly base
salary in effect at the time of termination.
Effect of Merger, Transfer of Assets or Dissolution
8.05 (a) This Agreement shall be. terminated by any voluntary or
involuntary dissolution of Company resulting from either a merger or
consolidation in which Company is not the consolidated or surviving corporation,
or a transfer of all, or substantially all, of the assets of Company.
(b) Termination under this section shall not be considered "for cause" but
shall be considered "without cause" for the purposes of this Agreement.
Termination by Executive
8.06 Executive may terminate his obligations under this Agreement by giving
Company at least sixty (60) days prior written notice.
Effect an Compensation
8.07 In the event this; Agreement is terminated prior to the completion of
the term of employment specified herein, Executive shall be entitled to the
compensation earned by and. vested in him prior to the date of termination as
provided for in this Agreement, computed pro rata up to, and including, that
date. Executive shall be entitled to no further compensation as of the date of
termination.
10
<PAGE>
ARTICLE 9. GENERAL PROVISIONS
9.01 Any notices to be given by either party to the other shall be in
writing and maybe transmitted either by personal delivery or by mail, registered
or certified, postage prepaid with return receipt requested. Mailed notices
shall be addressed to the parties at the address appearing in the introductory
paragraph of this Agreement, but each party may change that address by written
notice in accordance with this section. Notices delivered personally shall be
deemed communicated as of the date of actual receipt, mailed notices shall be
deemed communicated as of five (5) days after the date of mailing.
Attorneys' Fees and Costs
9.02 If this Agreement gives rise to a lawsuit or other legal proceeding
between any of the parties hereto, the prevailing party shall be entitled to
recover court costs, necessary disbursements (including experts' fees) and
actual attorneys' fees, in addition to any other relief such party may be
entitled. This provision shall be construed as applicable to the entire
contract.
Entire Agreement
9.03 This Agreement supersedes any and all other agreements, either oral or
in writing, between the parties hereto with respect to the employment of
Executive by Company, and contains all of the covenants and agreements between
the parties with respect to that employment in any manner whatsoever. Each party
to this Agreement acknowledges that no representations, inducements promises, or
agreements, orally or otherwise, have been made by any party, or anyone acting
on behalf of any party, which arc not embodied herein, and that no other
argument, statement, or promise not contained in this Agreement shall be valid
or binding.
Modifications
9.04 Any modification of this Agreement will be effective only if it is in
writing signed by the party to be charged,
Effect of Waiver
9.05 The failure of either party to insist on strict compliance with any of
the terms, covenants, or conditions of this Agreement by the other party shall
not be deemed a waiver of that term, covenant, or condition, nor shall any
waiver or relinquishment of any right or power at one time or times be deemed a
waiver or relinquishment of that right or power for all or any other times.
11
<PAGE>
Partial Invalidity
9.06 If any provision in this Agreement is hold by a court of competent
jurisdiction to be invalid, void, or unenforceable, the remaining provisions
shall nevertheless continue in full force without being impaired or invalidated
in any way.
Law Governing Agreement/Jurisdiction
9.07 This Agreement shall be governed by and construed in accordance with
the. laws of the State of California. Jurisdiction and venue for any suit
arising out of this Agreement shall lie exclusively in a competent court in the
County of San Diego, State of California.
Sums Due When Deceased
9.08 If Executive dies prior to the expiration of the term of his
employment any sums that may be due him from Company under this Agreement as of
the date of death shall be paid to Executive's executors, administrators, heirs,
personal representatives, successors, and assigns
COMPANY
BEST WAY, INC.,
a Nevada corporation
By: /s/
Bryant Cragun
Chief Executive Officer
EXECUTIVE
/s/
Allen D. Hardman
12
ZIASUN TECHNOLOGIES, INC.
AMENDMENT TO EMPLOYMENT AGREEMENT
- --------------------------------------------------------------------------------
This Amendment to Employment Agreement (the "Agreement") is made this 15th
day of April, 1999, by and between ZiaSun Technologies, Inc., a Nevada
Corporation, (hereinafter referred to as the "Company"), and Allen D. Hardman
(hereinafter referred to as "Employee")
RECITALS
A. Whereas, on May 30, 1997, the Company, formerly known as Bestway USA,
and Employee entered into that certain Employment Agreement (the "Employment
Agreement"), a copy of which is attached hereto as Exhibit 1 and incorporated
herein by reference.
B. Whereas, the Company and Employee now desire to amend and modify the
Agreement to reflect that the Stock Option Granted pursuant to Article 5., of
the Employment Agreement will retroactive, back to the date of the original
Employment Agreement (i) provide for the Conversion of the Option in Lieu of
Payment, and (ii) that the Stock Option shall be governed by the Stock Option
Agreement attached hereto as Exhibit 2 and executed of even date herewith.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
Employee hereby agree as follows:
AGREEMENTS
1. Amendment to Agreement. That Article 5., of the Employment Agreement is
hereby amended and modified to read as follows:
Article 5. Stock Option
5.01 Option Granted. The Company hereby grants Executive an option to
purchase one hundred thousand (100,000) shares of the common stock of
the Company, at a purhase price of $2.00 per share, pursuant to the
terms and conditions of that certain Non-Qualified Stock Option
Agreement, executed of even date herewith. It is acknowledged and
understood by Executive that this Stock Option does not qualify as an
incentive stock option as defined in I.R.C. ss.422(b).
2. Other Terms. All other terms and conditions of the Agreement shall
remain in full force and effect.
3. Entire Agreement; Exhibits. This document and its Exhibits contain the
entire agreement between the parties relating to the subject matter contained in
this Agreement. All prior or contemporaneous agreements, representations or
warranties, written or oral, between the parties are superseded by this
Agreement. This Agreement may not be modified except by written document signed
by an authorized representative of each party. In the event that any part of
this Agreement is found to be unenforceable, the remainder shall continue in
effect, to the extent consistent with the intent of the parties as of the
effective date of this Agreement.
Page 1
<PAGE>
4. No Oral Change. This Agreement and any provision hereof may not be
waived, changed, modified or discharged orally, but only by an agreement in
writing signed by the party against whom enforcement of any such waiver, change,
modification or discharge is sought.
5. Non-Waiver. The failure of any party to insist in any one or more cases
upon the performance of any of the provisions, covenants or conditions of this
Agreement or to exercise any option herein contained shall not be construed as a
waiver or relinquishment for the future of any such provisions, covenants or
conditions. No waiver by any party of one breach by another party shall be
construed as a waiver with respect to any subsequent breach.
6. Choice of Law. This Agreement and its application shall be governed by
the laws of the State of California.
7. Counterparts and/or Facsimile Signature. This Agreement may be executed
in any number of counterparts, including counterparts transmitted by telecopier
or FAX, any one of which shall constitute an original of this Agreement. When
counterparts of facsimile copies have been executed by all parties, they shall
have the same effect as if the signatures to each counterpart or copy were upon
the same document and copies of such documents shall be deemed valid as
originals. The parties agree that all such signatures may be transferred to a
single document upon the request of any party.
8. Binding Effect. This Agreement shall inure to and be binding upon the
heirs, executors, personal representatives, successors and assigns of each of
the parties to this Agreement.
AGREED AND ACCEPTED as of the date first above written.
ZIASUN TECHNOLOGIES, INC.
A Nevada Corporation
/S/ Anthony Tobin /S/ Alfredo Alex S. Cruz III
- --------------------------------- ----------------------------------
By: Anthony Tobin By: Alfred Alex S. Cruz III
Its: President Its: Secretary
EMPLOYEE
/S/ Allen D. Hardman
------------------------------------
Allen D. Hardman
Page 2
ZIASUN TECHNOLOGIES, INC.
Allen D. Hardman
Non-Qualified Stock Option Agreement
- --------------------------------------------------------------------------------
This Agreement, effective as of April 15, 1999, is between ZiaSun
Technologies, Inc., a Nevada Corporation ("the Company"), and Allen D. Hardman,
an individual ("Optionee").
1. Grant of Option. The Company, pursuant to the terms of that certain
Employment Agreement dated May 30, 1997, as amended (the "Employment
Agreement"), hereby grants to Optionee an option to purchase One Hundred
Thousand (100,000) shares of the Common Stock of the Company (the "Shares"), on
the terms and conditions set forth in this Agreement. The option granted under
this Agreement is a non-qualified stock option and is not intended to qualify as
either a qualified stock option or an incentive stock option as those terms are
defined by applicable provisions of the Internal Revenue Code of 1986, as
amended.
2. Purchase Price. The Purchase Price of the Shares to be purchased
pursuant to this option shall be Two Dollars ($2.00) per Share.
3. Vesting. Optionee's right to exercise the option granted in this
Agreement shall vest over four (4) years, as provided in this paragraph. This
option shall become exercisable with respect to twenty-five percent (25.0%) of
the shares subject to this Option on each anniversary date of Optionee's
completion of Employment with the Company. Notwithstanding the preceding
sentence, the option shall immediately become exercisable in full in the event
that (i) the shareholders of the Company approve a dissolution or liquidation of
the Company or a sale of all or substantially all of the Company's assets to
another entity; (ii) a tender within the meaning of section 14 of the Securities
Exchange Act of 1934, as amended, is made for five percent (5%) or more of the
Company's outstanding capital stock by any person other than the Company or an
affiliate; or (iii) the Company effects an underwritten public offering of its
securities pursuant to a registration statement filed under the Securities Act
of 1933. This option shall be subject to termination before its date of
expiration as provided in Paragraph 6(b).
4. No Transfer or Assignment of Option. Except as otherwise provided in
this Agreement, this option and the rights and privileges conferred hereby shall
not be transferred, assigned, pledged, or hypothecated in any way (whether by
operation of law or otherwise) and shall not be subject to sale under execution,
attachment, or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate, or otherwise dispose of this option, or of any right or privilege
conferred hereby, contrary to the provisions of this Agreement, or upon any
attempted sale under any execution, attachment, or similar process upon the
rights and privileges conferred hereby, this option and the rights and
privileges conferred hereby shall immediately become null and void.
5. Method of Exercise.
(a) Notice and Payment. The rights represented by this option may be
exercised by the Optionee, in whole or in part, at any time or in part
from time to time during the exercise period as set forth in Section
3, but not as to a fractional share of Common Stock, by giving written
notice to the Company pursuant to Paragraph 10(g) (or at such other
agency or office of the Company in the United States of America as it
may designate by notice in writing to the holder hereof at the address
of such holder appearing on the books of the Company), and by payment
to the Company of the purchase price, as set forth in Section 2, in
cash or by certified or official bank check in United States Dollars
for each share being purchased.
Page 1
<PAGE>
(b) Certificate Delivery and Ownership. In the event of any exercise
of the rights represented by this option, (i) a certificate or
certificates for the shares of Common Stock so purchased, registered
in the name of the Optionee entitled to receive the same, shall be
mailed to the Optionee within a reasonable time, not exceeding ten
days, after the rights represented by this option shall have been so
exercised; provided, however, that the Company shall not be required
to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate, and the
Company shall not be required to issue or deliver such certificates
unless or until the Optionee requesting the issuance thereof shall
have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been
paid. The Optionee whose name any certificate for shares of Common
Stock is issued upon exercise of this option shall for all purposes be
deemed to have become the holder of record of such shares on the date
on which the option was exercised and payment of the option price was
made, irrespective of the date of delivery of such certificate, except
that, if the date of such surrender and payment is a date when the
stock transfer books of the Company are closed, such person shall be
deemed to have become the holder of record of such shares at the close
of business on the next succeeding date on which the stock transfer
books are open. The issuance of any shares of Common Stock pursuant to
the terms of this option shall at all times be subject to the
requirements of the Act, as amended, and to the applicable state and
any foreign securities and blue sky laws then in effect.
(c) Issuance of Shares. After receiving a proper notice of exercise,
the Company shall cause to be issued a certificate or certificates for
the Shares as to Optionee, registered in Optionee's name (or in
Optionee's name and the name of Optionee's spouse as community
property or as joint tenants with a right of survivorship). The
certificate or certificates shall contain the legend required by
Paragraph 9(f).
(d) Conversion Right. In lieu of exercising this option as specified
above, Optionee may from time to time convert this Option, in whole or
in part, into a number of shares of Common Stock determined by
dividing (i) the aggregate fair market value of the Shares or other
securities otherwise issuable upon exercise of this Option minus the
aggregate Option Price of such Shares by (ii) the fair market value of
one Share. The fair market value of the Share shall be determined
pursuant to Section (e).
(e) Fair Market Value.
(i) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such
exchange or listed for trading on the Nasdaq National Market, the
current fair market value shall be the last reported sale price
of the Common Stock on such exchange or market on the last
business day prior to the date of exercise of this Option or if
no such sale is made on such day, the average closing bid and
asked prices for such day on such exchange or market; or
(ii) If the Common Stock is not so listed or admitted to unlisted
trading privileges, but is traded on the Nasdaq SmallCap Market,
the current market value shall be the average of the closing bid
and asked prices for such day on such market and if the Common
Stock is not so traded, the current market value shall be the
mean of the last reported bid and asked prices reported by the
National Quotation Bureau, Inc. on the last business day prior to
the date of the exercise of this Option; or
Page 2
<PAGE>
(iii)If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported,
the current fair market value shall be an amount, not less than
book value thereof as at the end of the most recent fiscal year
of the Company ending prior to the date of the exercise of the
Option, determined in such reasonable manner as may be prescribed
by the Board of Directors of the Corporation.
-----------------------------------------------------------------
By way of example only, and assuming the following, the number of
shares to be issued to Optionee upon conversion would be
calculated as follows:
-----------------------------------------------------------------
(i) The closing bid for the Company's common stock is $10.00 on
the date that Optionee exercises his rights as to vested
options.
(ii) The Optionee is vested with the right to purchase 25,000
shares; (iii) The exercise price of the Option is $2.00 per
share.
Aggregate Fair market value of Shares (25,000 x $10.00)= 250,000
Aggregate Option Price .............. (25,000 x $2.00) = 50,000
Fair market value of one share ...... (Closing Bid) = $10.00
(Aggregate Fair market value of Shares) minus (Aggregate Option Price
---------------------------------------------------------------------
Aggregate Option Price
20,000 Shares to be Issued = (250,000 - 50,000) i.e.200,000
------------------ -----------
$10.00 $10.00
6. Term and Expiration.
(a) Term. This option, if it has not expired earlier under the
provisions of Paragraph 6(b), shall expire in all events on the
seventh (7th) anniversary of the effective date of this Agreement.
(b) Termination of Option. The option granted under this Agreement, to
the extent that it has not been exercised, shall terminate at the
following times:
DEATH: If Optionee dies while he is employed by the Company,
Optionee's estate shall have the right for a period of six (6) months
after the date of death to exercise the option to the extent Optionee
was entitled to exercise the option on that date, provided the actual
date of exercise is in no event after the expiration of the term of
the option. To the extent the option is not exercised within this
six-month period, the option will terminate. Optionee's "estate" shall
mean Optionee's legal representative or any person who acquires the
right to exercise the option by reason of Optionee's death.
DISABILITY: If Optionee's employment ends because Optionee
becomes disabled, Optionee or his qualified representative (in the
event of Optionee's mental disability) shall have the right for a
period of twelve (12) months after the date on which Optionee's
employment ends to exercise the option to the extent Optionee was
entitled to exercise the option on that date, provided the actual date
of exercise is in no event after the expiration of the term of the
option. To the extent the option is not exercised within this
twelve-month period, the option will terminate.
Page 3
<PAGE>
RESIGNATION: If Optionee voluntarily resigns from the Company,
Optionee shall have the right for a period of three (3) months after
the date of resignation to exercise the option to the extent Optionee
was entitled to exercise the option on that date, provided the date of
exercise is in no event after the expiration of the term of the
option. To the extent the option is not exercised within this
three-month period, the option will terminate.
TERMINATION FOR REASONS OTHER THAN CAUSE: If Optionee's
employment is terminated by the Company for reasons other than cause,
Optionee shall have the right for a period of three (3) months after
the date of termination to exercise the option to the extent Optionee
was entitled to exercise the option on that date, provided the date of
exercise is in no event after the expiration of the term of the
option. To the extent the option is not exercised within this
three-month period, the option will terminate. The termination of
Optionee's employment by the Company will be for reasons other than
cause if the termination is NOT due to an act by Optionee of
embezzlement, fraud, dishonesty, or breach of fiduciary duty to the
Company, or to deliberate disregard by Optionee of the rules of the
Company resulting in loss, damage, or injury to the Company, or to any
unauthorized disclosure by Optionee of any of the secrets or
confidential information of the Company, or to Optionee's having
induced any client or customer of the Company to break any contract
with the Company, or to Optionee's having induced any principal for
whom the Company acts as agent to terminate the agency relationship,
or to any conduct of Optionee that constitutes unfair competition with
the Company.
OTHER REASONS: If Optionee's employment ends for any reason not
mentioned above in this Paragraph 6(b), all rights of Optionee in the
option, to the extent that it has not been exercised, shall terminate
on the date his employment ends.
7. Legality of Initial Issuance. No Shares shall be issued upon the
exercise of this option unless and until the Company has determined that all
applicable provisions of state and federal securities laws have been satisfied.
8. Capital Adjustments.
(a) The Company's Freedom to Act. The existence of this Agreement
shall not affect in any way the right or power of the Company or its
shareholders to make or authorize any or all adjustments,
recapitalizations, reorganizations, or other changes in the Company's
capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, or preferred or
preference stocks affecting the Shares or the rights thereof, or of
any rights, options, or warrants to purchase any capital stock of the
Company, or the dissolution or liquidation of the Company, any sale or
transfer of all or any part of its assets or business, or any other
corporate act or proceedings of the Company, whether of a similar
character or otherwise.
(b) Adjustment of Optioned Shares. The Shares with respect to which
this option is granted are Shares of the Company as presently
constituted; but if and whenever, prior to the delivery by the Company
of all of the Shares with respect to which these options are granted,
the Company shall effect a subdivision or consolidation of the Shares
or other capital readjustment, the payment of a stock dividend, or
Page 4
<PAGE>
other increase or reduction in the number of the Shares outstanding
without receiving compensation therefor in money, services, or
property, the number of the Shares then remaining subject to option
hereunder shall (i) in the event of an increase in the number of
outstanding Shares, be proportionately increased, and the cash
consideration payable per Share shall be proportionately reduced; and
(ii) in the event of a reduction in the number of outstanding Shares,
be proportionately reduced, and the cash consideration payable per
Share shall be proportionately increased.
9. Miscellaneous Provisions.
(a) Withholding Taxes. In the event that the Company determines that
it is required to withhold federal, state, or local tax as a result of
the exercise of this option, Optionee, as a condition to the exercise
of this option, shall make arrangements satisfactory to the Company to
enable it to satisfy all withholding requirements.
(b) No Rights as a Shareholder. Optionee shall have no rights as a
shareholder with respect to any Shares subject to this option until
the Shares have been issued in the name of Optionee.
(c) No Employment Rights. Nothing in this Agreement shall be construed
as giving Optionee the right to be retained as an Employee of the
Company.
(d) Further Assurances. Each party to this Agreement agrees to perform
any and all further acts and to execute and deliver any documents that
may reasonably be necessary to carry out the provisions of this
Agreement.
(e) Attorneys' Fees. In any legal action or other proceeding brought
by either party to enforce or interpret the terms of this Agreement,
the prevailing party shall be entitled to recover reasonable
attorneys' fees and costs.
(f) Governing Law. The Agreement and all determinations made and
actions taken pursuant hereto, to the extent not otherwise governed by
the Code or the securities laws of the United States, shall be
governed by the law of the State of Nevada.
(g) Notices. Any written notice to the Company required by any of the
provisions of the Agreement shall be addressed to the chief personnel
officer or to the chief executive officer of the Company, and shall
become effective when it is received by the office of the chief
personnel officer or the chief executive officer.
(h) Entire Agreement.This Agreement, together with those documents
that are referenced in the Agreement, are intended to be the final,
complete, and exclusive statement of the terms of the agreement
between Optionee and the Company with regard to the subject matter of
this Agreement. This Agreement supersedes all other prior agreements,
communications, and statements, whether written or oral, express or
implied, pertaining to that subject matter. This Agreement may not be
contradicted by evidence of any prior or contemporaneous statements or
agreements, oral or written, and may not be explained or supplemented
by evidence of consistent additional terms.
Page 5
<PAGE>
(i) Successors and Assigns. Optionee agrees that he will not assign,
sell, transfer, delegate, or otherwise dispose of, whether voluntarily
or involuntarily, or by operation of law, any rights or obligations
under this Agreement, except as expressly permitted by this Agreement.
Any such purported assignment, sale, transfer, delegation, or other
disposition shall be null and void. Subject to the limitations set
forth in this Agreement, the Agreement shall be binding on and inure
to the benefit of the successors and assigns of the Company and any
successors and permitted assigns of Optionee, including any of his
executors, administrators, or other legal representatives. It shall
not benefit any person or entity other than those specifically
enumerated in this Agreement.
(j) Severability. If any provision of this Agreement, or its
application to any person, place, or circumstance, is held by an
arbitrator or a court of competent jurisdiction to be invalid,
unenforceable, or void, that provision shall be enforced to the
greatest extent permitted by law, and the remainder of this Agreement
and of that provision shall remain in full force and effect as applied
to other persons, places, and circumstances.
(k) Interpretation. This Agreement shall be construed as a whole,
according to its fair meaning, and not in favor of or against any
party. By way of example and not in limitation, this Agreement shall
not be construed in favor of the party receiving a benefit nor against
the party responsible for any particular language in this Agreement.
Captions are used for reference purposes only and should be ignored in
the interpretation of the Agreement. Unless the context requires
otherwise, all references in this Agreement to Paragraphs are to the
paragraphs of this Agreement.
(1) Counterparts. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one and the same
instrument. Consent may be executed by facsimile and such facsimile
copy shall be conclusive evidence of the consent and ratification of
the matters contained herein by the undersigned parties.
The parties have duly executed this Agreement as of the date first written
above.
ZIASUN TECHNOLOGIES, INC.
A Nevada Corporation
/S/ Anthony Tobin /S/ Alfredo Alex S. Cruz III
- --------------------------------- ----------------------------------
By: Anthony Tobin By: Alfredo Alex S. Cruz III
Its: President Its: Secretary
OPTIONEE
/S/ Allend D. Hardman
------------------------------------
Allen D. Hardman
Page 6
Date this 1st day of June 1998
MOMENTUM ASSOCIATES LIMITED
and
PETER GRAHAM DALEY
******************************************
AGREEMENT
******************************************
Horvath & Giles
16th Floor On Hing Building
No. 1 On Hing Terrace
Central
Hong Kong
Tel. No.: 2522 9118
<PAGE>
AN AGREEMENT made the 1st day of June One Thousand Nine Hundred
Ninety-Eight
BETWEEN
MOMENTUM ASSOCIATES LIMITED whose registered address is situate at 17th Floor,
No.53-55 Lockhart Road, Wanchai, Hong Kong (hereinafter called "MAL") of the one
part and
PETER GRAHAM DALEY of Flat 6C, Block 19, Beacon Heights, Kowloon Tong, Kowloon,
Hong Kong (hereinafter called "PGD") of the other part.
WHEREBY IT IS AGREED as follows:-
1) MAL engages PGD to provide administrative, promotional and technical
support services to enable MAL to carry on business as a facilitator to
internet marketing and publishing companies as effectively as possible on
the following terms and conditions.
2) PGD agrees:
(a) To assist in the Internet publishing and marketing of products which
include Swiftrade, M Finance, PINmail, MediaHits, Search Dragon and
others to be added from time to time;
(b) To provide professional, administrative and technical assistance
required in relation to the holding of internet assets, to assist in
the acquiring of equipment and machinery including computers and the
training of personnel in relation thereto;
(c) To undertake any other action necessary, and which PGD can reasonably
provide, to enable MII to continue in operation with adequate
administrative and technical support.
3) MAL agrees to pay PGD a housing allowance of HK$15,000 per month for the
period from 1st June 1998 up to 31st May 1999, subject to review from time
to time.
4) The terms of this Agreement shall commence on 1st June 1998 up to 31st May
1999 and shall be renewed automatically unless either party shall have
given at least one month's notice in writing to terminate this Agreement.
IN WITNESS whereof the parties have hereunto set their hands the day and year
first above written.
<PAGE>
SIGNED by Anthony Leonard )
)
Tobin for and on behalf of )
Momentum Associates Limited in )
the presence of: Karina Lee )
SIGNED by Peter Graham )
)
Daley in the presence of Karina Lee )
2
Dated this 1st day of June 1998
MOMENTUM ASSOCIATES LIMITED
and
ANTHONY LEONARD TOBIN
**************************************
AGREEMENT
**************************************
Horvath & Giles
16th Floor On Hing Building
No. 1 On Hing Terrace
Central
Hong Kong
Tel. No.: 2522 9118
<PAGE>
AN AGREEMENT made the 1st day of June One Thousand Nine Hundred Ninety-Eight
BETWEEN
MOMENTUM ASSOCIATES LIMITED whose registered address is situate at 17th Floor,
No.53-55 Lockhart Road, Wanchai, Hong Kong (hereinafter called "MAL") of the one
part and
ANTHONY LEONARD TOBIN of 3E, Block 17, South Horizon, Ap Lei Chau, Hong Kong
(hereinafter called "ALT") of the other part.
WHEREBY IT IS AGREED as follows:
1) MAL engages ALT to provide administrative, promotional and technical
support services to enable MAL to carry on business as a facilitator to
internet marketing and publishing companies as effectively as possible on
the following terms and conditions.
2) ALT agrees:
(a) To assist in the Internet publishing and marketing of products which
include Swiftrade, M Finance, PINmail, MediaHits, Search Dragon and
others to be added from time to time;
(b) To provide professional, administrative and technical assistance
required in relation to the holding of internet assets, to assist in
the acquiring of equipment and machinery including computers and the
training of personnel in relation thereto;
(c) To undertake any other action necessary, and which ALT can reasonably
provide, to enable MII to continue in operation with adequate
administrative and technical support.
3) MAL agrees to pay ALT a housing allowance of HK$19,000 per month plus
HK$1,112 per month for management fees for the period from 1st June 1998 up
to 31st May 1999, subject to review from time to time.
4) The terms of this Agreement shall commence on 1st June 1998 up to 31st May
1999 and shall be renewed automatically unless either party shall have
given at least one month's notice in writing to terminate this Agreement.
IN WITNESS whereof the parties have hereunto set their hands the day and year
first above written.
<PAGE>
SIGNED by Peter Graham )
)
Daley for and on behalf of )
)
Momentum Associates Limited in )
)
the presence of: Karina Lee )
SIGNED by Anthony Leonard )
)
Tobin in the presence of: )
M. McCusker
Michael James McCusker
Dated this 1st day of January 1998 MOMENTUM INTERNET INC.
and
CROSSBOW CONSULTANTS LIMITED
AGREEMENT
Horvath & Giles
16"' Floor On Hing Building
No. I On Hing Terrace
Central
Hong Kong
Tel. No.: 2522 9118
<PAGE>
AN AGREEMENT made the 1st day of January One Thousand
Nine Hundred Ninety-Eight
BETWEEN
MOMENTUM INTERNET INC. whose registered address is situate at P.O. Box
957, Offshore Incorporated Centre, Road Town, Tortola, British Virgin Islands
(hereinafter called "MII") of the one part and
CROSSBOW CONSULTANTS LIMITED whose registered address is situate at P.O. Box
957, Offshore Incorporated Centre, Road Town, Tortola, British Virgin Islands
(hereinafter called "the Consultant") of the other part.
WHEREBY IT IS AGREED as follows:-
1) MII engages the Consultant to provide all administrative, promotional
and technical support services to enable M11 to carry on business as
an internet publishing and marketing company as effectively as
possible on the following, terms and conditions.
2) The Consultant agrees:
(a) To assist in the internet publishing and marketing of products
of MII which include Swiftrade, M Finance, PINmail, MediaHits,
Search Dragon and others to be added from time to time;
(b) To provide professional, administrative and technical
assistance required in relation to the holding of internet
assets, to assist in the acquiring of equipment and machinery
including computers and at the direction of M11 the training of
personnel in relation thereto;
(c) To undertake any other action necessary, and which it can
reasonably provide, to enable MII to continue in operation with
adequate administrative and technical support.
3) M11 agrees to pay the Consultant a service fee of US$10,000 per month
for the period from 1st January 1998 up to 31st December 1998.
Thereafter the fee for each succeeding year shall be agreed during the
three months prior to I" January of every succeeding year with
provision for renegotiation during the currency of any particular year
if rising costs due to inflation or changed circumstances warrant. In
the event that agreement on the service fee cannot be reached before
1st January of any particular year this Agreement shall terminate
three months after that date.
1
<PAGE>
4) The terms of this Agreement shall commence on 1st January 1998 up to
31st December 1998 and shall be renewed automatically unless either
party shall have given at least one month's notice in writing to
terminate this Agreement.
IN WITNESS whereof the parties have hereunto set their hands the day and year
first above written.
SIGNED by Peter Graham Daley )
for and on behalf of ) /s/
Momentum Internet Inc. )
in the presence of, )
SIGNED by Anthony Leonard Tobin )
for and on behalf of ) /s/
Crossbow Consultants Limited )
in the presence of, )
2
Dated this 25th day of March 1999
ASIA4SALE.COM LIMITED
and
MOMENTUM INTERNET INC.
**************************************
AGREEMENT
***************************************
Horvath & Giles
16th Floor On Hing Building
No. 1 On Hing Terrace
Central
Hong Kong
Tel. No.: 2522 9118
<PAGE>
THIS AGREEMENT is made the 25th day of 1999
BETWEEN
Asia4sale.com Limited whose registered office is situate at 12A First Pacific
Bank Centre, 56 Gloucester Road, Wanchai, Hong Kong (hereinafter called
"Asia4sale") of the one part and
Momentum Internet Inc. having its registered address at P.O. Box 957, Offshore
Incorporated Centre, Road Town, Tortola, British Virgin Islands (hereinafter
called "MII") of the other part.
WHEREAS
1) Asia4sale provides various internet services including on line shopping
facilities and MII provides promotional services
2) Asia4sale has agreed to share its revenues with MII on the terms and
conditions hereinafter appearing
NOW IT IS HEREBY AGREED as follows:
1 In consideration of MII providing promotional services to
Asia4sale, it is hereby agreed that after Asia4sale has paid
suppliers, shop franchisees as hereinafter defined and credit card
transaction fees for each purchase made (but no other expenses) the
balance of the total paid receipts of Asia4sale (after deduction of
tax) will be split equally between Asia4sale and MII.
2. Payments made by Asia4sale to MII will be at a mutually agreed time
subject to an account being taken between both parties after receipt
of the audited accounts for any financial year of Asia4sale so that
appropriate adjustments can be made.
3. Definitions:
1) Suppliers: all those third parties who provide goods to
and which are onward sold by Asia4sale.
ii) Shop franchisees: all those third parties who sell the
products of Asia4sale through web sites
4. This agreement is governed by the laws of Hong Kong and the parties
hereto submit to the exclusive jurisdiction of the Courts of Hong
Kong.
IN WITNESS whereof this Agreement has been executed on the day and year first
above written.
1
<PAGE>
SIGNED by BRIAN HODGSON )
/s/ Brian Hogdson
for and on behalf of Asia4sale.com )
Limited in the presence of:- )
SIGNED by ANTHONY )
/s/ Anthony Tobin
LEONARD TOBIN for and on )
behalf of Momentum Internet Inc. in)
the presence of )
2
SUBSIDIARIES
OF
ZIASUN TECHNOLOGIES, INC.
1. BestWay Beverages, Inc., a Nevada Corporation is a wholly owned subsidiary
of the Registrant. BestWay Beverages, Inc., holds a license from Fountain
Fresh International, Inc., under which BestWay will market , sell and
distribute the Beverage Center Equipment developed by Fountain Fresh which
is used to dispense Fountain Fresh Beverages and purified water. The
Beverage Center Equipment is a patented in-store, self service, pressure
fill, mini bottling plant/beverage center.
2. Momentum Asia, Inc., a Corporation formed under the laws of the Republic of
the Philippines is a wholly owned subsidiary of the Registrant. Momentum
Asia, provides a wide range of compatible graphic design, copy writing,
printing, database management, and e-mail customer service operations./
3. Momentum Internet Incorporation, a Corporation formed under the laws of the
British Virgin Islands, Momentum Internet Incorporation is a wholly owned
subsidiary of the Registrant. Momentum Internet Incorporated is, among
other things, in the Financial Internet Website publication business
wherein subscribers can received financial news, stock quotes and market
information about various companies.
5. Asia4sale.com, Ltd., a Hong Kong registered, is a wholly owned subsidiary
of the Registrant. Asia4sale.com is a three-part e-commerce facility
serving the global market (1) Home Shopping, so online shoppers anywhere in
the world will be able to order goods direct from manufacturers in Asia,
and have these purchases delivered direct to their door; (2)
Business-To-Business Barter. To provide a truly professional service
Asia4sale.com has acquired the assets of Pacific Barter Ltd., a company
specializing in barter in Asia; (3) Industrial Auctions. Businesses,
dealers or individuals all over the world will be able to buy or sell heavy
equipment, vehicles, machinery, stock lots, etc. in the Asian region,
through online auctions.
6. Online Investors Advantage, Inc., a Utah corporation, is a wholly-owned
subsidiary of ZiaSun Technologies, Inc. Online Investors provides in-depth
consumer training, via workshops, home study, and online subscriptions in
optimum use of Internet investment and financial management tools and
services. OIA recently commenced expansion into the International
marketplace.
7. Swiftrade, Inc., a British Virgin Islands registered corporation, is a
wholly-owned subsidiary of Momentum Asia, Inc., a subsidiary of the
Registrant. Swiftrade is an online trading and financial services portal,
which provides Internet access for retail and institutional users to
international electronic stock trading.
8. Momentum Associates Ltd., is a HOng Kong registered corporation and a
wholly-owned subsidiary of Momentum INternt Inc., a subsidiary of the
Registrant.
9. Momentum Internet (Phils.) Inc., a Philippines corporation is a
wholly-owned subsidiary of Momentum Internet Inc., a subsidiary of the
Registrant.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
appoints D. Scott Elder and Allen D. Hardman his true and lawful
attorney-in-fact and agent, with full power of substitution for him and in his
name, place and stead, in any and all capacities, to sign any or all amendments
(including post-effective amendments) to the Registration Statement of ZiaSun
Technologies, Inc., on Form 10-SB, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto such attorney-in-fact, and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes he might or could do in person, hereby ratifying and conforming all
that such attorney-in-fact and agent, or his substitute may lawfully do or cause
to be done by virtue hereof. Each person whose signature appears below hereby
revokes any power of attorney granted in connection with the Form 10-SB
Statement prior to September 1, 1999.
Pursuant to the requirements of the Securities Exchange Act of 1934 this
Form 10-SB has been signed by the following persons in the capacities and on the
dates indicated below.
Signature Title Date
/s/ Anthony L. Tobin President and Director 9/10/1999
- ---------------------------- --------------------------- --------------
Anthony L. Tobin
/s/ Ross W. Jardine Director 9/14/1999
- ---------------------------- -------------------------- --------------
Ross W. Jardine
/s/ Alfred Alex S. Cruz III Secretary 9/10/1999
- ---------------------------- -------------------------- --------------
Alfredo Alex S. Cruz III
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> JUN-30-1999 DEC-31-1998
<CASH> 5,483,031 517,781
<SECURITIES> 164,016 775,903
<RECEIVABLES> 427,615 899,879
<ALLOWANCES> 0 0
<INVENTORY> 22,896 50,000
<CURRENT-ASSETS> 6,662,781 2,250,933
<PP&E> 1,073,494 713,297
<DEPRECIATION> (300,555) (209,518)
<TOTAL-ASSETS> 23,122,492 4,764,560
<CURRENT-LIABILITIES> 1,961,713 600,013
<BONDS> 0 0
0 0
0 0
<COMMON> 27,055 10,465
<OTHER-SE> 21,133,724 4,154,082
<TOTAL-LIABILITY-AND-EQUITY> 23,160,779 4,764,560
<SALES> 9,013,320 2,289,158
<TOTAL-REVENUES> 9,013,320 2,289,158
<CGS> 5,154,469 811,571
<TOTAL-COSTS> 5,154,469 811,571
<OTHER-EXPENSES> 1,890,701 1,432,799
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 29,426 13,048
<INCOME-PRETAX> 2,331,218 1,168,868
<INCOME-TAX> 895,587 16,658
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,435,631 1,152,210
<EPS-BASIC> 0.05 0.47
<EPS-DILUTED> 0.05 0.47
</TABLE>
