As filed with the Securities and Exchange Commission on July 27, 1999
SEC File No. 333-____
- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------
FORM SB-2
Registration Statement
Under the Securities Act of 1933
---------------------------------
ALARON.COM HOLDING CORPORATION
(Name of Small Business Issuer in its charter)
Delaware 6200 36-4274489
--------------------------- ------------------------ --------------
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
822 West Washington Boulevard
Chicago, Illinois 60607
312-563-8000
(Address and Telephone Number of Principal Executive Offices)
822 West Washington Boulevard
Chicago, Illinois 60607
(Address of Principal Place of Business or Intended Principal Place of Business)
Steven A. Greenberg
822 West Washington Boulevard
Chicago, Illinois 60607
312-563-8000
Facsimile - 312-850-2820
(Name, Address and Telephone Number of Agent for Service)
Copies to:
GERALD L. FISHMAN, ESQ. ARTHUR DON, ESQ.
BARTON J. SPRINGER, ESQ. STEPHEN R. CURTIS, ESQ.
ADAM D. FISHMAN, ESQ. D'Ancona & Pflaum LLC
Wolin & Rosen Ltd. 111 East Wacker Drive, Suite 2800
2 North LaSalle Street, Suite 1776 Chicago, IL 60601
Chicago, IL 60602 312-602-2000
312-346-3600 Facsimile - 312-602-3048
Facsimile - 312-346-0464
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) or
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box [ ]
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the SEC, acting pursuant to said Section 8(a), may
determine.
FACING SHEET CONTINUED ON NEXT PAGE
<PAGE>
CONTINUATION OF FACING SHEET
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
============================================================================================================================
Proposed
Title of Each Class of Amount Proposed Maximum Maximum Amount of
Securities To Be Offering Price Per Aggregate Registration
To Be Registered Registered (1)(2) Security (2) Offering Price (2) Fee
============================================================================================================================
<S> <C> <C> <C> <C>
Common Stock 1,500,000 $12.00 $18,000,000 $5,310
- ----------------------------------------------------------------------------------------------------------------------------
Common Stock 228,000 (3) $12.00 $2,736,000 $807
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Underwriters' Warrants 150,000 $.01 $1,500 $1
- ----------------------------------------------------------------------------------------------------------------------------
Common Stock
Underlying Underwriters' 150,000 $14.40 $2,160,000 $637
Warrants
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL $22,897,500 $6,755
============================================================================================================================
<FN>
(1) Pursuant to Rule 416, there are also being registered such indeterminable
number of additional securities which may be issued as a result of the
anti-dilution provisions of the underwriters' warrants.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(3) Includes 225,000 shares to be sold in the event of exercise of the
underwriters' over-allotment option and up to 3,000 shares to be sold by
counsel for the Registrant.
</FN>
</TABLE>
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, July 27, 1999
INITIAL PUBLIC OFFERING PROSPECTUS
ALARON.COM HOLDING CORPORATION
1,500,000 shares of common stock
$_____ per share
Alaron.com Holding Corporation We provide brokerage
822 West Washington Boulevard services to our customers in
Chicago, Illinois 60607 futures and options on
(312) 563-8000 futures trading and related
products and services
The Offering through traditional methods
and the internet. Since
Per Share Total 1989, our subsidiary, Alaron
Trading Corporation, has
Public Offering Price . . . .$_____ $_____ provided traditional full
and discount futures and
Underwriting Discounts . . $_____ $_____ options on futures brokerage
and other services. Our
Proceeds to us . . . . . . .$_____ $_____ online futures and options
(before expenses) on futures brokerage
services are provided
through "Alaronline", our
internet trading service
located on our website,
www.alaron.com.
This is our initial public
offering. No public market
currently exists for our
common stock.
Proposed American Stock Exchange Symbol: ACOM
This offering involves a high degree of risk. You should purchase our
shares only if you can afford a complete loss. You should carefully consider the
risks you face beginning on page 5 before you invest.
The Securities and Exchange Commission and state securities regulators
have not approved or disapproved these shares, or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
We have entered into a firm commitment underwriting agreement with
National Securities Corporation for the sale of the shares in this offering.
Certain of our shareholders have granted to the underwriter a 45-day option to
purchase from them up to an additional 225,000 shares of common stock to cover
over-allotments.
We expect that our initial offering price will be between $10 and $12.
The underwriter expects to deliver the shares to purchasers on or about
_________________, 1999.
NATIONAL SECURITIES CORPORATION
The date of this Prospectus is ______________, 1999
<PAGE>
Summary
This summary highlights selected information contained elsewhere in
this prospectus. It is not complete and may not contain all of the information
that may be important to you. To fully understand this offering, you should
carefully read the entire prospectus, including "The Risks You Face" and our
financial statements. Unless otherwise indicated, all information in this
prospectus (i) assumes no exercise of the underwriters' over-allotment option,
(ii) gives effect to the recent tax-free transfer to our holding company of 100%
of the ownership of Alaron Trading Corporation, and 65% of the ownership of
Limitup.com, Inc., by certain of our principal stockholders, and (iii) gives
effect to a three-for-two stock split in June, 1999.
About Us
We provide brokerage services in futures and options on futures trading
and related products and services through traditional methods and the internet.
Despite our name, we are not solely an online brokerage firm which allows
clients to trade futures directly over the internet. Since 1989, our subsidiary,
Alaron Trading Corporation, has provided traditional full and discount brokerage
on futures and options on futures assisting our clients with money management
and trading discipline and providing other related services. Since September,
1998, through "Alaronline," our internet trading service located on our website,
www.alaron.com, our clients have been directly trading futures and options on
futures online quickly and simply and have had direct access to our proprietary
online research.
Alaron Trading Corporation is a registered futures commission merchant
with the CFTC and a member of the NFA and is our principal source of revenue and
operations. Through Alaron Trading, we offer a full range of brokerage services
in commodity futures and options on futures. We maintain our headquarters in
Chicago, Illinois, near the Chicago Mercantile Exchange and have branch offices
in Pompano Beach, Florida, Northbrook, Illinois, San Francisco, California and
Sparta, New Jersey. At these locations, we offer deep-discount, full-service,
broker-assisted paper trading, system trading, managed futures accounts and
online and internet brokerage services through our "Alaronline" service. We also
offer educational services, ranging from basic market knowledge to money market
strategies, and trading techniques. From advanced trading technology (fast page
response and order reporting) and extensive research, quotes, charts and futures
news, to ease of navigation, online account forms and special services, we
believe we provide everything today's futures and options investor needs to
trade with ease.
In addition, we are in the process of creating a related internet
resource center through our new "Limitup.com" venture. This online resource
center will be a content web page providing information about the futures
markets and industry as well as links to our "Alaronline" website. We also have
an affiliated introducing broker called Greenstreet Discount Corp.
Our mission is to be a leader in both traditional and online brokerage
services, as well as related e-commerce in general. Our focus will be on
advancing technology, research, execution and customer service. We continue to
broaden our name recognition by marketing and enhancing our "Alaronline"
website, www.alaron.com.
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<PAGE>
About The Offering
Common Stock Offered 1,500,000 shares
Common stock to be outstanding
after this offering 11,776,199 shares
Estimated Net Proceeds $14,050,000
Use of Proceeds We intend to use the net proceeds received
from this offering
to:
o provide additional regulatory capital
o obtain clearing membership status on at
least one principal commodity futures
exchange
o expand our marketing
o enhance our internet brokerage
operations
o provide other internet products and
services o potential acquisitions
o increase working capital
The Risks You Face Investing in our shares is very risky. You
should buy only if you can afford to lose
your entire investment. You should
carefully consider the risks involved in
investing in our shares beginning on
page 5.
Proposed AMEX Symbol ACOM
Underwriter's Representative National Securities Corporation
A public market for our common stock did not exist prior to this
offering. We cannot assure you that any trading market for our common stock will
develop, or even if developed, will continue to exist following this offering.
You may have difficulty in reselling your common stock, and it is possible that
you will not be able to resell at or above the price at which you buy it.
3
<PAGE>
Summary Combined Financial Information
The following tables set forth certain summary combined financial data of
the Company. The summary combined statement of operations data for three months
ended March 31, 1999 are derived from the pro forma Financial Statements of the
Company, which have been derived from the historical financial statements of the
Company and Alaron Trading Corporation. The financial statements for the periods
indicated appear elsewhere in the Prospectus. The data in such tables should be
read together with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and notes thereto, appearing elsewhere herein.
The pro forma balance sheet data have been prepared assuming that the
business combination and other events described in the footnotes below had
occurred as of April 30, 1999. The pro forma statement of operations have been
prepared as if the events described in the footnotes below had occurred at the
beginning of the earliest fiscal year presented.
<TABLE>
<CAPTION>
Statement of Operations
Data:
Historical
Alaron Trading Company Pro Forma
---------------------------------------------------------- Combined
Nine Months Ended Year Ended Three Months
----------------------- ----------------------- Ended
4/30/99 4/30/98 7/31/98 7/31/97 3/31/99
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Total Revenues $8,988,258 $10,098,413 $13,509,158 $ 12,304,594 $3,222,243
Net Loss ($559,422) ($1,095,022) ($1,437,684) ($953,322) ($155,712)
Net Loss per Share ($ 0.28) ($ 0.61) ($ 0.74) ($ 0.53) ($ 0.01)
Weighted Average
Shares Outstanding 1,976,285 1,800,000 1,932,214 1,800,000 11,801,699
</TABLE>
Balance Sheet Data: April 30, 1999
-----------------------------------------------------------
Historical
-------------------------- Pro-Forma
Alaron Trading Alaron.com Combined As Adjusted (1)
----------- ---------- ----------- -----------
Total Assets $24,597,285 -- $28,438,507 $42,488,507
Subordinated Debt $ 1,100,000 -- $ 1,100,000 $ 1,100,000
Total Liabilities $23,622,646 -- $22,522,646 $22,522,646
Shareholders Equity $ 974,639 -- $ 4,815,861 $18,865,861
- --------------------------------
(1) Adjusted to give effect to the sale of 1,500,000 shares in this offering at
an assumed initial public offering price of $11.00 per share and the
initial application of the net proceeds therefrom.
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<PAGE>
The Risks You Face
We have experienced operating losses during each of our last two fiscal years
(and earlier) which may continue in the future.
In the past, we have been adversely affected by a variety of factors, such
as variations in the volume of futures and options trading and changes in
interest rates. These factors have resulted in operating losses for the past
three years. Low trading volume and lack of price volatility generally means
that we receive less commissions from our customers. Interest earned on customer
deposited funds can be a material portion of our revenues. Therefore, lower
interest rates means that we earn less on customer deposited funds. This results
in us having fluctuations in our results of operations since many of our costs
are fixed.
We depend on Joel W. Greenberg, Steven A. Greenberg, Barry Issacson, Carrie A.
Greenberg and Michael A. Greenberg and the loss of any of their services could
harm our business.
We believe that our success depends to a significant degree on the
continued services of our senior management team of our Chairman, Joel W.
Greenberg, our President, Steven A. Greenberg, our Executive Vice-President,
Barry Issacson, our Executive Vice-President and Secretary-Treasurer, Carrie A.
Greenberg, and our Chief Technology Officer, Michael A. Greenberg. Our business
could be materially adversely affected if any of these persons were unable or
unwilling to continue serving us. We have employment agreements with each of
these individuals. Competition for key personnel and other highly qualified
technical and managerial personnel is intense. The loss of the services of any
of these individuals or the inability to identify, hire, train and retain other
qualified personnel in the future could harm our business.
We rely heavily on electronic systems and third party providers and systems
failures could harm our business.
We rely heavily on a number of electronic systems including the internet
and the telephone as well as third party providers to generate new business,
receive and process trade orders and conduct our e-commerce business. While we
have not experienced any major problems in the past, heavy stress, system
failures, or problems with third party providers of "back office" computer
services could cause our systems to operate at unacceptably slow speeds or fail
altogether. In addition, since there are a very limited number of "back office"
system providers in the industry, replacement "back office" resources are
limited if our current provider experiences system failures or other related
problems. This could cause delays in processing customers' orders which could
result in substantial losses for our customers, which in turn, could subject us
to customer claims for losses.
5
<PAGE>
Any possible compromises of our systems or security could harm our business.
The secure transmission of confidential information over public networks is
a critical element of our operations. To the best of our knowledge, to date, we
have not experienced any security breaches in the transmission of confidential
information. Moreover, we continually evaluate advanced encryption technology to
try to ensure the continued integrity of our systems. However, we cannot assure
you that advances in computer capabilities, new discoveries in the field of
cryptography or other events or developments will not result in a compromise of
the technology or other algorithms we and our vendors use to protect client
transaction and other data. Any compromise of our systems or security could harm
our business.
We rely on E.D.&F. Man, Inc. for clearing purposes and termination of our
agreement with E.D.&F. Man, Inc. or increased clearing costs could harm our
business.
Because we are not currently an exchange clearing member, we do not clear
trades for our customers. Instead, we pay E.D.& F. Man,Inc., a competitor of the
Company, to do so. By virtue of our clearing agreement with E.D.&F. Man, Inc.,
we are dependent on the operational capacity and the ability of E.D.&F. Man,
Inc. for the orderly processing of transactions. Termination of this agreement
could harm our business. We attempt to cover our clearing costs with our
commission fees charged to our customers. Also, we have agreed to indemnify
E.D.&F. Man, Inc. for claims, suits, actions, or any other proceedings relating
to our customers. However, if our clearing costs are increased and we are unable
to also increase our commission rates, our profitability would be adversely
affected. Although we currently plan on becoming a clearing member, we cannot
assure you that we will be successful in doing so.
Margin calls to our customers which are not met could have a materially adverse
effect on our net capital.
We require our customers to deposit funds to meet margin requirements,
which functions at a partial performance bond to assure the customer's
performance of a futures contract. When the market value of a particular open
futures position changes to a point where the margin on deposit does not satisfy
the maintenance margin requirements, we will make a margin call to the customer
which, if not met, allows us to liquidate the customer's position. Since we will
be required by our clearing firm to make up any deficits, margin calls which are
not met could have a materially adverse effect on our net capital. Our margin
requirements are equal to or greater than exchange minimum levels.
Failure to comply with net capital requirements could subject us to suspension
or revocation by the CFTC or expulsion by the NFA.
The CFTC, the NFA and various other regulatory agencies have stringent
rules with respect to the maintenance of specific levels of net capital by
futures commission merchants. Failure to maintain the required net capital may
subject a firm to suspension or revocation of registration by the CFTC and
suspension or expulsion by the NFA and other regulatory bodies and ultimately
could require our liquidation. We have never violated our
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<PAGE>
minimum net capital requirements, but on two occasions we provided the NFA and
CFTC with early warning reports that we needed additional capital. In those
reports, we disagreed with the need for the early warning. In addition, a change
in the net capital rules, the imposition of new rules or any unreasonably large
charge against net capital could limit our operations that require the intensive
use of capital, such as the financing of client account balances. A significant
operating loss or any unusually large charge against net capital could adversely
affect our ability to expand or even maintain our present levels of business,
which could harm our business.
There are significant risks to our business inherent in expanding our online
services to include new businesses in the e-commerce area.
We have recently expanded our traditional futures and options brokerage
services to include online brokerage services. In addition, we intend to expand
our online products and services to include services and products other than
brokerage related ones including an online financial bookstore and financial
software and data sales. If we are unable to manage this growth effectively or
enter into new markets, our results of operations could be materially adversely
affected. To be successful in our e- commerce business, we must continually
adapt to technological advances. Hiring the appropriate people and updating
computer equipment and software to stay current with these changes places
significant demands on our administrative, operational and financial resources.
Updating our technology may result in less rigorous testing of our systems,
which could lead to performance problems.
Mistakes on orders or "rogue brokers" could harm our business.
There is a great deal of risk involved in trading futures and options
contracts. If a customer is unable to satisfy losses which he or it incurs, or
if we make a mistake on an order, we may be obligated to bear the burden of
these losses. Such losses could be very large and could materially adversely
affect us or even compromise our ability to conduct our business. Although we
maintain a pro-active risk management program in an attempt to identify
customers accounts that may involve an unacceptable risk to us and we maintain
controls in an attempt to prevent mistakes, we cannot assure you that we will be
successful in protecting against such trading losses.
We are also responsible for supervising our brokers in their dealings with
customers. As a result, we may be obligated to cover losses in a customer's
account caused by the improper trading activity of a broker. While we have a
rigorous compliance program, we cannot assure you that we will be able to always
identify the occasional "rogue broker" and that could lead to customer
complaints and our incurring substantial losses.
Greater resources of our competitors could put us at a competitive disadvantage
that could ultimately harm our business.
We compete with many other businesses, many of which offer a broader range
of financial services and have substantially greater resources and operating
efficiencies than us. We are often at a disadvantage in competing with these
companies. The number of
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<PAGE>
customers actively engaged in futures and options trading is relatively small
compared to those that trade stocks and bonds. This results in intense
competition among futures brokerage firms, and our relative lack of resources
may prevent us from successfully competing.
The market for online futures brokerage services is relatively new,
however, we expect it to evolve rapidly and become intensely competitive in the
future. While presently our competition in the electronic futures brokerage
market is relatively small, there are few barriers to entry into this market by
current online securities brokerage firms such as E*Trade Group, Inc. and
Charles Schwab Corporation.
The electronic commerce market is also intensely competitive. We expect
this competition to continue to intensify in the future.
Our failure to obtain or maintain AMEX listing could harm our common stock and
your ability to sell it.
We submitted our application to have our common stock listed to trade on
the American Stock Exchange. If we are unable to satisfy the entry standards for
listing, or even if our common stock is listed but we are unable to satisfy
AMEX's standards for continued listing, any trading in our common stock could be
conducted in the over-the-counter market or in the so-called "pink sheets". This
would result in it being more difficult for you to sell our common stock and
could result in lower market prices and larger spreads between the bid and ask
prices for our common stock.
We may not be prepared for the Year 2000 or third-parties on which we rely may
not be prepared which could harm our business.
Because we depend to a very substantial degree upon the proper functioning
of our computer systems, a failure of our systems to be Year 2000 compliant
could harm our business. Failure of this kind could, for example, cause
settlement of trades to fail, lead to incomplete or inaccurate accounting,
recording or processing of trades in futures and options on futures, result in
generation of erroneous results; or give rise to uncertainty about our exposure
to trading risks and our need for liquidity. If not remedied, potential risks
include business interruption or shutdown, financial loss, regulatory actions,
reputational harm and legal liability.
In addition, we depend upon the proper functioning of third-party computer
and non-information technology systems. If third parties with whom we interact
have Year 2000 problems that are not remedied, we could have the following
problems:
o in the case of vendors, a disruption of important services upon
which we depend, such as telecommunications and electrical
power;
o in the case of third-party data providers, we could receive
inaccurate or out-of-date information that would impair our
ability to perform critical data functions;
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<PAGE>
o in the case of financial intermediaries such as exchanges and
clearing agents, we could experience failed trade settlements,
an inability to trade in certain markets and disruption of
funding flows;
o in the case of banks and other lenders, our capital flows could
be disrupted, potentially resulting in liquidity stress; and
o in the case of counterparties and customers, we could have
financial and accounting difficulties for those parties
exposing us to increased credit risk and lost business.
Disruption or suspension of activity in the world's financial markets'
computer oriented systems due to Year 2000 problems is also possible. Also,
uncertainty about the success of our efforts to fix or limit these problems
generally may cause many market participants to reduce their market activities
temporarily as they assess the effectiveness of our efforts during our
"phase-in" of increased online activities. We may face a general reduction in
trading, other market activities, lost revenues and reduced funding availability
in late 1999, and early 2000. We cannot predict the impact this may have on our
business.
Investing in our common stock is very risky. You should not buy our common
stock unless you can afford to lose your entire investment. You should carefully
consider the preceding risks and the other information in this prospectus before
reaching your decision to buy our common stock. These risks are not the only
ones we face. Additional risks that generally apply to publicly traded companies
and companies in our industry, that we have not yet identified or that we think
are immaterial may also impair our business operations. Our business operating
results and financial condition could be adversely affected by any of the
preceding risks. The trading price of our common stock could decline due to any
of these risks. You could lose all or part of your investment. You should also
refer to the other information set forth in this prospectus, our financial
statements and the related notes.
9
<PAGE>
Forward Looking Statements
We have included in this prospectus forward-looking statements within the
meaning of the federal securities laws. These are statements about our
expectations, beliefs, intentions or strategies for the future. You will be able
to identify these types of statements since they are indicated by words or
phrases such as "anticipate", "expect", "intend", "plan", "will", "we believe",
"the company believes", "management believes" and similar language. In addition,
such statements are subject to certain risks, uncertainties and assumptions
which we explain more fully in each particular case. We base our forward-looking
statements on our current expectations and on information currently available to
us. Our actual results may differ materially from the results that we have
anticipated in the statements. We will not update these statements.
In this prospectus, unless it appears otherwise from the context in which
it is used, the "Company", "Alaron.com", "Alaron", "we", "us" and "our" refers
to Alaron.com Holding Corporation and its wholly-owned subsidiary, Alaron
Trading
Corporation.
Alaron.com Holding Corporation
We were incorporated in Delaware in December, 1998. Our principal executive
offices are located at 822 West Washington Boulevard, Chicago, Illinois 60607,
and our telephone number is (312) 563-8000. Our world wide website address is
www.alaron.com. Information contained in our website should not be considered
part of this prospectus.
Alaron Trading was originally organized in 1989 to provide brokerage
services in futures and options on futures. In April, 1999, we effected a
tax-free transfer of 100% of the ownership of Alaron Trading and 65% of the
ownership of Limitup.com, Inc. to Alaron.com Holding Corporation.
10
<PAGE>
Use of Proceeds
We will receive approximately $14,050,000 from the sale of 1,500,000 shares
of common stock at the assumed initial offering price of $11.00 per share. We
will not receive any proceeds if the underwriter's over-allotment option shares
are sold. Steven A. Greenberg, Joel W. Greenberg, Michael A. Greenberg and
Carrie A. Greenberg have each granted to the underwriter, on a pro rata basis,
the option to purchase the shares of common stock to cover over-allotments.
These amounts represent the net proceeds after deducting underwriting discount,
underwriter's non-accountable expense allowance and additional estimated
offering expenses payable by us and estimated to be $400,000. We expect to use
the net proceeds substantially as follows:
Approximate Approximate
Amount Percentage
----------- -----------
Expansion of Marketing (1) $ 1,500,000 11%
Website Enhancement and Programming (2) $ 750,000 5%
Potential Acquisitions (3) $ 1,000,000 7%
Regulatory Capital (4) $ 5,000,000 36%
Working Capital and General Corporate Purposes (5) $ 5,800,000 41%
Total $14,050,000 100%
=========== ====
- -----------
(1) Represents costs associated with a national marketing and advertising
campaign, including advertisements in national newspapers and trade
publications and on the internet, as well as salaries of personnel
engaged in these activities.
(2) Represents amounts to be used to enhance our website and complete the
programming to allow for more efficient execution of transactions over
the internet, including the acquisition of additional computer
equipment and software.
(3) We are continually evaluating potential acquisitions to provide our
clients with the best possible service and products. Currently, we have
no understandings, commitments, arrangements or agreements with respect
to any pending or contemplated transaction.
(4) Represents amounts we will maintain in relatively liquid form as part
of the net capital we are required by the NFA to maintain.
(5) Represents amounts to be used for, among other things, salaries,
occupancy expenses and recruiting of employees.
The amounts set forth in the Use of Proceeds are our best estimate and
merely indicate our proposed use of proceeds. They cannot be precisely
calculated. They are based upon our present plans and our anticipated future
revenue and expenditures. Although we have tentatively allocated the net
proceeds from this offering for various uses, these projected expenditures are
merely estimates and approximations and are not firm commitments by us.
Accordingly, we have broad discretion to adjust the
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application and allocation of the net proceeds of this offering in order to
address changing circumstances and opportunities. Actual expenditures may vary
substantially from these estimates depending upon many factors, such as
additional print and electronic media advertising and expansion of various
activities in the futures brokerage business through internal growth or
acquisition.
We believe that the proceeds of this offering combined with the cash
flow from our operations will be sufficient for our planned operations for at
least 12 months following the date of this prospectus. If our plans change, our
assumptions change or prove to be inaccurate, or if the proceeds of this
offering otherwise prove to be insufficient to implement our business plans, we
may need to seek additional funds through loans or other financing arrangements
as a result of regulatory capital or other requirements. We currently do not
have any such arrangements, nor do we contemplate any. If or when the need
arises, we may not be able to obtain additional funds or, if obtained, the
financing may not be on terms favorable to us.
Pending use of the proceeds from this offering, we may invest all or
portion of such proceeds in short-term bank certificates of deposit, U.S.
Government obligations, money market investments and short-term investment grade
securities.
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Dividend Policy
We have never paid dividends on our common stock and do not intend to
pay dividends in the foreseeable future. We intend to retain any earnings we may
have to finance the development and expansion of our business. Our board of
directors decides when dividends are to be paid. This decision is based upon
many factors, such as the Board's assessment of the financial condition of the
Company, its earnings, need for funds, capital requirements and applicable laws
and regulations. Accordingly, we cannot assure you that dividends of any kind or
amount will ever be paid in the future. If you need immediate or future income
by way of dividends, you should not purchase our securities.
13
<PAGE>
Dilution
Net tangible book value per share is our total tangible assets minus
our total liabilities and divided by the number of shares of common stock
outstanding. Dilution is the difference between the price per share of common
stock to be paid by new investors and the net tangible book value per share as
of April 30, 1999, after giving effect to our recent private placement overseas
and to this offering. At April 30, 1999, the net tangible book value of the
common stock was $4,815,861 in the aggregate, or $.47 per share. This includes
the effect of the issuance of 1,382,916 shares (including 434,466 shares issued
as commissions) in our recent private placement in Europe (at an average of
approximately $2.77 per share which resulted in net cash proceeds to us of
$3,841,222). After completion of the issuance of 1,500,000 shares offered hereby
(at the assumed initial public offering price of $11.00 per share, resulting in
estimated net proceeds of $14,050,000 after deducting underwriting discounts and
estimated offering expenses), the pro forma net tangible book value of the
common stock as of April 30, 1999, would have been $18,865,861 in the aggregate,
or $1.60 per share. This represents an immediate increase in net tangible book
value of $1.13 per share to the original stockholders and an immediate dilution
per share of $9.40, or 85%, to new investors in this offering.
The following table illustrates the foregoing dilution to investors on
a per share basis:
Amount (1)
----------
Assumed Initial public offering price per share(2) $11.00
Net tangible book value per share before
private placement and offering $0.11
Pro forma net tangible book value per share
after private placement before public offering $0.47
Pro forma increase in net tangible book
value per share after public offering $1.13
-----
Adjusted pro forma net tangible book value
per share after offering $ 1.60
-------
Dilution per share to public investors $ 9.40
=======
- ----------------------------------
(1) Does not reflect (i) the issuance of up to 150,000 shares of common
stock on exercise of the Underwriters' Warrants and (ii) the
reservation of 1,050,000 shares of common stock available for issuance
under our stock option plans.
(2) Offering price before deduction of Underwriters' discounts and
commissions and before deduction of estimated expenses of the offering.
On conclusion of this offering, investors in this offering will own
1,500,000 (approximately 13%) of the issued and outstanding shares of common
stock, for which they will have paid $16,500,000 or $11.00 per share. This
compares with 10,276,199 shares of common stock held by our original and
pre-offering shareholders, for which they have paid an aggregate consideration
of only $4,815,861, or $.47 per share, and which will constitute approximately
90% of the outstanding shares of common stock following this offering. If the
underwriters exercise the entire over-allotment option, our pre-offering
shareholders will own approximately 87% of our outstanding shares.
14
<PAGE>
Capitalization
The following table sets forth the subordinated debt and the
capitalization of the Company as of April 30, 1999, and on a pro forma basis as
adjusted to give effect to our recent European private placement and the sale of
the shares we are offering by this prospectus at an assumed initial public
offering price of $11.00 per share and the initial application of the net
proceeds as described under "Use of Proceeds." You should read the information
in this table together with our financial statements and notes which begin on
Page F-1 of this prospectus.
<TABLE>
<CAPTION>
Alaron.com Pro-Forma
April 30, 1999 Combined(1)(2) After Offering(1)(2)(3)
-------------- ------------- -----------------------
<S> <C> <C> <C>
Subordinated debt $---- $ 1,100,000 $ ----
Shareholder's equity:
Preferred stock; $.01 par
value, 10,000,000 shares
authorized; no shares
outstanding $---- $ ---- $ ----
Common stock; $.01 par value,
30,000,000 shares authorized;
8,893,275 shares issued
and outstanding; 11,776,199
shares after offering(4) $ 88,933 (4) $ 102,762 (4) $ 118,017 (4)
Common stock Subscription $(59,289) $ ---- $ ----
Additional paid-in capital(2) $(29,644) $ 9,908,388 $23,943,133
Retained earnings (deficit) $---- $(5,195,289) $(5,195,289)
Total Shareholders'
Equity (deficit) $---- $ 4,815,861 $18,865,861
Total Capitalization $---- $ 5,915,861 $18,865,861
<FN>
(1) Does not reflect (i) the issuance of up to 150,000 shares of common
stock on exercise of the Underwriters' Warrants and (ii) the
reservation of 1,050,000 shares of common stock available for issuance
under our stock option plans.
(2) Includes an estimated $3,841,222 in net cash proceeds from the recent
European private placement of 948,450 shares of common stock at $4.50
per share and the issuance of an additional 434,466 shares of common
stock to the distributor of that placement (for a total of 1,382,916
shares at an average of approximately $2.77 per share).
(3) Adjusted to reflect the sale of 1,500,000 shares of common stock in
this offering at the assumed initial public offering price of $11.00
per share and the application of the net proceeds therefrom (after
deducting the underwriting discount, non-accountable expense allowance
and the estimated expenses of this offering).
(4) Number of shares also reflects the 3-for-2 stock split in June, 1999.
</FN>
</TABLE>
15
<PAGE>
Management's Discussion and Analysis
Of Financial Condition and Results of Operations
Overview
We provide brokerage services in futures and options on futures
brokerage trading and related products and services through traditional methods
and the internet. We offer our services 24 hours a day, 365 days a year.
Our revenues consist principally of transaction revenues, which include
brokerage commissions and interest. Brokerage commissions are generated through
customer trades through our full service retail and discount operations. We have
begun to generate commission revenues from our internet operations through our
"Alaronline" trading platform located at our website, www.alaron.com. Interest
revenues are generated by customer funds on deposit with us. The amount of
interest earned on these funds is dependent on the amount of customer funds and
interest rates.
We have experienced substantial growth in annual revenue since our
inception. Although increases in the overall activity in the futures and options
markets have contributed to our growth, we believe that the growth has also been
the result of our successful advertising campaigns which have brought us
increased recognition. We have attempted to shift the focus of our advertising
consistent with the growth of the internet and online trading.
Results of Operations (Fiscal Year)
Alaron.com Holding Corporation was organized in December, 1998. Our
wholly-owned subsidiary, Alaron Trading Corporation, has been in business since
1989. The following table summarizes, for the periods indicated, our
wholly-owned subsidiary's operating results for each of the periods indicated,
and the increase (or decrease) by item as a percentage of the amount for the
prior period:
16
<PAGE>
Alaron Trading Corporation
--------------------------
Year Ended Year Ended Percentage
July 31, 1997 July 31, 1998 Increase
($000's) ($000's) (Decrease)
-------- -------- ----------
REVENUES:
Commissions $ 11,046 $ 12,054 9
Interest 1,149 1,341 17
Other 110 114 4
-------- --------
TOTAL REVENUES $ 12,305 $ 13,509 10
EXPENSES:
Brokers' Commissions $ 5,669 $ 5,530 (2)
Employee Compensation 2,167 2,358 9
Clearing Costs 2,040 2,552 25
Additional Compensation
to Service Debt 633 658 4
Communications 538 550 2
Advertising 531 609 15
Errors, Bad Debt, Arbitrations 445 697 57
Computers 458 688 50
Occupancy & Equipment Rental 263 423 61
Other Expenses 514 764 49
-------- --------
TOTAL EXPENSES $ 13,258 $ 14,947 13
NET LOSS: $ (953) $(1,438) 51
Revenues
Commission revenues increased 9% in 1998, to $12,054,000 from
$11,046,000 in 1997, as result of an increase in trading volume. For fiscal
1998, trading volume reached a record level of 650,000 contracts, a 23% increase
over the 530,000 contracts traded during fiscal 1997. These increases were
largely due to advertising expenditures, which directly correlate to customer
leads which, in turn, lead to new accounts and increased commissions. Interest
revenues increased 17% from $1,149,000 to $1,341,000 due to increases in
customer funds on deposit with us during the period.
Losses
We had a net loss of $1,438,000 in fiscal 1998, as compared to $953,000
in fiscal 1997. This 18% increase in net losses was attributable in part to
employee compensation paid to additional personnel hired. This net loss was also
attributable to the additional compensation that was paid to our principal
shareholders to service personal debt that was used to contribute capital to the
Company. This debt has since been refinanced and the additional compensation for
fiscal 1999, and the years thereafter, should be approximately $542,000 until
repaid in 2004, or prepaid before then.
17
<PAGE>
Compensation
Employee compensation, other than the additional compensation paid to
our principal shareholders described above, increased 9% from $2,167,000 in
fiscal 1997, to $2,358,000 in fiscal 1998, to accommodate the additional
personnel needed to service the 9% increase in revenues and the 23% increase in
trading volume.
Commission Expense
The commission expense paid by us to our individual brokers decreased
2% in 1998 to $5,530,000 from $5,669,000 in 1997. The reduction resulted
principally from an increase in the use by our active trading clients of our
discount brokerage services which have lower commission rates than the
commissions paid to the brokers for retail brokerage services.
Clearing Costs
Clearing costs increased 25% in fiscal 1998, from $2,040,000 in 1997,
to $2,552,000. The substantial increase in the volume of contracts traded led to
this increase in clearing costs. We plan to become a clearing firm though we
can't assure that we will be approved as a clearing member firm. If we are
approved as a clearing member, we will incur significant nonrecurring costs
associated with training employees to perform the functions of a clearing firm.
We will also incur recurring personnel costs for additional employees to perform
the functions of a clearing firm. However, we expect that these one-time
expenditures will ultimately lead to lower, long term clearing costs in the
future.
Advertising
Advertising expense in fiscal 1998, increased 15% to $609,000 from
$531,000 in fiscal 1997. Management believes that advertising has been the
principal component of our growth and, accordingly, has continued to spend funds
on marketing and advertising. Advertising expenditures directly affect the
number of leads generated by us and, in turn, the number of new customers and
ultimately the amount of our total commission revenues. We have, however,
refocused our advertising expenditures in areas which we believe will be more
effective. These areas include new publications, target banner advertising on
the internet and selected television programs and channels. In addition, we have
revamped our website in order to make it more attractive to those with an
interest in futures and options.
Errors, Bad Debt Expense, Arbitration Costs
Errors, bad debt expense and arbitration costs increased 57%, from
$445,000 in fiscal 1997, to $697,000 in fiscal 1998. Extreme stock market
volatility in late 1997, resulted in unusually large debits for three clients of
one of our Introducing Brokers. The broker and clients involved have been making
payments to the Company which are expected to continue until the debits are
repaid in full. The Company has hired additional margin clerks and improved its
risk management systems to prevent recurrence of these events. As a result,
errors, bad debt expense and arbitration costs
18
<PAGE>
have decreased during the first nine months of fiscal 1999. The Company has also
hired an in-house attorney to work on collection of customer deficit and debit
balances.
Occupancy and Equipment Expenses
Occupancy and equipment expenses increased 62% from $263,000 in 1997,
to $465,000 in 1998, due principally to the expense of opening and operating a
branch office in Florida, as well as the acquisition of new equipment and
hardware systems in our Chicago headquarters.
Computer Related Expense
The computer expense in fiscal 1998, increased 50% to $688,000 from
$458,000 in fiscal 1997. The additional expenses in 1998, included maintenance
and upgrading of back office data processing systems as well as other
technology-related infrastructure expenses. For example, while we are currently
in the process of expanding further our computer network to include our branch
offices, in 1998, we built a local area network for our Chicago headquarters,
prepared for online trading operations, updated software, and enhanced our
homepage www.alaron.com, all of which contributed to the increase in computer
expense.
19
<PAGE>
Results of Operations (Interim Periods)
The following table sets forth certain Alaron Trading Corporation
unaudited financial data for the nine months ended April 30, 1999, and 1998. In
the opinion of management, the unaudited information set forth below has been
prepared on the same basis as the audited information and includes all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the information set forth. The operating results for any interim
period are not necessarily indicative of results for any future period.
Nine Months Nine Months
Ended Ended Percentage
April 30, 1998 April 30, 1999 Increase
($000's) ($000's) (Decrease)
-------- -------- --------
REVENUES:
Commissions $ 8,995 $ 8,174 (9)
Interest 1,043 713 (32)
Other 60 101 68
-------- -------- --------
TOTAL REVENUES $ 10,098 $ 8,988 (11)
EXPENSES:
Brokers' Commissions $ 4,164 $ 3,696 (11)
Employee Compensation 1,716 1,702 (1)
Clearing Costs 1,970 1,365 (31)
Additional Compensation
to Service Debt 523 151 (71)
Communications 418 427 (2)
Advertising 459 516 (12)
Errors, Bad Debt, Arbitrations 486 40 (1,200)
Computers 471 433 (8)
Occupancy & Equipment Rental 205 401 96
Interest Expense 80 93 16
Other Expenses 701 724 3
-------- -------- --------
TOTAL EXPENSES $ 11,193 $ 9,548 (17)
NET LOSS: $ (1,095) $ (560) (49)
Revenues
Commission revenues decreased 9% from $8,995,000 in the nine month
period ended April 30, 1998, to $8,174,000 during the same period in 1999. The
decrease in revenue was a result of our shift in focus from traditional
brokerage services to the internet. Advertising expenditures as a whole
increased 12% from $459,000 for the nine month period ended April 30, 1998, to
$516,000 for the same period in 1999, while our advertising on traditional
brokerage services decreased. Beginning in 1999, we began including internet
advertising as a major focus.
20
<PAGE>
Since November, 1998, our website traffic has increased more than 2000%. Our
monthly revenues from the website have increased to approximately $130,000
during June, 1999. New trading accounts have increased substantially as a result
of internet marketing and online trading.
Interest revenues decreased 32% from $1,043,000 to $713,000 due to
decreases in interest rates and lower levels of customer funds on deposit.
Subsequent to the end of the period, customer funds on deposit have again begun
to increase due to the growth in online trading.
Losses
Net loss decreased 49% to $559,000 in the nine month period ended
April 30, 1999, from a net loss of $1,095,000 for the same period in 1998. This
decrease was attributable to the refinancing of individual indebtedness of
certain of our principals which reduced the additional compensation paid to
them.
Compensation
Additional compensation that was paid to our principal shareholders to
service personal debt that was used to contribute capital to the Company
decreased 71% from $523,000 in the nine months ended April 30, 1998, to $151,000
during the same period in 1999, because the principals refinanced their
individual indebtedness to provide for interest payments instead of amortizing
the outstanding principal. The decreased debt service required lower payments by
the principals and, therefore, we were able to lower the additional compensation
paid to the principals.
Commission Expense
Commission expenses decreased 11% from $4,164,000 in the nine month
period ended April 30, 1998, to $3,696,000 during the same period in 1999, due
to the decrease in trading volume. This decrease is generally consistent with
the 9% decrease in commission revenues.
Clearing Costs
Clearing costs decreased 31% from $1,970,000 in the nine months ended
April 30, 1998, to $1,365,000 during the same period in 1999. This decrease
occurred because of lower trading volume and reduced clearing costs from our
clearing firm, E.D.&F. Man, Inc., and the reduced costs associated with online
transactions versus transactions conducted in the traditional manner.
Communication Expense
Communications expense increased 2% from $418,000 in the nine month
period ended April 30, 1998, to $427,000 during the same period in 1999. As
internet and online trading activities through our website continue to grow,
there is a shift from traditional voice communication expense to internet
related communication expense.
21
<PAGE>
Errors, Bad Debt Expense, Arbitration Costs
Errors, bad debt and arbitration expenses declined 1,200% from
$486,000 in the nine month period ended April 30, 1998, to $40,000 during the
same period in 1999. The decrease resulted from more rigorous compliance
activities, and more efficient risk management systems, some of which is related
to online trading, and the adequacy of the bad debt allowance during the nine
month period ended April 30, 1999
.
Occupancy and Equipment Rental
Occupancy and equipment rental was up 96% from $205,000 in the nine
month period ended April 30, 1998, to $401,000 during the same period in 1999,
due to added branch offices in New Jersey and California and upgraded computer
equipment leases.
Other Expenses
Other expenses increased 3% from $701,000 in the nine month period
ended April 30, 1998, to $724,000 during the same period in 1999. This increase
was largely due to increases in accounting and legal fees associated with
capital raising activities, as well as consulting expenses associated with
website development and online trading infrastructure.
Liquidity and Capital Resources
We are subject to the minimum net capital requirements of the CFTC and
the NFA and will be subject to similar requirements of any futures exchange of
which we may become a clearing member. These regulations require registered
futures commission merchants to maintain minimum net capital based on a
percentage of client segregated funds. We have experienced a substantial
expansion in our business, and the related amount of client segregated funds has
increased. Accordingly, the minimum net capital we are required to maintain has
also increased. We have historically satisfied our need for additional funds
from internally generated profits, and more recently, from capital contributions
from our principal shareholders and subordinated loans. Subordinated loans are
traditional promissory notes that conform to NFA standards and are, by agreement
with the lender, subordinated to the claims of all other creditors. Due to the
fact that these loans are subordinated and that they contain certain prepayment
and repayment restrictions, CFTC and NFA rules permit us to consider our
subordinated loans as part of our net capital. We intend to repay the
subordinated loans as they reach their maturity. We also recently completed a
European private placement of shares of our common stock. With the completion of
this initial public offering, we will further expand our equity capital base.
This will enhance our liquidity and our ability to meet our net capital
requirements.
Cash and cash equivalents at April 30, 1999 were $1,902,083 as
compared to $2,204,678 at April 30, 1998. Working capital at April 30, 1999 was
$1,845,165 as compared to $2,916,693 at April 30, 1998. Our ratio of current
assets to current liabilities was 1.08 to 1.00 at April 30, 1999, compared to
1.11 to 1.00 at April 30, 1998.
Pursuant to the CFTC's minimum financial requirements, we are
currently effectively required to maintain net capital of the greater of
$375,000 or 7% of customer
22
<PAGE>
funds required to be segregated under the Commodity Exchange Act, as amended. At
April 30, 1999, we had net capital of $1,809,312, which was $781,608 in excess
of our minimum financial requirements.
Net cash used by operating activities was $802,286 at April 30, 1999
and $1,496,426 at April 30, 1998. The decrease in cash flow used by operating
activities was primarily the result of a decrease in funds receivable from our
clearing broker at April 30, 1999 of $94,442 compared to an increase of
$2,556,803 at April 30, 1998.
Net cash provided by financing activities was $178,948 at April 30,
1999, compared to $1,369,193 for the same period in 1998. The decrease in cash
flows from financing activities was a result of a $100,000 subordinated loan
received in 1999 compared to a $1,000,000 loan received in 1998.
Based on currently proposed plans and assumptions relating to the
implementation of our current plans, we believe that the proceeds of this
offering, combined with cash flow from operations, will enable us to fund our
planned operations for a period of at least 12 months from the date of this
prospectus. However, we cannot assure you that we will realize sufficient cash
flow from operations. If not, or if our plans change, our assumptions change or
prove to be inaccurate, or if the proceeds of this offering otherwise prove to
be insufficient to implement our business plans, we may require additional
financing and may seek to raise funds through subsequent equity or debt
financings or other sources. If we need additional funds, they may not be
available in adequate amounts or on acceptable terms. If funds are needed but
are not available, our business would be harmed.
We presently anticipate that we will incur capital expenditures of
approximately $100,000 through the fiscal year ended July 31, 1999. These
expenditures will be primarily for acquisition of computer equipment and
software development to increase the number of users capable of accessing our
systems and continue to enhance our worldwide website, as well as Year 2000
readiness.
Year 2000 Compliance
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field and cannot
distinguish 21st century dates from 20th century dates. This could result in
system failures or miscalculations causing disruptions of operations including,
among other things, a temporary inability to process transactions, send invoices
or engage in similar normal business activities. As a result, the software and
computer systems of many companies may need to be upgraded or replaced in order
to comply with such "Year 2000" requirements. Furthermore, the trading or
purchasing patterns of customers or potential customers may be affected by Year
2000 issues as companies expend significant resources to correct their current
systems for Year 2000 compliance. Any failure by us to make our systems or
products Year 2000 compliant could affect our ability to provide or get paid for
our services. This could also lead to an increase in the allocation of resources
to address Year 2000 problems of our customers without additional revenue
commensurate with such dedication of resources, or an increase in litigation
costs relating to losses suffered by our customers due to such Year 2000
problems.
23
<PAGE>
We have conducted a review of our internal computer systems to
identify the systems that could be affected by the Year 2000 issue and to
develop a plan to resolve any issues. While we have completed substantially all
of the testing required on our internal network, including our accounting,
management, back office and operating systems, said testing is not finished
completely. As a result, we are still in the process of upgrading and replacing
certain software and computer systems in use by our firm. Nevertheless, we have
determined that we will not be required to materially modify or replace our
information and non-information technology systems to properly recognize and
utilize dates beyond December 31, 1999. We presently believe our network and
operating systems will be Year 2000 compliant within the requisite time.
However, even if these changes are successful, failure of third parties, to
which we are financial or operationally linked, to address their own system
problems could have a material adverse effect on us. Furthermore, the investing
and trading patterns of clients may be affected by Year 2000 issues as clients
become concerned about the Year 2000 issue and the effect it will have on the
U.S. and international stock markets and the securities industry generally.
Changes in these patterns may harm our business.
We continue to monitor and review the Year 2000 issue and, as
appropriate, modify or replace the software (and replace some hardware) in our
computer systems in our main and branch offices. We continue to monitor our own
internal systems to prepare for Year 2000 compliance. Our testing is expected to
involve major market participants, including competing firms and financial
intermediaries, such as stock exchanges and clearing agencies that are prominent
in the U.S. We have also initiated communications with counter-parties,
intermediaries and vendors with whom we have important financial and operational
relationships to determine the extent to which they are vulnerable to the Year
2000 issue. We have not yet received sufficient information from these parties
about their remediation plans to predict the outcome of their efforts.
To date, Year 2000 readiness has cost us an estimated $100,000
(including purchasing new equipment and upgrades to existing systems) and will
cost approximately $25,000 more to complete. Our Year 2000 program costs will be
funded from the proceeds of this offering. These costs are expensed as incurred.
We cannot assure you that these estimates will be correct, and thus actual
results could differ materially from our plans.
24
<PAGE>
Business
Overview
Alaron.com Holding Corporation provides brokerage services in futures
and options on futures trading and related products and services through
traditional methods and the internet. We are not solely an online brokerage firm
which allows clients to trade futures directly over the internet. Since 1989,
our subsidiary, Alaron Trading Corporation, has provided traditional full and
discount brokerage in futures and options on futures trading assisting our
clients with money management and trading discipline and providing other related
services. Since September, 1998, through "Alaronline," our internet trading
service located on our website, www.alaron.com, our clients have been directly
trading futures and options on futures online quickly and simply and have had
direct access to our proprietary online research.
Alaron Trading Corporation is a registered futures commission merchant
with the CFTC and a member of the NFA. Through Alaron Trading, we offer a full
range of commodity futures and options on futures brokerage services. We
maintain our headquarters in Chicago, Illinois, near the Chicago Mercantile
Exchange and have branch offices in Pompano Beach, Florida, Northbrook,
Illinois, San Francisco, California, and Sparta, New Jersey. At these locations,
we offer deep-discount, full-service, broker-assisted paper trading, system
trading, managed futures accounts and online and internet brokerage services
through our "Alaronline" service. We also offer educational services, ranging
from basic market knowledge to money market strategies, and trading techniques.
From advanced trading technology (fast page response and order reporting) and
extensive research, quotes, charts and futures news, to ease of navigation,
online forms and special services, we believe we provide everything today's
futures and options investor needs to trade with ease.
In addition, we are in the process of creating a related internet
resource center through our new, 65% owned, "Limitup.com" venture. This online
resource center will be a content web page providing information about the
futures markets and industry as well as links to our "Alaronline" website. We
also have an affiliated introducing broker called Greenstreet Discount Corp.,
owned by Steven, Michael and Carrie Greenberg.
Our mission is to be a leader in both traditional and online brokerage
services, as well as in related e-commerce. Our focus will be on technology,
research, execution and customer service. We continue to broaden our name
recognition by marketing and enhancing our "Alaronline" website, www.alaron.com.
Futures and Options Trading
Futures. Futures contracts are standardized contracts made on
organized exchanges which provide for the future delivery of various
agricultural and industrial commodities, foreign currencies, financial
instruments, financial indexes, stock indexes and others at a specified price,
date, time and place. The contractual obligations may be satisfied either by
taking or making physical delivery of an approved grade of the commodity or cash
settlement in the case of financial-related or certain other futures
25
<PAGE>
contracts or by making an offsetting or liquidating sale or purchase of an
equivalent futures contract prior to the expiration date of the futures
contract.
Futures prices can be highly volatile and are influenced by many
factors, such as changing supply and demand relationships, government
agricultural, commercial, and trade programs and policies, interest rate and
equities price fluctuations, national and international political and economic
events, weather and climate conditions, insects and plant diseases and purchases
and sales by foreign countries.
Futures traders fall into two broad classifications: hedgers and
speculators. Hedging is a protective procedure designed to minimize the price
risk inherent in a cash market position. The usual objective of the hedger is to
protect the profit which he expects to earn in his business rather than to
profit from his futures trading. For example, a farmer would attempt to protect
the amount he expects to earn on a corn crop (his cash market position) by
taking a position in corn futures.
The speculator generally expects neither to deliver nor receive the
physical commodity or cash settlement. Instead, the speculator risks his capital
with the hope of profiting from price fluctuations in futures contracts. The
speculator is, in effect, the risk bearer who assumes the risks which the hedger
seeks to avoid. Most of our clients trade futures for speculative rather than
hedge purposes.
Options. Trading of options on futures contracts on domestic exchanges
is permitted as well. Among traded options are options on U.S. Treasury Bond
futures, gold futures, stock index futures, agricultural futures, financial
futures and various foreign currencies. Options are the right, but not the
obligation, to purchase or sell futures contracts at any time until expiration
of the option. We do not engage in the trading of securities options.
Margins. Futures trading requires margin deposits which are the
minimum amount of funds which must be deposited by the futures customer with his
or her broker in order to initiate futures trading or to maintain open positions
in futures contracts. A margin deposit may be as little as less than one percent
of the total purchase price of a contract being traded. Because of these low
margins, price fluctuations occurring in futures markets may create profits and
losses which are greater than are customary in other forms of investment or
speculation.
A futures margin deposit is not a partial payment by the customer as
it is in connection with the purchase of securities, but rather functions as a
partial performance bond. It helps assure the customer's performance of the
futures contract. Since margin deposits do not involve a loan from the broker
toward the futures contract purchase price, the customer does not pay interest
to his broker on any remaining balance. Futures brokerage firms may increase the
amount of margin deposit required as a matter of policy. We require our
customers to meet margin requirements which are equal to or greater than
exchange minimum levels. Generally, we retain the interest earned on our
customers' margin deposits.
As is the general practice in the industry, when the market value of a
particular open futures position changes to a point where the margin on deposit
does not satisfy the
26
<PAGE>
maintenance margin requirements, we will make a margin call to the customer. If
the margin call is not met within a reasonable time, we have the right to close
out or liquidate the customer's position. We compute margin requirements
throughout and at the end of each day. Margin calls to our customers which are
not met could have a materially adverse effect on our net capital since we will
be required by our clearing firm to make up any deficits.
History
Alaron.com Holding Corporation's business is primarily operated by our
wholly-owned subsidiary, Alaron Trading Corporation. Alaron Trading was formed
in 1989, with $1,000 in capital as a two employee guaranteed introducing broker.
One year later we were registered as a commodity trading advisor. We have since
evolved into a futures commission merchant with approximately 53 employees, more
than 100 registered brokers and approximately 5,000 clients. We began our
"Alaronline" brokerage services through our website in September, 1998. Our main
operations are headquartered in a 30,000 square foot facility, located just west
of Chicago's futures exchanges and financial district. We maintain a staff 24
hours a day, 365 days a year.
We offer deep-discount, full-service, broker-assisted paper trading,
online trading, system trading and managed futures accounts. In addition, we
offer educational services, ranging from basic market knowledge to money market
strategy, and trading techniques, from advanced trading technology (fast page
response and order reporting) and extensive research, to ease of navigation,
online forms and special services. We use an electronic data processing service
to process orders, transmit execution reports and record all data pertinent to
trades.
Our Futures and Options Operations
Full Service. Our full service brokers assist our clients with money
management strategies and trading discipline. These brokers are supported by our
in-house team of market analysts (approximately 10 persons, one of whom is a
full-time analyst) which provide both fundamental and technical analyses of the
fast-paced futures and options markets. We generally charge between $25 and $100
per contract in round turn commissions for full service brokerage.
Discount. Our discount trading clients are primarily introduced to us
through Greenstreet Discount Corporation. We are able to offer discounted
commissions by eliminating the cost of a full service broker servicing the
client. Order entry specialists take clients' orders and enter them into a
computerized order entry system or telephone them directly to an exchange
trading floor without providing other services. The discount trading desk is
staffed 24 hours a day, 365 days a year. Discount clients are generally charged
between $10 and $25 per contract in round turn commissions.
Online Trading. Our "Alaronline" service, which strives to be one of
the industry leaders, provides our customers with futures and options brokerage
services over the internet. Through the "Alaronline" service located on our
website at http://www.alaron.com, we offer automated order placement, portfolio
tracking, price quotations, charting research, news and other informational
services. We generally
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charge between $10 and $25 per contract in round turn commissions for online
trading. Our clients have access to real-time quotes, charts, futures news
indexed by keyword, and up-to-the-click account balances. We offer a number of
proprietary research pages each day, as well as market reports such as "Logical
Economics" and Special Situation commodity reports. Our dedicated customer
service is available 24 hours a day, 365 days a year.
Clearing Trades. We are not currently a member of any exchange and,
therefore, we are only able to effectuate futures and options on futures
transactions for our clients through arrangements with other futures commission
merchants which are exchange clearing members. We are required to pay a fee to
such clearing firms for executing the transactions. We currently maintain our
client omnibus account with the LIT Division of E.D.&F. Man, Inc., a registered
futures commission merchant and clearing member of the Chicago Mercantile
Exchange, the Chicago Board of Trade and other principal futures exchanges. The
fact that E.D&F. Man, Inc. is responsible for actual order execution, record
keeping and clearance of clients transactions is not disclosed to our clients on
our account statements. Although we currently plan to become a clearing member
of a futures exchange, we cannot assure you that we will be successful in doing
so.
Back Office. Our "back office" is where we maintain our internal
office management including the processing of all trade orders, and our office
administration, accounting and bookkeeping operations. Currently, we have
agreements with Rolfe & Nolan (USA), Inc., to utilize their computer software
and electronic systems to run our "back office". Presently, we have
approximately 40 full time employees in our "back office".
Introducing Brokers. An introducing broker is a CFTC-registered firm
that handles customer orders but does not handle customer funds. We began
developing our network of introducing brokers in 1994. Currently, we have
agreements with approximately 60 introducing brokers, seven of which are located
outside the United States and 50 of which are guaranteed by us as to certain
obligations under the Commodity Exchange Act. We generally charge clients of
introducing brokers commissions determined by the introducing brokers, typically
between $15 and $99 per contract in round turn commissions. We generally retain
between $10 and $25 of the commissions charged. In addition, as a joint
marketing vehicle, we have conducted educational seminars highlighted by keynote
speakers, with various introducing brokers seeking a regional clientele.
Risk Management. Trading in futures and options involves utilizing
substantial leverage which creates a high financial risk/reward ratio. Since we
may be obligated to pay our customers' losses, we maintain a pro-active risk
management approach in an attempt to identify accounts and trading patterns
which may involve unacceptable risk to us. While we believe the program
significantly reduces the risk of losses, no such program can eliminate all
risk. Among the steps we take are:
o Trade desk managers review margin reports throughout the day and at
the end of each day.
o All accounts are subject to immediate demands for margin calls.
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o Accounts are subject to three-tiered margin monitoring, beginning with
the order clerks, followed by the trade desk manager and senior
management.
o Margins are reviewed constantly and adjusted as market conditions
warrant. Our margins are set in excess of exchange minimum
requirements if management deems it necessary. Margins are determined
based on an analysis of market volatility and commodity concentrations
of client positions.
o The trade desk manager monitors concentrations of contracts; where
concentrations exist, increased margin is required.
o Senior management reviews all accounts where heightened risk levels
have been identified. Problem accounts are notified of their status,
at which time a proposed resolution of the account risk is
communicated to the broker or client.
We have the right to liquidate any customer's position when we believe
that the customer's account balance is or will be insufficient to cover a
potential loss. Furthermore, as is generally done in the industry, we may
withhold commissions from the brokers for the errors or losses of their
customers in order to reimburse the firm.
Future Growth. To date, we have built our core business in the
traditional full-service and discount brokerage areas. This means that most of
our business comes in through our individual registered futures and options
brokers. At present, we have approximately 100 such brokers in our offices. We
intend to grow our brokerage business in three principal ways. The first is to
continue to recruit and train new individual brokers, the second is to continue
to develop our online internet trading services offered through our "Alaronline"
service and the third is to better develop customer leads.
Since we began offering our services through the internet in
September, 1998, the number of customers trading through "Alaronline" has
increased dramatically from less than 20 the first month to over 1,900 in June,
1999. Revenues in the month when we began offering our online services were
insignificant and have grown each month since then. In June, 1999, online
revenues approximated $130,000. We are experiencing greater numbers of customers
using "Alaronline" and intend to continue to develop that business through
increased marketing efforts.
In our opinion, online trading in general, and "Alaronline" in
particular, will not replace the full-service broker. Rather, we believe our
online services will give our brokers greater tools to service their customers.
In order to capitalize on this belief, we recently installed a wide area
computer network into which all of our brokers are connected. On this network,
which is a broker version of our "Alaronline" service, our brokers can retrieve
live quotes, enter customer orders and more efficiently manage and monitor a
customer's trading activity.
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Other Electronic Commerce Business in General and Online Trading
General. Advances in telecommunications and information technology
have fundamentally altered the way individuals conduct business. For example,
the development of the microprocessor and the personal computer revolutionized
the way individuals use computers by providing inexpensive and powerful
capabilities to them. Consumers have embraced the personal computer and
expressed strong preferences for the convenience and control it provides.
Just as the microprocessor changed the use of computers, the emergence
of the internet as a tool for communications and commerce is driving a
revolution in the world of financial transactions and information services.
Consumers are rapidly embracing the internet because it is simple to access,
makes vast amounts of information available instantaneously, and allows
individuals to communicate with one another regardless of location. With the
proliferation of personal computers and modems and the development of
easy-to-use web browsers, use of the internet is growing exponentially.
The Emergence of Electronic Commerce. The internet and online services
provide innovative ways of conducting business. With the emergence of the
internet as a globally accessible, fully interactive and individually
addressable communications and computing medium, companies that have
traditionally conducted business in person, through the mail or over the
telephone are increasingly utilizing electronic commerce or "e-commerce".
Increased use of credit cards, automatic teller machines ("ATMs"), the incidence
of electronic funds transfers, online banking and online bill payment has
automated, simplified and reduced the costs of financial transactions for
consumers, businesses and financial institutions. Consumers are showing strong
preferences for transacting certain types of business such as paying bills,
booking airline tickets, trading securities and purchasing consumer products
such as personal computers, books and cars electronically, rather than in person
or over the telephone. These transactions are being streamlined through online
e-commerce and can now be performed directly by individuals virtually anywhere
at any time. These self-directed online transactions are less expensive, faster
and more convenient than transactions conducted through a human intermediary.
Development of Online Investing and Information Services. In the past,
investors could access the financial markets only through a full-commission
broker, who would give investment advice and place trades. With the deregulation
of brokerage commissions in 1975 and the resulting unbundling of brokerage
services, investors began to realize that they could separate financial advisory
services from trading. This brought about the advent of the discount brokerage
firm, which provided an alternative investment approach by completing trades at
a reduced cost. With the emergence of electronic investing services, investors
can further eliminate the costs associated with the human interaction required
by full-commission and traditional discount brokerage firms. By requiring
personnel to handle each transaction, most traditional brokerage firms restrict
their customers' access to trading and information to the availability of the
person processing the transaction. In addition, although full-commission and
discount brokerage firms are able to offer electronic trading services, their
continued reliance on personnel, branch offices and the associated
infrastructure for a major part of their business prevents them from reducing
their cost structure to the lower level achievable through an all electronic
model. As a result of these factors, online investing accounts are gaining
popularity and the aggregate value of these accounts is expected to grow.
We believe that the proliferation of ATMs, the increasing presence of
banks in supermarkets, the expansion of do-it-yourself financial transaction
software, the growth of discount and online brokerage firms and a variety of
other indicators evidence a shift
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in societal norms that is fundamentally altering the way consumers manage their
personal financial assets. We also believe that, based on customer feedback and
the rapid acceptance by consumers of online transactions, consumers are
increasingly taking direct control over their personal financial affairs, not
simply because they are able to do so, but because they find it more convenient
and less expensive than relying on financial intermediaries. Investors want the
flexibility to transact business at times and places that are convenient for
them. In addition, the broad availability of financial information online has
dramatically narrowed the gap between the resources available to the individual
investor and the institutional investor. Individual investors have become
increasingly sophisticated and knowledgeable about investing, having experienced
greater access to stock and futures quotes, company financial information,
investment advice and other investment information on the web or through other
online services. As investors obtain even more access to investment information,
we believe they will desire greater control over their financial decisions and
seek alternative ways to invest more conveniently and cost-effectively and with
less interaction with brokers and other financial services professionals. We
believe that this trend has created a growing opportunity to provide online
investing services that are easy to access, easy to use, cost-effective and
secure.
www.alaron.com From our website, www.alaron.com, clients can directly
trade futures and options quickly and simply. The website provides our clients
with access to real-time quotes, charts, futures news indexed by keyword, and
up-to-the-click account balances. The research available is one of the biggest
online trading benefits. Each day, we offer eleven proprietary research pages,
as well as market reports and Special Situation commodity reports. We believe
that our website is cleaner and provides for more simple navigation than
competitive websites. Research, real time news, quotes and charts are easily
accessible. Moreover, proprietary research pages and over new stories with
respect to the futures and options industry are available through the site. New
account forms can be printed from the website along with proprietary market
reports. All of these online functions are supported by dedicated online support
staff and customer service. Alaron Trading is open 24 hours a day, 365 days a
year.
Limitup.com. In furtherance of developing our own online investing and
information services programs, we have acquired a 65% interest in the internet
web domain, www.limitup.com. Limitup.com is a joint venture between us and
Robert Stein, a registered Associated Person at Alaron Trading. We issued 33,750
shares of our common stock to Mr. Stein for our 65% interest. The website will
be a content webpage dedicated to the futures broker and trader which provides
information about the futures markets and industry. The webpage will consist of
various information regarding the futures business and will include broker
lists, interactive games about trading, downloadable software, information about
the exchanges and chat rooms devoted to market moves, quotes, charts and
information about trading techniques. In addition to maintaining links to our
"Alaronline" service at www.alaron.com, the webpage may also provide links to
various other information webpages regarding the futures industry.
Revenue from the Limitup.com website will be produced several ways,
including: (i) banner ads for futures related products sold at prices reflecting
the traffic flow on the webpage; (ii) charging fees to content providers to
provide free "teasers" about their services; and (iii) selling qualified leads
generated from traffic on the website
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by industry participants which develop from interactive trading games, free
product offers, and various software downloads.
In addition to aggressively marketing our "Alaronline" service, we may
also plan to market and advertise the limitup.com website through print ads,
radio, television and e-mail. Limitup.com's products and services should create
a desirable arena for advertisers, product vendors and brokers in the futures
industry to sell their goods and services. With visitors to the website
requesting information about futures, and trading and playing futures-oriented
games, the number of qualified customer leads can potentially grow.
Our Revenues
As a brokerage firm, Alaron Trading's revenues relate directly to the
volume of its clients orders, generally irrespective of the underlying prices of
futures contracts. Therefore, our revenues are primarily derived from
transactions effected for individual clients. In addition, a portion of our
revenues is derived from interest earned on client margin deposits held in
segregated accounts. This accords with CFTC regulation and standard industry
practice. The amount of client margin deposits we hold at any time is limited by
the amount of our regulatory capital. For example, for every $10,000,000 in
customer margin deposits, we must have at least $700,000 in regulatory capital.
Thus, any growth in our customer base could be significantly limited.
Marketing
Our marketing and advertising activities had in the past centered
around the print media, primarily newspapers and magazines, which report on the
futures markets and activities, television, radio, direct and mass marketing
campaigns, educational seminars and the internet through www.alaron.com.
Currently, we have begun to develop a broad marketing campaign designed to
capture market share and bring brand name recognition to Alaron.com,
"Alaronline" and Limitup.com. We plan to do this with extensive use of the
internet, websites, strategic alliances, and advertising promotions. We find
that marketing our e-commerce services on the internet to be the most cost
effective means for reaching prospective customers.
The emergence of the internet as a tool for marketing, communication
and commerce is driving a revolution in the world of online trading affecting
the entire industry of financial services. The securities industry has
experienced a proliferation of online trading which has changed the way the
world invests. The futures and options industry has just begun to trade online
and we intend to continue marketing our brokerage and trading services over the
internet in order to expand our client base to other countries. The internet
provides a marketing and educational tool which may enable us to effectively
reach trading prospects in a manner which in the past were ineffective and cost
prohibitive. "Alaronline" also provides a cost effective means of transacting
international clients' business.
Finally, we believe that, with proper marketing and education, we may
capture additional online futures trading, including securities day traders
crossing over to trade the highly leveragable S&P 500 futures and Dow Jones
futures contracts and
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electronically traded contracts like the e-mini S&P and e-mini Nasdaq index
contracts recently developed.
Research
In addition to our one full-time analyst, we utilize analyses
generated by as many as ten of our individual registered Associated Persons
conducting research in various futures markets. We then report this research
each business day featuring both fundamental and technical analyses. These
reports are broadcast on a daily telephone hotline as well as on our website. At
any given time, our officers, directors and other personnel may have market
positions which may agree or disagree with the research opinions expressed in
the various reports. Furthermore, any decision to purchase or sell as a result
of any such research is the full responsibility of our customer or the person
authorizing the transaction on behalf of our customer.
Competition
The futures brokerage business exists in an intense pressure-packed
and highly competitive environment. This environment has caused a contraction in
the number of registered futures brokerage firms. A significant number of such
firms, ranging from small introducing brokers to major clearing operations, have
been forced either to withdraw from the industry or have been acquired.
Nonetheless, throughout this period of consolidation, worldwide futures and
options trading volume has continued to increase. We compete with other
brokerage firms, both full service and discount, which may offer clients a
broader range of financial services than Alaron. Such other firms often have
substantially greater resources and operating efficiencies than us. These
competitors include brokerage firms like Lind-Waldock & Company, First American
Discount Corp., Jack Carl division of E.D.&F. Man, Inc. and LFG, LLC.
Other institutions, notably large securities brokerages, offer their
customers some of the services which we presently provide. At the same time, the
number of active participants in futures trading is relatively small when
compared to those engaged in securities trading. Furthermore, additional
independent securities and futures brokerage firms may engage in direct
competition with us. As usually occurs when competition increases, there is
corresponding downward pressure on prices and profit margins, either of which
could materially and adversely affect us. Our ability to compete in the future
will depend upon many factors, including the ability to attract new customers.
The electronic commerce market is new, rapidly evolving and intensely
competitive. The market for information resources is more mature but also
intensely competitive. We expect competition to continue to intensify in the
future. We currently or potentially compete with various electronic brokerage
businesses like E*Trade Group, Inc. and Charles Schwab Corporation, as well as a
number of indirect competitors that specialize in electronic commerce or derive
a substantial portion of their revenue from electronic commerce. We may not be
able to maintain a competitive position against current or future competitors as
they enter the markets in which we compete, particularly those with greater
financial, marketing, service, support, technical and other resources than us.
Our failure to maintain a competitive position within the market could have a
material adverse effect on our business, financial condition and results of
operations.
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Many of our current and potential competitors have longer operating histories,
larger customer bases, greater brand recognition and significantly greater
financial, marketing and other resources than us. Consequently, these
competitors may be able to devote greater resources to marketing and promotional
campaigns and devote substantially more resources to website and systems
development than us. New technologies and the expansion of existing technologies
may increase the competitive pressures on us. For example, applications that
select specific titles from a variety of websites may channel customers to
electronic brokerage businesses that compete with us. Companies that control
access to transactions through a network or web browsers could also promote our
competitors or charge us a substantial fee for inclusion. In addition, vendors
of information resources, such as technology based training, could provide
direct access to training programs online. There can be no assurance that we
will be able to compete successfully against current and future competitors, and
competitive pressures we face may have a material adverse effect on our
business, financial condition and results of operations.
Regulation
Futures exchanges and professionals in the United States are subject
to extensive regulation by the CFTC under the Commodity Exchange Act. The
principal function of the CFTC is to promote orderly and efficient commodity
futures markets through regulation.
With respect to domestic futures and options trading, the Commodity
Exchange Act requires all futures commission merchants, such as Alaron Trading,
and all introducing brokers, to meet and maintain specified fitness and
financial requirements, account separately for all clients' funds, property and
positions, and maintain specified books and records on customer transactions
open to inspection by the staff of the CFTC. Failure to meet its regulatory
requirements could subject Alaron Trading to disciplinary actions, including
fines, censure, suspension or revocation of registration.
Futures professionals and organizations are subject to regulatory
oversight by the futures exchanges or self-regulatory organizations such as the
NFA, of which they are members. In addition, the CFTC has delegated its
registration and certain regulatory functions to the NFA. The NFA, a
self-regulatory body, has established and enforces training standards and
proficiency tests, minimum financial requirements and standards of fair practice
for futures commission merchants. As a designated self-regulatory organization,
the NFA has authority to enforce its rules, the violation of which could lead to
various penalties, including expulsion. Since NFA membership is mandatory for
all CFTC registered commodity professionals, loss or suspension of such
membership would preclude a firm from engaging in business. Alaron Trading is a
member of the NFA. We are also planning to become a clearing member of a futures
exchange. If that happens, our direct regulator would be the exchange instead of
the NFA.
As a registered futures commission merchant and member of the NFA, we
are subject to minimum financial requirements under the Commodity Exchange Act.
The minimum financial requirements which specifies minimum net capital
requirements for registered broker-dealers, is designed to measure the general
financial integrity and liquidity of a broker-dealer and requires that at least
a minimum part of its assets be kept
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in relatively liquid form. In general, net capital is defined as net worth
(assets minus liabilities), plus qualifying subordinated borrowings and certain
discretionary liabilities, and less certain mandatory deductions that result
from excluding assets that are not readily convertible into cash and from
valuing conservatively certain other assets. Among these deductions are
adjustments (called "haircuts"), which reflect the possibility of a decline in
the market value of an asset prior to disposition.
Failure to maintain the required net capital may subject a firm to
suspension or revocation of registration by the CFTC and suspension or expulsion
by the NFA and other regulatory bodies and ultimately could require the firm's
liquidation. The minimum financial requirement prohibits payments of dividends,
redemption of stock, the prepayment of subordinated indebtedness and the making
of any unsecured advance or loan to a shareholder, employee or affiliate, if the
payment would reduce the firm's net capital below a certain level.
Under the minimum financial requirements, we must maintain in net
capital the greater of $375,000 or 7% of customer funds required to be
segregated under the Commodity Exchange Act in order not to file early warning
reports. Failure to maintain adjusted net capital the greater of $250,000 or 4%
of customer segregated funds will suspend us immediately from doing any
business. In addition, the minimum financial requirements provide that the total
outstanding principal amount of a broker-dealer's indebtedness under certain
subordination agreements, the proceeds of which are included in its net capital,
may not exceed 70% of the sum of all our capital accounts and long term debt for
a period in excess of 90 days.
A change in the minimum financial requirements, the imposition of new
rules or any unusually large charge against net capital could limit those of our
operations that require the intensive use of capital, such as the financing of
client account balances, and also could restrict our ability to pay dividends,
repay debt or repurchase shares of our outstanding stock. A significant
operating loss or any unusually large charge against net capital could adversely
affect our ability to expand or even maintain our present levels of business,
which could harm our business.
The above-described regulatory structure may be modified by the CFTC
or by legislative changes enacted by the Congress. Furthermore, the fact of CFTC
registration or the NFA membership of Alaron Trading does not imply that either
the CFTC or NFA has passed upon or approved this offering as described in this
prospectus.
With respect to electronic commerce, we anticipate that we may be
subject of additional regulation as the market for online commerce evolves.
Because of the growth in the electronic commerce market, Congress has held
hearings on whether to regulate providers of services and transactions in the
electronic commerce market. In addition, federal or state authorities could
enact laws, rules or regulations affecting our business or operations. We also
may be subject to federal, state and foreign money transmitter laws and state
and foreign sales and use tax laws. If enacted or deemed applicable to us, such
laws, rules or regulations could be imposed on our activities or our business.
Due to the increasing popularity of the internet, it is possible that laws and
regulations may be enacted with respect to the internet, covering issues such as
user privacy, pricing, content and quality of products and services. The
Telecommunications Act of 1996 prohibits the
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transmission over the internet of certain types of information and content.
Although certain of these prohibitions have been held unconstitutional, the
increased attention focused upon these liability issues as a result of the
Telecommunications Act could adversely affect the growth of internet and private
network use.
Employees and Associated Persons
As of June 30, 1999, we employed 53 full-time employees and 108 CFTC
registered Associated Persons located in five states, 18 of which are also our
employees. Of the 53 full-time employees, three handle compliance matters, one
is in marketing, one is in accounting, one is in operations, 40 are in
administration, and 7 are in both operations and administration.
Properties
We lease a building of approximately 30,000 square feet as its
principal offices and operations headquarters at 822 West Washington Boulevard,
Chicago, Illinois, from Alaron Development, L.L.C., a limited liability company
owned and controlled by Steven, Michael and Carrie Greenberg. The lease provides
for a base rent of $100,000 for the first five years, and $250,000 for the next
five years. Commencing January 1, 1996, the base rent increases 4% each year
until the lease expires on December 31, 2004. The lease was not negotiated at
arm's length; however, we believe that it is on as favorable terms to us as
could be obtained from unaffiliated parties in light of prevailing leases for
similar properties in the same general geographic area.
Alanorth, L.L.C., an affiliate of ours, leases approximately 2,600
square feet of office space for use by us as a branch office at 633 Skokie
Boulevard, Northbrook, Illinois. Lease payments for the five year term of the
lease average $41,000 per year, and the lease expires on December 31, 2002. The
lease is from an unaffiliated third party.
We lease approximately 5,000 square feet of office space as a branch
office at 660 South Federal Highway, Pompano Beach, Florida from Alaron
Development, L.L.C. which is owned and controlled by Steven, Michael and Carrie
Greenberg. Lease payments for the four year term of the lease are $90,000 per
year and the lease expires on June 30, 2002. The lease was not negotiated at
arm's length; however, we believe that it is favorable to us in light of
prevailing leases for similar properties in the same general geographic area.
We lease as branch offices, (i) approximately 1,156 square feet of
office space at 442 Post Street, San Francisco, California, from an unaffiliated
individual at $15,420 per year expiring on August 31, 2000; and (ii)
approximately 550 square feet of office space at 191 Woodport Road, Sparta, New
Jersey, from an unaffiliated party at $8,040 per month expiring on October 31,
1999.
We believe that our existing office space is adequate to meet our
requirements for the future.
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Litigation
As a brokerage firm having numerous customers and correspondents, we
are, from time to time, subject to various lawsuits, including civil litigation,
arbitrations and reparations proceedings, and to administrative proceedings by
futures industry regulators relating principally to customers and regulatory
requirements. Such matters range from those in which we seek to collect deficit
amounts due from customers, to customer complaints, allegations by regulatory
authorities of alleged improprieties by us and the like. In those actions in
which we are the defendant, the complaints may request such items as monetary
penalties, license suspensions or revocations and the like. After consultation
with legal counsel, management is of the opinion that the estimated costs of
disposition of such complaints, matters of litigation and administrative
proceedings will not have a material adverse effect on our financial condition.
Alaron Trading Corporation. In July, 1995, the NFA Business Conduct
Committee issued a complaint against us which alleged violations of various NFA
financial requirements, failure to adequately supervise our employees and the
conduct of our futures activities, failure to maintain adequate books and
records and use of promotional materials in violation of NFA compliance rules.
Without admitting or denying the allegations and without a hearing, we consented
to the imposition of a $40,000 fine, to continue to employ a qualified and
experienced senior financial and operations executive and to conduct a field
audit of each of our guaranteed introducing brokers at least once each year. We
believe we have complied with all of the stipulations above to which we
consented.
On February 19, 1999, the Business Conduct Committee of the NFA filed
a complaint against us, Steven A. Greenberg, our President, and Jeffrey H.
Spencer, a registered Associated Person of ours and formerly our Director of
Introducing Broker Services, alleging violations of certain NFA compliance rules
and by-laws. Briefly, the complaint alleges that we opened certain accounts
introduced by persons whose NFA membership or associate status was not yet
completed, that we permitted three persons to act in a capacity requiring
registration as an Associated Person at a time when their respective
registrations were not yet effective and that we paid a total of $9,000 in
commissions to two persons prior to the time their respective NFA memberships
became effective. In addition, the complaint alleges that we improperly handled
a subordinated loan made to us for regulatory capital purposes. The complaint
alleges that Mr. Spencer permitted and assisted in the alleged violations and
that Mr. Greenberg, as President, failed to supervise Mr. Spencer and us
appropriately in violation of NFA rules. None of the allegations involve any
losses or alleged losses to customers. The NFA has the authority to fine us or
our principals, suspend or bar us or our principals from engaging in the
commodities business or deregister us as a futures commissions merchant.
We and the individual respondents believe that we have meritorious
defenses to the allegations. However, rather than expend the substantial time,
effort and financial resources which would be necessary to defend successfully
against these allegations at a hearing, we have commenced discussions with the
NFA Staff to the Business Conduct Committee in an effort to dispose of these
allegations without a hearing. Of course, there is no assurance that we and the
Business Conduct Committee will reach a settlement of this matter or that if a
settlement is reached, that it won't result in a
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significant fine or penalty. If no such settlement is reached, we intend to file
our answer to the allegations denying them and vigorously defending against them
at any such hearing. Based upon our own internal investigation into the
allegations and consultation with special counsel in this matter, we believe
that this matter will not have a material adverse effect on our business and
operations, although there can be no assurance of this.
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<PAGE>
Management
Directors and Executive Officers
The Company's Executive Officers and Directors are:
Name Age Position Held
- ---- --- -------------
Joel W. Greenberg 60 Director and Chairman of the Board of
Directors
Steven A. Greenberg 32 President and Director
Carrie A. Greenberg 27 Executive Vice-President, Secretary,
Treasurer and Director
Barry S. Isaacson 34 Chief Operating Officer and Director
Daniel F. Lazarus 43 Vice President and Chief
Compliance Officer
Mara Greenberg 38 Director
Stefan Kallabis 36 Director (nominee)
Robert H. Daskal 58 Director (nominee)
Joel W. Greenberg, a founder of Alaron.com, is the Chairman of Alaron
Trading. A member of the Chicago Mercantile Exchange since 1967, Mr. Greenberg
has more than 30 years experience in the futures industry. He served as a member
of the Chicago Mercantile Exchange Board of Governors from 1976 to 1979,
including service as First Vice-Chairman, and was second Vice-Chairman during
1996 and 1997. From 1969 to 1986, Mr. Greenberg was Vice-President of Heinold
Commodities, Inc., a futures commission merchant, and from 1987 to 1989, he was
a Vice-President of Shearson Lehman Brothers, Inc., a futures commission
merchant. He has been a member of the International Monetary Market, the
International Options Market and Growth and Emerging Market divisions of the
Chicago Mercantile Exchange, and of the Chicago Board of Trade. Mr. Greenberg is
a director of Smithfield Foods, Inc., a publicly traded company and of various
private and civic organizations. Mr. Greenberg holds a B.S. degree from the
University of Illinois. Mr. Joel Greenberg is the father of Steven Greenberg,
the Company's President and a director, Carrie Greenberg, the Company's
Executive Vice-President, Secretary, Treasurer and a director, Michael
Greenberg, the Company's Chief Technology Officer, and the father-in-law of Mara
Greenberg, a director, who is Michael Greenberg's wife.
Steven A. Greenberg is a founder of Alaron.com and Alaron Trading, and
has served as President of both since their respective inceptions. He has been a
member of the Chicago Mercantile Exchange since 1988, where he acted as a broker
and trader through 1991 and from the Spring of 1998 to the present. He is also a
member of the International Monetary Market and Growth and Emerging Market
divisions of that Exchange. He has served and continues to serve on various
committees at the Chicago Mercantile Exchange and is involved in various civic
organizations. Steven Greenberg holds a B.A. in International Relations from
Boston University.
Carrie A. Greenberg, a founder of Alaron.com, has been Treasurer and
Secretary of Alaron Trading since 1991 and Executive Vice President of
Alaron.com since its inception. She has been a member of the Chicago Mercantile
Exchange's International Options Market division since 1993. Ms. Greenberg has a
B.A. from the University of Illinois.
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<PAGE>
Barry S. Isaacson, a founder of Alaron.com, has been employed by
Alaron Trading in various capacities since 1989, serving as its Executive
Vice-President since 1991. Mr. Isaacson holds a B.S. from Southern Methodist
University. Mr. Isaacson is the brother-in-law of Steven Greenberg, the
Company's President and Director.
Daniel F. Lazarus was appointed our Vice President and Alaron
Trading's Chief Compliance Officer in July 1999. For the past five years, he has
been a lawyer at the Chicago Mercantile Exchange where he acted as principal
legal advisor in Exchange disciplinary and arbitration hearings. While at the
Chicago Mercantile Exchange, he provided legal support in regulatory, compliance
and trade practice and clearing matters, as well as other legal issues. For nine
years in the 1980s, Mr. Lazarus was employed by Merrill Lynch Futures, Inc.
where he managed all functions pertaining to customer position and monetary
balancing, regulatory reporting, processing and clearing of customer and firm
accounts at various futures exchanges. He has been a member of the International
Monetary Market and an Assistant Chicago Mercantile Exchange Floor Manager for
Shearson Hayden-Stone, Inc. Mr.Lazarus holds a B.A. with the highest honors from
DePaul University and a law degree from The University of Michigan Law School.
He is the senior principal of Alaron Trading in charge of all regulatory
compliance matters.
Mara Greenberg has been a Senior Executive Assistant with the Boston
Consulting Group in Chicago since 1995. From 1992 through 1994, she was
Assistant to the Chief Financial Officer of Mirage Resorts, Inc., Las Vegas,
Nevada. From 1983 through 1992, Ms. Greenberg was an Equity Research Associate
with two major securities brokerages. She holds a B.S. in finance from Ithaca
College.
Stefan Kallabis. Immediately following the offering, Mr. Kallabis will
become an independent director. He is the president and owner of Prime Asset
Management AG, the firm which handled our recent European private placement of
stock. He founded Prime in January, 1997. Before establishing Prime, beginning
in August, 1994, Mr. Kallabis was engaged in distribution, marketing and
organization of a number of investment magazines and newsletters. From November,
1991 through August, 1994, he was employed by HYPO Capital Management, Berlin,
Germany, as a financial consultant to high net worth and high income
individuals. Mr. Kallabis has been involved in various aspects of the securities
and futures businesses since 1986 and holds a number of diplomas from various
programs in business administration, economics and corporate finance.
Robert H. Daskal. Immediately following the offering, we also intend
to appoint Robert H. Daskal as an independent director. Mr. Daskal has served as
Senior Vice President, Chief Financial Officer and Treasurer of the Olympic
Cascade Financial Corporation since its inception in February, 1997. Also, Mr.
Daskal is presently a director of Inco Homes Corporation. Form 1994 to 1997, Mr.
Daskal was Executive Vice President, Chief Financial Officer and a Director of
Inco Homes Corporation, and from 1985 to 1994 he was Executive Vice
President-Finance, Chief Financial Officer and a Director of UDC Homes, Inc.
(and its predecessors). UDC Homes, Inc. filed a petition for relief under
Chapter 11 of the Bankruptcy Code in May, 1995. Mr. Daskal, a former Tax Partner
with Arthur Andersen & Co., became a CPA in Illinois in 1967. He received his
B.B.A. and J.D. from the University of Michigan.
Certain Significant Persons
Michael A. Greenberg, a founder of Alaron.com and Alaron Trading,
serves as its Chief Technology Officer in which he provides consultation to the
President and other senior officers about the strategic direction of the
Company. He was Chief Executive Officer and a director of Alaron Trading from
its inception until September, 1997. Michael Greenberg has been a member of the
Chicago Mercantile Exchange since 1989, where he has traded for his own account.
Mr. Greenberg has served on various committees at the Chicago Mercantile
Exchange. He holds a B.A. in Finance from Indiana University.
Cheryl B. Fitzpatrick, Esq., has served as Alaron Trading's General
Counsel since August, 1996. Prior to joining Alaron trading, Ms. Fitzpatrick
served as a staff attorney for JG Industries, Inc., a publicly owned department
store, from October, 1989
40
<PAGE>
to June, 1990, the National Association of Securities Dealers from June, 1990 to
April, 1991, and was corporate counsel for Lind-Waldock & Company, a registered
futures commission merchant, from April, 1991 to August, 1996. Ms. Fitzpatrick
holds a B.S. in Journalism from Southern Illinois University and a J.D. from IIT
Chicago-Kent College of Law.
Stanley W. Preston III, Esq. has served as Alaron Trading's corporate
counsel since November, 1997. Mr. Preston holds a B.S. in accounting and finance
from The Ohio State University (1994) and a J.D. from Chicago-Kent College of
Law (1997). Mr. Preston served in the United States Marine Corps from 1984
through 1988.
Joseph L. Ehrlich has been Vice President-Operations of Alaron Trading
since September, 1996. He has also been Manager of Risk Management Operations
for Alaron Trading since 1995. He has been with Alaron Trading since 1992. Prior
to 1992, Mr. Ehrlich was an Account Executive at Index Futures Group, Inc., and
a Manager at Lind- Waldock & Company, both of which are registered futures
commission merchants.
Dennis M. Dunne has served as Alaron Trading's Controller since March,
1995. Mr. Dunne, who has 23 years experience in the industry, was the regulatory
accountant for First Options of Chicago from 1990 to 1995. Mr. Dunne holds a
B.S. in Commerce from DePaul University and is a certified public accountant.
Director Compensation
Directors are not currently compensated but may be reimbursed for
expenses incurred by them in connection with their duties as directors. We
anticipate that the board of directors will meet at least four times a year.
The Underwriter's Representative, National Securities Corporation, has
the right to designate two people to attend all meetings of the board of
directors. We have agreed to reimburse the designees of the Representative for
their out-of-pocket expenses incurred in connection to attending these meetings.
The Representative has the right to cause us to use our best efforts to elect
one of its designees to the board of directors for five years after the date
they are elected. Mr. Robert H. Daskal is that designee.
Committees of the Board of Directors
Our board of directors has established an Audit Committee and a
Compensation Committee.
Audit Committee. Our Audit Committee, which is responsible for
nominating our independent accountants for approval by the board of directors,
reviewing the scope, results and costs of the audit with our independent
accountants, and reviewing the financial statements, audit practices and
internal controls of the Company, will be comprised of directors, a majority of
whom will be independent directors.
Compensation Committee. Our Compensation Committee is responsible for
recommending compensation and benefits for our executive officers to the board
of
41
<PAGE>
directors and for administering our Stock Option Plans. Our Compensation
Committee will be comprised of independent directors.
Limitation of Liability and Indemnification
As permitted by the Delaware General Corporation Law ("DGCL"), the
Company has included in its Certificate of Incorporation a provision to
eliminate the personal liability of its directors for monetary damages for
breach or alleged breach of their fiduciary duties as directors, except for
liability (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involved
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases, as
provided in Section 174 of the DGCL, or (iv) for any transaction from which the
director derived an improper personal benefit. The effect of this provision in
the Company's Certificate of Incorporation is to eliminate the rights of the
Company and its stockholders (through stockholders' derivative suits on behalf
of the Company) to recover monetary damages against a director for breach of the
fiduciary duty of care as a director except in the situations described in (i)
through (iv) above. This provision does not limit nor eliminate the rights of
the Company or any stockholder to seek non-monetary relief such as an injunction
or rescission in the event of a breach of a director's duty of care. These
provisions will not alter the liability of directors under federal securities
laws.
The Certificate of Incorporation and the by-laws of the Company
provide that the Company is required and permitted to indemnify its officers and
directors, employees and agents under certain circumstances. In addition, if
permitted by law, the Company is required to advance expenses to its officers
and directors as incurred in connection with proceedings against them in their
capacity as a director or officer for which they may be indemnified upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such person is not entitled to
indemnification. At present, the Company is not aware of any pending or
threatened litigation or proceeding involving a director, officer, employee or
agent of the Company in which indemnification would be required or permitted.
The Company believes that its charter provisions and indemnification agreements
are necessary to attract and retain qualified persons as directors and officers.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors and officers of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
Executive Compensation
The following table sets forth certain information with respect to the
compensation paid to (i) the Company's Principal Executive Officer and (ii) each
of the Company's other executive officers who received aggregate salary and
bonus compensation in excess of $100,000 for services rendered to the Company
(collectively, the "Named Executive Officers"):
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<PAGE>
Summary Compensation Table
Annual Compensation (1)
-----------------------------------
Fiscal Salary Bonus
Name and Principal Position Year $ $
- --------------------------- ---- --- ---
Steven A. Greenberg, President 1998 181,313 $201,720 (2)
1997 233,100 $299,444 (2)
1996 205,082 $260,109 (2)
Michael A. Greenberg (3) 1998 181,313 $201,720 (2)
1997 232,863 $299,444 (2)
1996 198,945 $260,109 (2)
Carrie A. Greenberg, Executive Vice 1998 73,731 45,761 (2)
President, Secretary and Treasurer 1997 94,985 66,549 (2)
1996 66,637 57,843 (2)
Barry S. Isaacson, Chief Operating 1998 25,000 93,483
Officer 1997 25,000 89,083
1996 25,000 88,371
- -----------------------------------
(1) In accordance with SEC rules, other compensation in the form of
perquisites and other personal benefits has been omitted because the
aggregate amount of such perquisites and other personal benefits to
each of the Named Executive Officers constituted less than the lesser
of $50,000 or 10% of the total of annual salary and bonuses for each
Named Executive Officer for such year.
(2) Paid as additional compensation used to pay down personal bank loans, the
proceeds of which were contributed as additional equity to Alaron Trading.
(3) As of September 22, 1997, Michael Greenberg no longer served as an officer
or director of Alaron Trading. He is employed as our Chief Technology
Officer.
Employment Agreements
We have entered into five-year employment agreements, ending February
28, 2004, with each of Steven A. Greenberg, Michael A. Greenberg, Carrie A.
Greenberg, Barry S. Isaacson and Joel W. Greenberg. Subject to certain
conditions, each employment agreement will automatically renew for additional
one year terms.
Under his employment agreement, Steven A. Greenberg will receive an
annual base salary of $200,000 for the first year of the term of his employment.
Under his employment agreement, Michael A. Greenberg will receive an annual base
salary of $200,000 for the first year of the term of his employment. Under her
employment agreement, Carrie A. Greenberg will receive an annual base salary of
$135,000 for the first year of the term of her employment. Under his employment
agreement, Barry S. Isaacson will receive an annual base salary of approximately
$121,000 for the first year of the term of his employment. Under his employment
agreement, Joel W. Greenberg will receive an annual base salary of $50,000 for
the first year of the term of his
43
<PAGE>
employment. The annual base salary of each employee can be increased each year
in an amount determined by the Board of Directors in its discretion but must
increase by at least five percent of the base salary for the prior year. Each
employment agreement provides for the employee to receive an incentive bonus
equal to a percentage of our annual operating income, as defined in the
agreement, in excess of $1,000,000. These bonuses aggregate 14.95% of our annual
operating income in excess of $1,000,000. In addition, during each month of the
term of their respective employment agreements, Steven A. Greenberg, Michael A.
Greenberg and Carrie A. Greenberg will receive a nondiscretionary monthly cash
bonus of $18,806.82, $18,806,82 and $7,523.73, respectively, to enable them to
pay interest on the personal loans they contributed to our capital. They have
agreed to use all of the net proceeds they receive from the exercise of the
over-allotment option granted to the underwriters, to prepay a portion of these
loans after which the non-discretionary monthly cash bonuses will be reduced.
The employment agreements also entitle the individuals to employee benefit
plans, such as group health and life insurance. Under each of these employment
agreements, employment terminates, among other reasons, upon death of the
employee and may be terminated by us if the employee is convicted of
embezzlement, theft or fraud.
Stock Option Plans
1999 Stock Option Plan and 1999 Executive Stock Option Plan. We
recently adopted our 1999 Stock Option Plan (the "Plan") and our 1999 Executive
Stock Option Plan (the "Executive Plan"), each of which enables us to grant
options for shares of our common stock. The Plan authorizes the grant of options
to purchase up to an aggregate of 700,000 shares of common stock to all
full-time salaried or commissioned employees. The number of individuals who
currently would be eligible to receive options under the Plan is approximately
100. The Executive Plan authorizes the grant of options to purchase up to an
aggregate of 350,000 shares of common stock to all of our executive officers and
members of the board. The number of individuals who currently would be eligible
to receive options under the Executive Plan is approximately ten.
The purpose of both the Plan and the Executive Plan is to advance the
interests of stockholders by enhancing our ability to attract, retain and
motivate persons who make (or are expected to make) important contributions.
This is accomplished by providing these people with equity ownership
opportunities and performance-based incentives and thereby better aligning their
interests with those of the stockholders. Both the Plan and the Executive Plan
provide for the granting of incentive stock options as defined in Section 422 of
the U.S. Internal Revenue Code of 1986, as amended (the "Code"), and options
which do not qualify as incentive stock options. The following description of
the Plan and the Executive Plan is qualified in its entirety by reference to the
full text of the Plan and the Executive Plan, as the case may be.
The board of directors has delegated its authority under the Plans to
the Compensation Committee. The Compensation Committee has the authority to
grant awards under the Plan and the Executive Plan and to adopt, amend and
repeal such administrative rules, guidelines and practices relating to the Plan
and the Executive Plan as it deems advisable. The Compensation Committee may
correct any defect, supply any omission or reconcile any inconsistency in the
Plan and the Executive Plan or any award under the Plan and the Executive Plan
in the manner and to the extent it shall deem
44
<PAGE>
expedient to carry the Plan and the Executive Plan into effect and it shall be
the sole and final judge of such expediency. All decisions by the Compensation
Committee are made in its sole discretion and are final and binding on all
persons having or claiming any interest in the Plan and the Executive Plan or in
any award under the Plan and the Executive Plan. No director or person acting
pursuant to the authority delegated by the board shall be liable for any action
or determination relating to or under the Plan and the Executive Plan made in
good faith.
The Plan and the Executive Plan or any portion thereof can be amended,
suspended or terminated by the directors at any time; provided, however, that
without approval of shareholders, no amendment shall be made which (i) increases
the maximum number of shares of common stock or changes the class of shares
which may be subject to stock options granted under the Plan and the Executive
Plan, except for specified adjustment provisions, (ii) extends the term of the
Plan and the Executive Plan, or (iii) changes the requirements as to eligibility
for participation in the Plan or the Executive Plan.
Stock options may be granted to purchase common stock under the Plan
and the Executive Plan at a price to be determined by the board but not less
than the fair market value of the common stock on the date of grant. The
exercise price of incentive stock options granted to someone owning more than
ten percent of the outstanding voting stock must be 110% of the fair market
value of the common stock on the date of the grant. The maximum number of shares
for which options may be granted under the Plan and the Executive Plan during
any calendar year may not exceed 35,000. Other than these limits of 35,000
options per year, there is no limitation on the aggregate number of stock
options which may be granted to any optionee under the Plan or the Executive
Plan.
As of the date hereof, there have not been any options granted under
the Plan or the Executive Plan. There are no current understandings or
agreements to grant any options under the Plan or the Executive Plan.
Stock options are exercisable at such times and subject to such terms
and conditions determined by the board. The Plan and the Executive Plan provide
that if a stock option, or portion thereof, expires, lapses without being
exercised or is terminated, canceled or surrendered for any reason without being
exercised in full, the unpurchased shares of common stock which were subject to
such stock option or portion thereof shall be available for future grants of
stock options under the Plan or the Executive Plan, as the case may be.
Under the terms of the Plan and the Executive Plan, the exercise price
for all options must be paid in cash or by check payable to the order of the
Company, or with common stock owned by the optionee and having a fair market
value on the date of exercise equal to the aggregate exercise price of the
shares to be so purchased, or by delivery of a promissory note on terms
acceptable to the board, or by delivery of an irrevocable and unconditional
undertaking by a creditworthy broker to deliver sufficient funds to pay the
exercise price, or a combination thereof.
Except as the board may otherwise provide, options granted pursuant to
the Plan and the Executive Plan will not be assignable or transferable except by
will or the laws
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<PAGE>
of intestate succession, and during the life of an optionee, may only be
exercised by that person.
The purchase price and the number and kind of shares that may be
purchased upon exercise of options granted pursuant to the Plan, and the number
of shares which may be granted pursuant to the Plan, are subject to adjustment
in certain events, including stock splits, recapitalizations, mergers, and
reorganizations.
The Plan and the Executive Plan each provide, among other things, that,
immediately prior to the occurrence of an "Acquisition Event" (as defined in the
Plan and the Executive Plan), fifty percent of the common shares covered by
options which are not then exercisable shall become fully exercisable in the
manner set forth in the option.
Legal Proceedings Involving Directors, Officers and Affiliates
Alaron Securities Corporation. In 1993, Steven, Michael and Carrie
Greenberg organized and owned Alaron Securities Corporation, a separate
securities brokerage firm which was registered with the Securities and Exchange
Commission, various states, and a member of the National Association of
Securities Dealers, Inc. ("NASD"). Michael A. Greenberg was the President and
Chief Executive Officer and an unrelated individual was its Chief Operating
Officer.
During the first half of 1995, Alaron Securities Corporation became the
subject of disciplinary proceedings and complaints from the states of Illinois,
Maryland and Wisconsin and the NASD. Alaron Securities Corporation ceased all
operations as of May 31, 1995, and subsequently withdrew its broker/dealer
registration and NASD membership.
These various proceedings alleged, among other things, failure to
register the firm or personnel, failures to maintain minimum net capital
requirements in light of alleged mischaracterization of customer accounts as
proprietary accounts, securities law fraud, and record keeping and reporting
violations. Alaron Securities Corporation settled the Illinois proceedings,
without a hearing and without admitting or denying the allegations, by accepting
a revocation of its Illinois securities registration, paying an administrative
fine of $10,000 and reimbursing $20,000 to the Illinois Secretary of State for
costs. As part of the settlement, proceedings against Alaron Securities
Corporation officers and directors were dismissed.
Proceedings in Wisconsin were based upon a summary broker-dealer
license denial caused by Alaron Securities Corporation's alleged failure to
complete its pending application for registration in that state. Following a
hearing, Alaron Securities Corporation was allowed to withdraw its application
for registration in Wisconsin.
The Maryland Securities Commissioner brought an action against Alaron
Securities Corporation, Steven A. Greenberg and Michael A. Greenberg for its
failure to comply with the procedural guidelines in connection with its
registration as a broker/dealer in the state of Maryland. In settlement of that
proceeding, without a hearing and without admitting or denying the allegations,
the respondents, Alaron
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<PAGE>
Securities Corporation and Messrs. Greenberg consented to the entry of an order
under which they paid the State of Maryland an administrative fine of $20,000
and Messrs. Greenberg each agreed not to apply for securities registration in
Maryland for a period of three years commencing from the date of the Consent
Order, October 14, 1996.
On March 10, 1997, a Consent Order disposing of the NASD proceeding was
entered by the NASD National Business Conduct Committee under which, without a
hearing and without admitting or denying the truth of the allegations, Alaron
Securities Corporation was censured and received a suspended fine of $25,000,
Steven A. Greenberg was censured, suspended from association with any NASD
member for 30 days and fined $10,000, Michael A. Greenberg was censured,
suspended from association with any NASD member for five years, barred from
acting in any principal capacity with any NASD member firm and received a
suspended fine of $50,000, and the unaffiliated former Chief Operating Officer
of Alaron Securities Corporation was censured, barred from any association with
any NASD member firm and received a suspended fine of $100,000.
Joel W. Greenberg. On July 30, 1998, the Securities and Exchange
Commission instituted a cease and desist proceeding and simultaneously accepted
a settlement with Mr. Greenberg in a matter relating to Incomnet, Inc., a
publicly traded company of which Mr. Greenberg was an outside director from 1988
through 1995. Without admitting or denying the SEC findings and without a
hearing, Mr. Greenberg consented to the entry ordering him to cease and desist
from committing or causing any violations under the federal securities laws and
regulations. The SEC's findings as to Mr. Greenberg were that, as an outside
director, Mr. Greenberg should have made independent inquiry and not have relied
on information and documents provided him by the former chief executive officer
of Incomnet, and that Mr. Greenberg failed to file with the SEC an amended
disclosure form concerning his collateralization of a personal loan with the
shares of Incomnet stock owned by him.
Steven A. Greenberg. On February 19, 1999, the Business Conduct
Committee of the NFA filed a complaint against Mr. Greenberg, the Company and
one of its Associated Persons. See "Business - Litigation."
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<PAGE>
Principal Stockholders
The following table sets forth certain information regarding beneficial
ownership of our common stock as of the date of this prospectus, (i) by each
person or entity known by us to own beneficially more than five percent of the
common stock, (ii) by each of our directors, (iii) by each Named Executive
Officer, and (iv) by all our executive officers and directors as a group.
Steven, Carrie and Michael Greenberg are the children of Joel
Greenberg. Upon completion of this offering, the Greenberg family will have the
ability to vote approximately 75% of the issued and outstanding shares.
<TABLE>
<CAPTION>
Percent Beneficially Owned
----------------------------------------
Upon
Number of Shares Prior to After Exercise of
Name and Address(1) Beneficially Owned (2) Offering Offering Over-allotment (7)
- ---------------- ------------------ -------- -------- --------------
<S> <C> <C> <C> <C>
Steven A. Greenberg(3) 3,645,000 35% 32% 31%
Joel W. Greenberg, Trustee(4) 2,843,100 30% 24% 23%
Michael A. Greenberg 801,900 8% 8% 8%
Carrie A. Greenberg 810,000 8% 8% 8%
Joel W. Greenberg 704,399 7% 7% 7%
Barry S. Isaacson(5) 88,934 1% * *
Stefan Kallabis(6) 434,466 4% 3% 3%
Prime Asset Management AG
Borsenplatz 1
60313 Frankfurt-am-Main
Germany
All executive officers, directors
and 5% holders as a group 9,327,749 90% 82% 80%
- ---------------------------------
<FN>
* Less than one percent.
(1) Unless specifically noted, the business addresses of the directors and
executive officers is c/o the Company, 822 West Washington Boulevard,
Chicago, Illinois 60607.
(2) Beneficial ownership is determined in accordance with rules of the SEC, and
includes generally voting power and/or investment power with respect to
securities. Accordingly, the number of shares of common stock issuable upon
the exercise of any option owned by any such person or entity are not
included in this table. Except as indicated by footnote, to the knowledge
of the Company, the persons named in the table above have the sole voting
and
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<PAGE>
investment power with respect to all shares of common stock shown as
beneficially owned by them.
(3) 30,000 of such shares are held by Mr. Greenberg as custodian for his minor
children.
(4) The beneficiaries of the trust are all of the descendants of Joel W. and
Marcia Greenberg other than Michael A. Greenberg and his descendants.
(5) Mr. Isaacson is the brother-in-law of Steven A. Greenberg.
(6) These shares were issued to Prime Asset Management AG, Frankfurt, Germany,
the distributor of our recent European private placement, a company owned
by Mr. Kallabis. The amounts shown do not include warrants to purchase
600,000 shares at $7.50 per share, also issued to Prime Asset Management
AG.
(7) Steven, Joel, Michael and Carrie Greenberg have each granted to the
underwriter on a pro rata basis (Steven - 101,250; Joel - 78,975; Michael -
22,275; and Carrie - 22,500), a 45-day option to purchase from them an
aggregate of 225,000 shares of common stock to cover over-allotments. They
have agreed that any net proceeds they receive from this grant will be used
to repay certain indebtedness. See "Certain Transactions - Debt of Certain
Directors and Officers."
</FN>
</TABLE>
Section 203 of the Delaware General Corporation Law
In its Certificate of Incorporation, the Company elected not to be
subject to the provisions of Section 203 of the DGCL. This section provides,
with certain exemptions, that a Delaware corporation may not engage in any of a
broad range of business combinations with a person, or affiliate or associate of
such person, who is an "interested stockholder" for a period of three years from
the date that such person became an interested stockholder unless certain
conditions are satisfied. An "interested stockholder" is defined to include any
person, and the affiliates and associates of such person, that is the owner of
15% or more of the outstanding voting stock of the corporation or is an
affiliate or associate of the corporation and was the owner of 15% or more of
the outstanding voting stock of the corporation at any time within the
three-year period immediately prior to the date on which it is sought to be
determined whether such person is an interested stockholder.
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<PAGE>
Certain Transactions
Reorganization. In April, 1999, Steven A. Greenberg, Michael A.
Greenberg, Carrie A. Greenberg and the Greenberg Family Trust contributed all of
the outstanding stock of Alaron Trading to Alaron.com in a tax-free transfer.
In February, 1999, we agreed to purchase from Robert Stein, now an
Associated Person of Alaron Trading, a 65% interest in Limitup.com, Inc., in
exchange for an aggregate of 22,500 shares of our common stock. As a result,
Limitup.com has become the joint venture between us and Mr. Stein.
Debt of Certain Directors and Officers. In September, 1997, Joel W.
Greenberg loaned $1,000,000 to Alaron Trading under a Subordination Agreement
approved by the NFA. Interest is payable on the loan at the rate of 12 1/2% per
annum. The loan was originally due to mature in September, 1998, however the
maturity date was extended to September 8, 1999. Proceeds from this offering
will be used to repay this loan in full. In addition, on February 16, 1999, Mr.
Greenberg made an additional $100,000 subordinated loan to Alaron Trading
maturing on February 16, 2000.
During 1995, 1996, and 1997, as a result of regulatory capital
requirements, Steven, Michael and Carrie Greenberg contributed a total of
approximately $3,500,000 in equity to Alaron. The funds were the proceeds of
personal bank loans. In fiscal 1998, the Company paid the Greenbergs
approximately $808,000 in the aggregate as additional compensation to enable
them to service this debt. The Greenbergs recently refinanced these loans and
they now mature in 2004. In 1997, we paid Steven, Michael and Carrie Greenberg
$299,444, $299,444 and $66,548, respectively, to service this loan. In 1998, we
paid Steven, Michael and Carrie Greenberg $201,720, $201,720 and $45,760,
respectively, to service this loan. In 1999, we expect to pay to Steven, Michael
and Carrie Greenberg $47,342, $47,342 and $11,569, respectively, to service this
loan. The Company intends to continue to pay the Greenbergs additional
compensation to enable them to service the interest payments on this debt. We
estimate such payments will total approximately $541,648 per year. To reduce
this obligation, Steven, Joel, Michael and Carrie Greenberg have granted the
underwriters a 45-day option to purchase from them 225,000 shares of common
stock to cover over-allotments, and to use the proceeds to pay down this debt.
Affiliated Introducing Broker. Greenstreet Discount Corp., an
introducing broker owned by the Greenbergs, introduces discount customers to
Alaron Trading. Greenstreet is a "guaranteed introducing broker" of Alaron
Trading and therefore is not required to maintain its own independent regulatory
capital. Historically, Greenstreet has accounted for less than 5% of Alaron
Trading's revenues or operating income. Greenstreet was organized by Steven,
Michael and Carrie Greenberg in December, 1992. It operates under an introducing
broker clearing agreement with Alaron Trading substantially similar to those
Alaron Trading has with unaffiliated guaranteed introducing brokers.
Greenstreet, however, is provided free space at Alaron Trading's headquarters
for its 46 associated persons, each of whom is dually registered with Alaron
Trading and is provided telephone, electronic, computer and other administrative
services by Alaron Trading all without charge.
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<PAGE>
Leases with Related Parties. The Company leases a building of
approximately 30,000 square feet as its principal offices and operations
headquarters at 822 West Washington Boulevard, Chicago, Illinois, from Alaron
Development, LLC, a limited liability company owned and controlled by Steven,
Michael and Carrie Greenberg. The lease provides for a net rental of $8.33 per
square foot and expires on December 31, 2004. The lease was not negotiated at
arms length; however, we believe that it is on as favorable terms to us as could
be obtained from unaffiliated parties in light of prevailing leases for similar
properties in the same general geographic area.
We lease approximately 5,000 square feet of office space as a branch
office at 660 South Federal Highway, Pompano Beach, Florida from Alaron
Development, L.L.C. which is owned and controlled by Steven, Michael and Carrie
Greenberg. Lease payments for the four year term of the lease are $90,000 per
year and the lease expires on June 30, 2002. The lease was not negotiated at
arm's length; however, we believe that it is favorable to us in light of
prevailing leases for similar properties in the same general geographic area.
Recent European Private Placement
During May and June, 1999, the Company privately sold an aggregate of
948,450 shares of common stock at a price of $4.50 per share to 43 investors.
None of such shares are registered and, in accordance with the requirements of
Regulation S of the Securities and Exchange Commission, such shares cannot be
resold in United States markets or to United States citizens for at least one
year from their issuance and thereafter they may be sold only if they are
registered or are eligible for an exemption from United States registration.
Each investor has certified to the Company such investor's understanding and
agreement to those requirements.
In connection with the placement, the Company paid Robert Stein, the
owner of the 35% interest in Limitup.com, a finder's fee of 10% of the gross
proceeds ($426,803), which included our paying certain of his expenses.
Additionally, we paid Prime Asset Management AG of Frankfurt, Germany ("Prime"),
434,466 shares of the Company's common stock as the distributor of the European
placement. The shares issued to Prime Asset Management AG are subject to the
same Regulation S restrictions on resale as are the shares sold to the 43
investors in Europe. Mr. Stefan Kallabis, a nominee for director of the Company,
owns Prime Asset Management AG.
In addition, in connection with the placement, we have issued to Prime,
Warrants to purchase 600,000 shares of our common stock at $7.50 per share. If
Prime exercises the Warrants, however, the shares of common stock will come from
the holdings of the Greenberg family and not from the Company.
Prime's Warrants will expire on the earlier of three years after the
date of this prospectus or 45 days after the closing price for our common stock
has been at or above $11.25 for at least 20 out of 30 consecutive trading days.
In other words, if our common stock's price reaches $11.25 during the required
period, Prime will have 45 days thereafter to exercise and pay for up to 600,000
shares or it will lose that right even earlier than the three-year final
expiration of the Warrants. We have also agreed to
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<PAGE>
register for resale by Prime any shares that it purchases by exercising the
Warrants, subject to any applicable NASD limitations or restrictions.
Future Transactions. All future transactions, including loans between
us and our officers, directors, principal shareholders and affiliates will be
approved by a majority of the board of directors, including a majority of the
independent and disinterested outside directors on the board of directors, and
will be on terms no less favorable to us than could be obtained from
unaffiliated third parties.
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<PAGE>
Description of Securities
We are authorized to issue 30,000,000 shares of common stock, $.01 par
value, of which 10,276,199 shares are currently outstanding. After this
offering, there will be 11,429,199 shares of common stock outstanding.
Common Stock
Holders of common stock are entitled to dividends when, as and if
declared by the board of directors out of available funds, subject to any
priority as to dividends for any preferred stock that may be outstanding.
Holders of common stock are entitled to cast one vote for each share held at all
stockholders meeting for all purposes, including the election of directors.
Cumulative voting for the election of directors is not permitted. The holders of
more than fifty percent of the common stock issued and outstanding and entitled
to vote, present in person or by proxy, constitutes a quorum at meetings of
stockholders. The vote of the holders of a majority of common stock present at
meetings generally decides all questions before such meeting. However, certain
actions, such as amendments to certificate of incorporation, mergers or
dissolutions, require the vote of the holders of a majority or two-thirds of the
total outstanding common stock, not just a majority of those present at the
meeting. On liquidation or dissolution, the holder of each outstanding share of
common stock will be entitled to share ratably in the net assets of Alaron.com
available for distribution to such stockholder after the payment of debts and
other liabilities and after distributions to preferred stockholders, if any,
legally entitled thereto. Holders of common stock do not have any preemptive or
preferential rights to purchase or subscribe for any part of any unissued or any
additional authorized stock or any securities convertible into shares of its
stock. In addition, shareholders do not have redemption or conversion rights.
The outstanding shares of common stock are, and the securities offered by this
prospectus will be when issued and paid, fully paid and nonassessable.
Under Nasdaq rules, from the balance of the approximately 18,570,000
authorized shares which will not be outstanding, we can issue at any one time up
to an additional 20% of the then outstanding common stock without getting
shareholder approval. Accordingly, we could at various times issue a significant
number of shares of common stock without stockholder approval. We presently do
not have any plans, agreements or undertakings involving the issuance of any
such shares; however, we could use the issuance of such shares as a method of
discouraging, delaying or preventing a change in control of the Company. An
issuance of additional shares could significantly dilute our public ownership.
This in turn could adversely affect the market price of our securities. We may
in the future issue additional shares.
Preferred Stock
We are authorized to issue 10,000,000 shares of preferred stock, $.01
par value. The preferred stock may be issued in one or more series at such time
or times and for such consideration as shall be authorized from time to time by
the board of directors. The board of directors is authorized to fix the
designation of each series of preferred stock and the relative rights,
preferences, limitations, qualifications, powers or restrictions thereof,
including the number of shares comprising each series, the dividend
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<PAGE>
rates, redemption rights, rights upon voluntary or involuntary liquidation,
provisions with respect to a sinking fund, conversion rights, voting rights, if
any, other preferences, qualification, limitations, restrictions and the special
or relative rights of each series not inconsistent with the provisions of the
certificate of incorporation. We have no present plans to issue any shares of
preferred stock.
Options
As of the date hereof, we have not granted any options to purchase
shares of common stock. A total of 1,050,000 shares of common stock are reserved
for future issuance for options granted under the 1999 Stock Option Plan and the
1999 Executive Stock Option Plan.
Trading Symbol
We have applied for inclusion of our common stock for quotation on the
American Stock Exchange under the symbol ACOM. There is currently no public
trading market for our common stock. Even if our common stock is accepted for
quotation on the American Stock Exchange, we cannot assure you that a public
trading market will ever develop or, if one develops, that it will be
maintained.
Anti-Takeover Effects of Our Certificate of Incorporation and Bylaws
General
Certain provisions of our certificate of incorporation and bylaws may
be deemed to have an anti-takeover effect and may delay, defer or prevent a
tender offer or takeover attempt, including attempts that might result in a
premium being paid over the market price of the shares held by shareholders. The
foregoing provisions may not be amended in our certificate of incorporation or
bylaws without the affirmative vote of the holders of two-thirds of the
outstanding shares of common stock.
Special Meeting of Shareholders
Our certificate of incorporation and bylaws provide that special
meetings of our shareholders can be called only by the board of directors, the
Chairman or the President, or holders of a majority of our outstanding voting
stock.
Advance Notice Requirements for Shareholder Proposals and Director Nominations
Our certificate of incorporation and bylaws provide that shareholders
seeking to bring business before an annual meeting of shareholders, or to
nominate candidates for election as directors at an annual or special meeting of
shareholders, must provide timely notice thereof in writing. To be timely, a
shareholder's notice must be delivered to or mailed and received at our
principal executive offices not less than 60 days nor more than 90 days prior to
the meeting; provided, however, that in the event that less than 75 days' notice
of prior public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder, to be timely, must be received no later
than the close of business on the 15th day following the day on which the notice
of the date of the
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<PAGE>
meeting was mailed or the public disclosure was made, whichever is first. The
bylaws also specify certain requirements as to the content and form of a
shareholder's notice. These provisions may preclude shareholders from bringing
matters before the shareholders at an annual or special meeting or from making
nominations for directors at an annual or special meeting.
Transfer Agent and Registrar
The Transfer Agent for the Company's common stock is American Stock
Transfer and Trust Company, New York, New York.
55
<PAGE>
Shares Eligible for Future Sale
Upon completion of the offering, we will have 11,776,199 shares of
common stock outstanding. Of these shares, the 1,500,000 shares of common stock
sold in the offering will be freely tradeable without restriction under the
Securities Act of 1933. The remaining 10,276,199 shares of common stock will be
"restricted securities" as defined in Rule 144 and will become eligible for
public sale subject to the restrictions of Rule 144 commencing one year from
their issuance. A total of 9,327,749 restricted shares will be eligible for sale
under Rule 144 in April, 2000.
In general, under Rule 144, if a period of at least one year has
elapsed since the later of the date the "restricted shares" (as that phrase is
defined in Rule 144) were acquired from us and the date they were acquired from
an "affiliate" of ours, as that term is defined in Rule 144 (an "Affiliate"),
then the holder of the restricted shares (including an Affiliate) is entitled to
sell a number of shares within any three-month period that does not exceed the
greater of 1% of the then outstanding shares of the common stock or the average
weekly reported volume of trading of the common stock on The Nasdaq Stock Market
during the four calendar weeks preceding the sale. The holder may only sell the
shares through unsolicited brokers' transactions or directly to market makers.
Sales under Rule 144 are also subject to certain requirements pertaining to the
manner of the sales, notices of the sales and the availability of current public
information concerning us. An Affiliate may sell shares not constituting
restricted shares in accordance with the foregoing volume limitations and other
requirements but without regard to the one-year holding period.
Under Rule 144(k), if a period of at least two years has elapsed
between the later of the date restricted shares were acquired from us and the
date they were acquired from an Affiliate, as applicable, a holder of these
restricted shares who is not an Affiliate at the time of the sale and has not
been an Affiliate for at least three months prior to the sale would be entitled
to sell the shares immediately without regard to the volume limitations and
other conditions described above.
Our directors, executive officers and shareholders who own an aggregate
of 10,276,199 shares of common stock (representing all of the issued and
outstanding shares prior to this offering) have entered into written agreements
not to sell, hedge or otherwise dispose of the shares of common stock
beneficially owned by them for 12 months after the date of this prospectus
without the consent of the Representative.
We can make no predictions as to the effect, if any, that sales of
shares or the availability of shares for sale will have on the market price
prevailing from time to time. Nevertheless, sales of significant amounts of the
common stock in the public market, or the perception that these sales may occur,
could adversely affect prevailing market prices.
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<PAGE>
Underwriting
Subject to certain terms and conditions contained in the Underwriting
Agreement among us, certain of our shareholders and National Securities
Corporation, as the representative of the underwriters (the "Representative"),
the underwriters named below have severally agreed to purchase from us, and we
have agreed to sell to the several underwriters, the number of shares of common
stock set forth opposite their names below:
Name of Underwriter Number of Shares
National Securities Corporation............................. 1,500,000
---------
Total........................................... 1,500,000
=========
The Underwriting Agreement provides that the obligations of the several
underwriters to purchase the shares included in this offering are subject to
approval of certain legal matters by counsel and to various other conditions. If
any of the shares of common stock are purchased by the underwriters pursuant to
the Underwriting Agreement, all the shares of common stock (other than shares of
common stock covered by the over-allotment option described below) must be so
purchased.
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
certain payments that the underwriters may be required to make in respect
thereof. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers or controlling persons, we have
been advised that in the opinion of the SEC the indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
The underwriters propose to offer the shares of common stock directly
to the public at $____________ per share. The underwriters have advised us that
they will not engage in sales to discretionary accounts without the prior
specific written approval of the customer. The underwriters may allow certain
dealers, who are members of the NASD, concessions, not in excess of $________
per share of common stock of which not in excess of $_______ per share of common
stock may be reallowed to other dealers who are members of the NASD. The
offering prices, reallowances and concessions will not be changed until after
this offering has been completed.
The following table shows the underwriting discounts and commissions to
be paid to the Underwriters by us in connection with this offering. These
amounts are shown assuming both no exercise and full exercise of the
Underwriters' option to purchase additional shares of Common Stock.
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No Exercise Full Exercise
----------- -------------
Per share $ $
Total $ $
Certain of our shareholders have granted a 45-day over-allotment option
to the underwriters to purchase up to 225,000 additional shares of common stock
at the offering price less the underwriting discount. If the over-allotment
option is exercised in full, the sales will be made by the following
shareholders: Steven A. Greenberg - 101,250; Joel W. Greenberg, Trustee -
78,975; Michael A. Greenberg - 22,275; and Carrie A. Greenberg - 22,500. If the
underwriters exercise such over-allotment option, then each of the underwriters
will be committed, subject to certain conditions, to purchase the additional
shares in approximately the same proportion as set forth in the above table. The
underwriters may exercise this option only to cover over-allotments made in
connection with the sale of the shares of common stock offered hereby.
We have agreed to pay the Representative a non-accountable expense
allowance of 3% of the gross proceeds of this offering, of which $50,000 has
been paid as of the date of this prospectus. We have also agreed to pay all
expenses in connection with qualifying the shares of common stock offered hereby
for sale under the laws of the states the Representative designates, including
expenses of counsel retained for that purpose by the Representative.
Our directors, executive officers and our shareholders who own an
aggregate of 9,327,749 shares of common stock have entered into written
agreements not to sell, hedge or otherwise dispose of any of their common stock,
options or warrants now owned or hereinafter acquired, for a period of 12 months
from the date of this prospectus, without the prior written consent of the
Representative.
Prior to this offering, there has been no public market for the common
stock. Consequently, the initial public offering price for the common stock has
been determined by negotiations between us and the underwriters and is not
necessarily related to our asset value, net worth or other established criteria
of value. The factors considered in these negotiations, in addition to
prevailing market conditions, included the history of and prospects for the
industry in which we compete, an assessment of our management, our prospects,
our capital structure and certain other factors as were deemed relevant.
In connection with this offering, certain underwriters and selling
group members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the common stock.
These transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M, pursuant to which the underwriters or selling
group members may bid for or purchase common stock for the purpose of
stabilizing its market price.
The underwriters also may create a short position for the account of
the underwriters by selling more common stock in connection with the offering
than they are
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<PAGE>
committed to purchase from us and in that case may purchase common stock in the
open market following completion of the offering to cover all or a portion of
that short position.
The underwriters may also cover all or a portion of that short
position, up to 225,000 shares of common stock, by exercising the over-allotment
option. In addition, the Representative may impose "penalty bids" under
contractual arrangements with the underwriters, whereby it may reclaim from an
underwriter (or dealer participating in the offering) for the account of other
underwriters, the selling concession with respect to common stock that is
distributed in any offering but subsequently purchased for the account of the
underwriters in the open market. Any of the transactions described in this
paragraph may result in the maintenance of the price of the common stock at a
level above that which might otherwise prevail in the open market. None of the
transactions described in this paragraph is required, and, if they are
undertaken, they may be discontinued at any time.
Under the securities laws of certain states, the shares may be sold in
those states only through registered or licensed broker-dealers or pursuant to
available exemptions from such requirements. In addition, in certain states the
securities may not be sold unless the securities have been registered or
qualified for sale in that state or an exemption from that requirement is
available and is complied with.
Underwriters' Warrants
We have agreed to sell to the Representative and its designees for an
aggregate of $1,500, warrants (the "Underwriters' Warrants") to purchase up to
150,000 shares of common stock at an exercise price of $_____ per share (120% of
the public offering price per share). The Underwriters' Warrants may not be
sold, transferred, assigned or hypothecated for one year from the date of this
prospectus, except to the officers and partners of the Representative and
members of the underwriting syndicate and selling group, and are exercisable at
any time and from time to time, in whole or in part, during the five-year period
commencing on the date of this prospectus (the "Warrant Exercise Term"). During
the Warrant Exercise Term, the holders of the Underwriters' Warrants are given,
at nominal cost, the opportunity to profit from a rise in the market price of
the common stock. To the extent that the Underwriters' Warrants are exercised,
dilution to the interests of our shareholders will occur. Further, the terms
upon which we will be able to obtain additional equity capital may be adversely
affected since the holders of the Underwriters' Warrants can be expected to
exercise them at a time when we would, in all likelihood, be able to obtain any
needed capital on terms more favorable to us than those provided in the
Underwriters' Warrants. Any profit realized by the Underwriter on the sale of
the Underwriters' Warrants or the underlying shares of common stock may be
deemed additional underwriting compensation. We have agreed, at the request of
the holders of a majority of the Underwriters' Warrants, at our expense (which
may be substantial), to register the Underwriters' Warrants and the shares of
common stock underlying the Underwriters' Warrants under the Securities Act on
one occasion during the five (5) year period commencing one year following the
date of this prospectus.
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Holders of the Underwriters' Warrants are protected against dilution of
the equity interest represented by the underlying shares of common stock upon
the occurrence of certain events including, but not limited to, stock dividends.
The holders of the Underwriters' Warrants have no voting, dividend or other
rights as shareholders of the Company with respect to the shares underlying the
Underwriters' Warrants until the Underwriters' Warrants have been exercised. The
Company is obligated at all times to set aside and have available sufficient
number of authorized but unissued shares of common stock to be issued upon
exercise of the Underwriters' Warrants.
The foregoing does not purport to be a complete statement of the terms
and conditions of the Underwriting Agreement, copies of which are on file at the
offices of the Underwriters, the Company, the Securities and Exchange
Commission, Washington, D.C., and the Chicago Regional Office of the Securities
and Exchange Commission, Chicago, Illinois.
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Legal Matters
Wolin & Rosen Ltd., 2 North LaSalle Street, Chicago, Illinois, 60602,
has acted as counsel for the Company in connection with this offering and will
render an opinion concerning the legality of the sale of the securities offered
hereby. D'Ancona & Pflaum LLC, 111 East Wacker Drive, Chicago, Illinois, 60601,
has acted as counsel for the Underwriters in connection with this offering.
Wolin & Rosen, Ltd. is receiving up to 3,000 shares of our common stock
as part of its legal fees. The firm may sell those shares starting 60 days after
the date of this prospectus, or earlier if the Underwriter allows it.
Experts
The combined balance sheets as of July 31, 1998 and 1997, and the
consolidated statements of income, retained earnings, and cash flows for each of
the two years in the period, included in this prospectus, have been included
herein in reliance upon the report of Moore Stephens, P.C., independent
certified public accountants, given on the authority of that firm as experts in
accounting and auditing.
Where You Can Find More Information
We have filed with the Securities and Exchange Commission a
Registration Statement on Form SB-2, including amendments, relating to the
common stock offered by this prospectus. This prospectus does not contain all of
the information set forth in the Registration Statement and the exhibits
thereto. Statements contained in this prospectus as to the contents of any
contract or other document referred to are not necessarily complete; however,
all material information with respect to such contracts and documents are
disclosed in this prospectus. In each instance, we refer you to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by the actual contract or
other document.
For further information with respect to us and the common stock offered
hereby, we refer you to the Registration Statement, exhibits and schedules. A
copy of the Registration Statement may be inspected by anyone without charge at
the public reference facilities maintained by the Securities and Exchange
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and will also be available for inspection and copying at the regional
offices of the SEC located at 7 World Trade Center, New York, New York 10048 and
at Citicorp Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material may also be obtained from the Public
Reference Section of the Securities and Exchange Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. Such material may also be
accessed electronically by means of the Securities and Exchange Commission's
home page on the internet at http://www.sec.gov.
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Following this offering, we will become subject to the reporting
requirements of the Exchange Act and, in accordance therewith, we will file
annual, quarterly and special reports, proxy statements and other information
with the Securities and Exchange Commission.
These reports, proxy statements and other information can be inspected
and copied at the public reference facilities of the Commission set forth above,
and copies of these materials can be obtained from the Commission's Public
Reference Section at prescribed rates. We intend to furnish our shareholders
with annual reports containing audited financial statements and any other
periodic reports we deem appropriate or as may be required by law.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
ALARON.COM HOLDING CORPORATION
<S> <C>
Pro Forma Combined Financial Statements [Unaudited]:
Introductory Note................................................................... P-1
Pro Forma Combined Balance Sheet as of April 30, 1999 [Unaudited].................. P-2
Pro Forma Combined Statement of Operations for the three months ended...............
March 31, 1999 [Unaudited]........................................................ P-3
Pro Forma Combined Statement of Operations for the year ended.......................
December 31, 1998 [Unaudited]..................................................... P-4
Notes to Pro Forma Financial Statements [Unaudited]................................. P-5
Historical Financial Statements:
Report of Independent Auditors...................................................... F-1
Balance Sheet as of April 30, 1999 [Unaudited] and December 31, 1998................ F-2
Notes to Balance Sheet.............................................................. F-3 - F-4
ALARON TRADING COMPANY:
Report of Independent Auditors...................................................... F-5
Statement of Financial Condition as of April 30, 1999 [Unaudited] and
July 31, 1998..................................................................... F-6
Statement of Operations for the nine months ended April 30, 1999....................
and 1998 [Unaudited] and for the years ended July 31, 1998 and 1997............... F-7
Statement of Changes in Liabilities Subordinated to Claims of General Creditors..... F-8
Statement of Stockholders Deficit................................................... F-9
Statement of Cash Flows for the nine months ended April 30, 1999 and 1998
[Unaudited] and the years ended July 31, 1998 and 1997............................ F-10
Notes to Financial Statements....................................................... F-11 - F-19
</TABLE>
. . . . . . . .
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ALARON.COM HOLDING CORPORATION
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENT
[UNAUDITED]
- -------------------------------------------------------------------------------
The following pro forma combined balance sheet at April 30, 1999, and combined
statements of operations for the three months then ended March 31, 1999, give
effect to the following:
1. The assignment and contribution of all outstanding shares of Alaron
Trading Company to the Company.
2. The completion of a private placement offering of the company's common
stock.
3. An illustration of an offering of the Company's common stock and the
application of net proceeds therefrom.
The pro forma combined information is based on the historical financial
information of the Company, and Alaron Trading Company giving the effect to the
combination of these entities under common control recorded on the historical
basis, in a manner similar to pooling of interests method of accounting and the
assumptions and adjustments in the accompanying notes to the pro forma financial
statements.
The pro forma combined statements of operations give effect to these
transactions as if they had occurred a the beginning of the latest interim and
fiscal year presented.
The pro forma combined statements have been prepared by the combining Company's
management based upon historical financial statements of the Company and Alaron
Trading Company. These pro forma statements may not be indicative of the results
that actually would have occurred if the combination had been in effect on the
dates indicated or which may be obtained in the future. The pro forma combined
financial statements should be read in conjunction with the historic financial
statement and notes contained elsewhere herein.
P-1
<PAGE>
ALARON.COM HOLDING CORPORATION
- --------------------------------------------------------------------------------
PRO FORMA COMBINED CONDENSED BALANCE SHEET AS OF APRIL 30, 1999. [UNAUDITED]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Historical
----------
Alaron Pro Forma Pro Forma As Adjusted As Adjusted
Alaron.com Trading Adjustments Combined Adjustments Combined
---------- ------- ----------- -------- ----------- --------
Assets:
<S> <C> <C> <C> <C> <C> <C>
Cash and Cash
Equivalents $-- $1,902,083 $3,841,222 [4] $5,743,305 $14,050,000 [1] $19,793,305
Securities Owned -- 22,299,000 -- 22,299,000 22,299,000
Due from Exchange
Clearing Organization -- 8,563 -- 8,563 -- 8,563
Receivable from
Customers - Net -- 158,165 -- 158,165 -- 158,165
Furniture, Equipment
and Leaseholds - Net -- 191,251 -- 191,251 -- 191,251
Other Assets -- 38,223 -- 38,223 -- 38,223
--- ----------- ---------- ----------- ----------- -----------
Total Assets $ -- $24,597,285 $3,841,222 $28,438,507 $14,050,000 $42,488,507
==== =========== ========== =========== =========== ===========
Liabilities and Stockholders' Equity:
Liabilities:
Payable to Customers $-- $ 21,878,925 $ -- $ 21,878,925 $ -- $ 21,878,925
Accrued Commissions -- 414,747 -- 414,747 -- 414,747
Accounts Payable and
Accrued Expenses -- 228,974 -- 228,974 -- 228,974
--- ----------- ---------- ----------- ----------- -----------
Total Liabilities -- 22,522,646 -- 22,522,646 -- 22,522,646
--- ----------- ---------- ----------- ----------- -----------
Subordinated Borrowings -- 1,100,000 -- 1,100,000 -- 1,100,000
--- ----------- ---------- ----------- ----------- -----------
Commitments and
Contingent Liabilities -- -- -- -- -- --
-- -- -- -- -- --
Stockholders' Equity:
Preferred Stock -- -- -- -- -- --
Common Stock 88,933 6,169,928 (6,169,928)[1] 102,762 15,000 [1] 118,017
13,829 [4] 255 [2]
Paid-in Capital (29,644) -- 915,350 [1] 9,908,388 14,034,745 [1] 23,943,133
3,827,393 [4]
Accumulated Deficit -- (5,195,289) -- (5,195,289) -- (5,195,289)
Common Stock
Subscription (59,289) -- 59,289 [1] -- -- --
------- ----------- ---------- ----------- ----------- -----------
Total Stockholders'
Equity -- 974,639 3,841,222 4,815,861 14,050,000 18,865,861
--- ----------- ---------- ----------- ----------- -----------
Total Liabilities and
Stockholders'
Equity $-- $24,597,285 $3,841,222 $28,438,507 $14,050,000 $42,488,507
=== =========== ========== =========== =========== ===========
</TABLE>
See Notes to Pro Forma Combined Financial Statements.
P-2
<PAGE>
ALARON.COM HOLDING CORPORATION
- --------------------------------------------------------------------------------
PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 1999. [UNAUDITED]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Historical
----------
Alaron.com Alaron Trading
---------- --------------
Three months Three months
ended ended
March 31, April 30, Pro Forma Pro Forma
1 9 9 9 1 9 9 9 Adjustment Combined
------- ------- ---------- --------
<S> <C> <C> <C> <C>
Revenues:
Commissions and Fees $ -- $2,973,690 $ -- $ 2,973,690
Interest -- 235,728 -- 235,728
Other Income -- 12,825 -- 12,825
--- --------- --- ---------
Total Revenues -- 3,222,243 -- 3,222,243
--- --------- --- --------
Expenses:
Commissions -- 1,409,683 -- 1,409,683
Employee Compensation -- 567,522 -- 567,522
Clearing Charges -- 448,643 -- 448,643
Communications -- 207,830 -- 207,830
Advertising and Marketing -- 253,246 -- 253,246
Data Processing -- 141,482 -- 141,482
Occupancy and Equipment Rental -- 114,959 -- 114,959
Arbitration Settlement -- 16,475 -- 16,475
Interest Expense -- 34,119 -- 34,119
Other Expenses -- 183,996 -- 183,996
--- --------- --- --------
Total Expenses -- 3,377,955 -- 3,377,955
--- --------- --- --------
Pro Forma Net [Loss] $-- $(155,712) $-- $(155,712)
=== ========= === =========
Pro Forma [Loss] Per Share $ (.01)
=========
Weighted Average Number of
Shares Outstanding 11,801,699
==========
</TABLE>
See Notes to Pro Forma Combined Financial Statements.
P-3
<PAGE>
ALARON.COM HOLDING CORPORATION
- --------------------------------------------------------------------------------
PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 1998. [UNAUDITED]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Historical
----------
Alaron.com Alaron Trading
From Twelve months
Inception to ended
December 31, July 31, Pro Forma Pro Forma
1 9 9 8 1 9 9 8 Adjustment Combined
------- ------- ---------- --------
<S> <C> <C> <C> <C>
Revenues:
Commissions and Fees $-- $12,053,657 $(689,188) [2] $11,364,469
Interest -- 1,341,301 (205,736) [2] 1,135,565
Other Income -- 114,199 83,488 [2] 197,687
--- ---------- -------- ----------
Total Revenues -- 13,509,157 (811,436) 12,697,721
--- ---------- -------- ----------
Expenses:
Commissions -- 5,529,762 (340,521) [2] 5,189,241
Employee Compensation -- 3,015,803 (348,485) [2] 2,708,196
40,878 [3]
Clearing Charges -- 2,551,977 (349,592) [2] 2,202,385
Communications -- 550,114 85,815 [2] 635,929
Advertising and Marketing -- 609,004 (63,604) [2] 545,400
Data Processing -- 688,364 516 [2] 688,880
Occupancy and Equipment Rental -- 422,182 167,315 [2] 589,497
Bad Debt Expense -- 465,000 3,837 [2] 468,837
Arbitration Settlement -- 232,153 (88,498) [2] 143,655
Interest Expense -- 117,627 34,445 [2] 152,072
Other Expenses -- 764,857 (108,547) [2] 656,310
--- ---------- -------- -----------
Total Expenses -- 14,946,843 (966,441) 13,980,402
--- ---------- -------- ----------
Pro Forma Net [Loss] $-- $(1,437,686) $155,005 $(1,282,681)
=== =========== ======== ===========
Pro Forma [Loss] Per Share $ (.11)
===========
Weighted Average Number of
Shares Outstanding 11,801,699
==========
</TABLE>
See Notes to Pro Forma Combined Financial Statements.
P-4
<PAGE>
ALARON.COM HOLDING CORPORATION
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS [UNAUDITED]
- --------------------------------------------------------------------------------
Pro Forma and Combining Adjustments:
[1] To give effect to the assignment and contribution of Alaron Trading
Company common stock to the Company.
[2] Adjustments to update Alaron Trading income statements for the year
ended July 31, 1998. Adjustments to included Alaron Trading revenue
and expenses for the period August 1, 1998 to January 31, 1999 and
elimination of Alaron Trading revenue and expenses for the period
August 1, 1997 to January 31, 1998.
[3] To adjust officer compensation based on employment agreements.
[4] To give effect to the private placement sale of 948,450 common shares
for gross proceeds of $4,268,025 and commissions paid of $426,803
plus 434,466 shares of common stock.
As Adjusted Adjustments:
[1] To illustrate net proceeds of $14,050,000 received from an initial
offering of 1,500,000 shares of the Company's common stock.
[2] To record 22,500 shares issued in connection with a joint venture
agreement and 3,000 shares issued for professional services due upon
closing.
. . . . . . . . .
P-5
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
Alaron.com Holding Corporation
Chicago, Illinois
We have audited the accompanying balance sheet of Alaron.com Holding
Corporation as of December 31, 1998. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
As discussed in Note 1, the Company was inactive on December 31, 1998.
In our opinion, the balance sheet referred to above presents fairly, in
all material, respects, the financial position of Alaron.com Holding Corporation
as of December 31, 1998, in conformity with generally accepted accounting
principles.
MOORE STEPHENS, P. C.
Certified Public Accountants.
New York, New York
February 12, 1999, except
for Note 4F as to which
the date is June 19, 1999
F-1
<PAGE>
ALARON.COM HOLDING CORPORATION
- -------------------------------------------------------------------------------
BALANCE SHEETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
April 30, December 31,
1 9 9 9 1 9 9 8
---------- --------
[Unaudited]
<S> <C> <C>
Assets $ -- $ --
========== ========
Commitments and Contingencies --
Stockholders' Equity:
Preferred Stock, 10,000,000 Shares Authorized, $.01 Par Value,
None Issued $ -- $ --
Common Stock, 30,000,000 Shares Authorized, $.01 Par Value,
8,893,283 Shares Issued and Outstanding 88,933 88,933
Additional Paid-in Capital (29,644) (29,644)
Common Stock Subscription Receivable (59,289) (59,289)
---------- --------
Total Stockholders' Equity $ -- $ --
========== ========
</TABLE>
See Notes to Financial Statements.
F-2
<PAGE>
ALARON.COM HOLDING CORPORATION
NOTES TO BALANCE SHEET
- --------------------------------------------------------------------------------
[1] Description of Business
Alaron.com Holding Corporation [the "Company"], was incorporated on December 4,
1998 [date of inception], under the laws of the State of Delaware [See Note 3].
[2] Description of Securities
The authorized capital stock of the Company consists of 30,000,000 shares of
common stock, $.01 par value per share and 10,000,000 shares of preferred stock,
$.01 par value per share. The common stock carries no conversion rights and is
not subject to redemption or to any sinking fund provisions. All shares of
common stock are entitled to share equally in dividends from sources legally
available therefore when, as and if declared by the Board of Directors and, upon
liquidation or dissolution of the Company, whether voluntary or involuntary, to
share equally in the assets of the Company available for distribution to
stockholders.
[3] Preorganization Subscription Agreement
A preorganization subscription agreement was entered into in December 1998 which
provides for the issuance of 8,893,283 [Post Split] shares of the Company's
common stock on a subscription basis. At December 31, 1998, a subscription
receivable of $59,289 had been recorded as a deduction from stockholders'
equity.
[4] Subsequent Events
[A] Share Assignment and Contribution Agreement - The Company entered into share
assignment and contribution agreements dated in April 1999 [the "Stock
Assignment Agreement"] with the shareholders of Alaron Trading Corporation
["ATC"], to accept the assignment and contribution of all issued and outstanding
common stock of ATC. It is intended that ATC will operate as wholly-owned
subsidiary of the Company.
[B] Stock Option Plan and Executive Stock Option Plan - The Company has adopted
a stock option plan [the "Plan"] in April 1999. The Plan authorizes the grant of
options to purchase up to an aggregate of 300,000 shares of its common stock to
all full-time salaried or commissioned employees of the Company.
The Executive Plan authorizes the grant of options to purchase up to an
aggregate of 350,000 share of the Company's common stock to all executive
officers and members of the Board of Directors.
Stock options granted to purchase common stock under the Plan and the Executive
plan at a price to be determined by the Board of Directors but may not be less
than the fair market value of the common stock. The exercise price of incentive
stock options granted to persons owning more than ten percent of the outstanding
voting stock of the Company must be at 110% of the fair market value of the
common stock on the date of the grant. Options granted under the Plan shall vest
40% at the end of two years from the date such options are granted, and 20% for
each succeeding year. The maximum number of shares for which options may be
granted under the Plan and the Executive Plan during any calendar year may not
exceed 350,000. Other than these limits of 25,000 options per year, there is not
limitation on the aggregate number of stock options which may be granted to any
optionee under the Plan and the Executive Plan.
F-3
<PAGE>
ALARON.COM HOLDING CORPORATION
NOTES TO BALANCE SHEET, Sheet #2
- --------------------------------------------------------------------------------
[4] Subsequent Events [Unaudited] [Continued]
[C] Employment Agreements - In April 1999, the Company entered into five-year
employment agreements with each principal stockholders of the Company. Each
employment agreement will automatically renew for addition one year terms.
The agreements provide for an aggregate of $621,000 to be paid as base salaries
during the first year of employment. Individually each employment agreements
provides for first year compensation ranging between $50,000 to $200,000. Annual
base compensation may be increased in an amount to be determined by the Board of
Directors but must be increased by at least 5% of the base salary for each
succeeding year.
Each agreement also provides for annual incentive bonuses equal to a percentage
of income in excess of $1,000,000.
Three of the above mentioned employment agreements also provide for
nondiscretionary monthly cash bonuses of $45,137 during the term of the
agreement.
[D] Private Placement - In May and June 1999, Prime Asset Management ["Prime"]
acted as a distributor of a foreign private placement of 948,450 shares of the
Company's common stock at a sales price of $4.50 per share. Prime received
434,466 shares of the Company's common stock for being distributor of the
placement. In addition, Prime received warrants to purchase 600,000 shares of
the Company's common stock at $7.50 per share. If Prime exercises the warrants,
the shares of common stock will come from holdings of certain significant
shareholders and not from the Company. The warrants will expire on the earlier
of three year after the offering closing date or 45 days after the closing price
for the Company's common stock being at or above $11.25 for at least 20 out of
30 consecutive trading days.
In connection with the placement, a significant shareholder of Limitup.com will
receive a finders fee of placement 10% [$426,803] of the gross proceeds of the
private placement.
[E] Joint Venture - In February 1999, the Company agreed to purchase a 65%
ownership in Limitup.com, Inc. in exchange of 22,500 shares of the Company
common stock. The Agreement is contingent upon consummation of a public offering
of the Company's common stock. Limitup.com is wholly-owned by a related party of
the Company.
[F] Stock Split - In June 1999, the Company declared a 3-for-2 stock split. All
share data have been retroactively adjusted.
[G] Proposed Public Offering - The Company intends to make a public offering of
its securities. The net proceeds of the offering is expected to be approximately
$14,000,000.
[H] New Authoritative Announcements -The Financial Accounting Standards Board
["FASB"] issued Statement of Financial Accounting Standards ["SFAS"] No. 130,
"Reporting Comprehensive Income." SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. Earlier application is permitted.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required. SFAS No. 130 is not expected to have a
material impact on the Company.
F-4
<PAGE>
ALARON.COM HOLDING CORPORATION
NOTES TO BALANCE SHEET, Sheet #3
- --------------------------------------------------------------------------------
[4] Subsequent Events [Unaudited] [Continued]
The FASB has issued SFAS No. 131, "Disclosures About Segments of an Enterprise
and Related Information." SFAS No. 131 changes how operating segments are
reported in annual financial statements and requires the reporting of selected
information about operating segments in interim financial reports issued to
shareholders. SFAS No. 131 is effective for periods beginning after December 15,
1997, and comparative information for earlier years is to be restated. SFAS No.
131 need not be applied to interim financial statements in the initial year of
its application. SFAS No. 131 is not expected to have a material impact on the
Company.
In February 1998, the FASB issued SFAS No. 132, "Employers Disclosure about
Pension and Other Postretirement Benefits," which is effective for fiscal years
beginning after December 15, 1997. The modified disclosure requirements are not
expected to have a material impact on the Company.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for fiscal years
beginning after June 15, 2000. SFAS No. 133 is not expected to have a material
impact on the Company.
In October 1998, the FASB issued SFAS No. 134, "Accounting for Mortgage-Backed
Securities Retained after the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking Enterprises." SFAS No. 134 is not expected to have a material
impact on the Company.
In February 1999, the FASB issued SFAS No. 135, which is a recission of SFAS No.
75, "Deferral of the Effective Date of Certain Accounting Requirements for
Pension Plans of State and Local Government Units" SFAS No. 135 is not expected
to have a material impact on the Company.
The FASB has had on its agenda a project to address certain practice issues
regarding Accounting Principles Board ["APB"] Opinion No. 25, "Accounting for
Stock Issued to Employees." The FASB plans on issuing various interpretations of
APB Opinion No. 25 to address these practice issues. The proposed effective date
of these interpretations would be the issuance date of the final Interpretation,
which is expected to be in September 1999. If adopted, the Interpretation would
be applied prospectively but would be applied to plan modification and grants
that occur after December 15, 1998. The FASB's tentative interpretations are as
follows:
F-5
<PAGE>
ALARON.COM HOLDING CORPORATION
NOTES TO BALANCE SHEET, Sheet #4
- --------------------------------------------------------------------------------
[4] Subsequent Events [Unaudited] [Continued]
o APB Opinion No. 25 has been applied in practice to include in its
definition of employees, outside members of the board or directors and
independent contractors. The FASB's interpretation of APB Opinion No. 25
will limit the definition of an employee to individuals who meet the
common law definition of an employee [which also is the basis for the
distinction between employees and nonemployees in the current U.S. tax
code]. Outside members of the board of directors and independent
contractors would be excluded from the scope of APB Opinion No. 25
unless they qualify as employees under common law. Accordingly, the cost
of issuing stock options to board members and independent contractors
not meeting the common law definition of an employee will have to be
determined in accordance with FASB Statement No. 123, "Accounting for
Stock-Based Compensation," and usually recorded as an expense in the
period of the grant [the service period could be prospective, however,
depending on the terms of the options].
o Options [or other equity instruments] of a parent company issued to
employees of a subsidiary should be considered options, etc. issued by
the employer corporation in the consolidated financial statements and
accordingly, APB Opinion No. 25 should continue to be applied in such
situations. This interpretation would apply to subsidiary companies
only; it would not apply to equity method investees or joint ventures.
o If the terms of an option [originally accounted for as a fixed option]
are modified during the option term to directly change the exercise
price, the modified option should be accounted for as a variable option.
Variable grant accounting should be applied to the modified option from
the date of the modification until the date of exercise. Consequently,
the final measurement of compensation expense would occur at the date of
exercise. The cancellation of an option and the issuance of a new option
with a lower exercise price shortly thereafter [for example, within six
months] to the same individual should be considered in substance a
modified [variable] option.
o Additional interpretations will address how to measure compensation
expense when a new measurement date is required.
[I] Unaudited Interim Statements - The financial statements as of April 30, 1999
and for the nine months ended April 30, 1999 and 1998 are unaudited; however in
the opinion of management all adjustments [consisting solely of normal recurring
adjustments] necessary to make the interim financial statements not misleading
have been made. The results of the interim period are not necessarily indicative
of the results to be obtained for a full fiscal year.
. . . . . . . . .
F-6
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
Alaron Trading Corporation
Chicago, Illinois
We have audited the accompanying statement of financial condition of
Alaron Trading Corporation as of July 31, 1998, and the related statements of
operations, changes in liabilities subordinated to claims of general creditors,
changes in stockholders' equity and cash flows for the years ended July 31, 1998
and 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material, respects, the financial position of Alaron Trading
Corporation as of July 31, 1998, and the results of its operations and its cash
flows for the years ended July 31, 1998 and 1997, in conformity with generally
accepted accounting principles.
MOORE STEPHENS, P. C.
Certified Public Accountants.
Cranford, New Jersey
February 12, 1999
F-7
<PAGE>
ALARON TRADING COMPANY
- --------------------------------------------------------------------------------
STATEMENTS OF FINANCIAL CONDITION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
April 30, July 31,
1 9 9 9 1 9 9 8
------------ ------------
[Unaudited]
Assets:
<S> <C> <C>
Cash and Cash Equivalents $ 1,902,083 $ 2,525,421
Securities Owned 22,299,000 18,821,639
Due from Exchange Clearing Organization 8,563 103,005
Receivable from Customers [Net of Allowance of $465,000
and $453,112 at April 30, 1998 and July 31, 1998, Respectively] 158,165 312,662
Furniture, Equipment and Leasehold Improvements - At Cost
[Net of Accumulated Depreciation and Amortization] 191,251 216,564
Other Assets 38,223 57,303
------------ ------------
Total Assets $ 24,597,285 $ 22,036,594
============ ============
Liabilities and Stockholders' Equity:
Liabilities:
Payable to Customers $ 21,878,925 $ 18,862,013
Accrued Commissions 414,747 394,116
Accounts Payable and Accrued Expenses 228,974 325,352
------------ ------------
Total Liabilities 22,522,646 19,581,481
------------ ------------
Subordinated Borrowings 1,100,000 1,000,000
------------ ------------
Commitments and Contingent Liabilities -- --
------------ ------------
Stockholders' Equity:
Common Stock, No Par Value; 20,000,000 Shares Authorized,
1,979,285 Shares Issued and Outstanding 6,169,928 6,090,980
Accumulated Deficit (5,195,289) (4,635,867)
------------ ------------
Total Stockholders' Equity 974,639 1,455,113
------------ ------------
Total Liabilities and Stockholders' Equity $ 24,597,285 $ 22,036,594
============ ============
</TABLE>
The Accompanying Notes are an Integral Part of these Financial Statements.
F-8
<PAGE>
ALARON TRADING COMPANY
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine months ended Years ended
April 30, July 31,
---------------------------- ----------------------------
1 9 9 9 1 9 9 8 1 9 9 8 1 9 9 7
------------ ------------ ------------ ------------
[Unaudited] [Unaudited]
Revenues:
<S> <C> <C> <C> <C>
Commissions and Fees $ 8,173,769 $ 8,995,099 $ 12,053,658 $ 11,046,203
Interest 713,009 1,043,235 1,341,301 1,148,476
Other Income 101,480 60,079 114,199 109,915
------------ ------------ ------------ ------------
Total Revenues 8,988,258 10,098,413 13,509,158 12,304,594
------------ ------------ ------------ ------------
Expenses:
Commissions 3,696,180 4,164,424 5,529,761 5,668,973
Employee Compensation and Related
Benefits 1,852,977 2,238,609 3,015,803 2,800,355
Clearing Charges, Exchange Fees and Other
Trade Costs 1,365,311 1,969,947 2,551,977 2,040,188
Communications 426,597 418,139 550,114 537,729
Advertising and Marketing 515,975 458,819 609,004 531,488
Data Processing 432,542 471,145 688,364 458,067
Occupancy and Equipment Rental 400,706 205,483 422,182 262,681
Bad Debt Expense 3,837 350,000 465,000 366,507
Arbitration Settlements 35,964 135,584 232,153 78,154
Interest Expense 93,219 79,740 117,627 --
Other Administrative Expenses 724,372 701,545 764,857 513,774
------------ ------------ ------------ ------------
Total Expenses 9,547,680 11,193,435 14,946,842 13,257,916
------------ ------------ ------------ ------------
Net Loss $ (559,422) $ (745,022) $ (1,437,684) $ (953,322)
============ ============ ============ ============
</TABLE>
The Accompanying Notes are an Integral Part of these Financial Statements.
F-9
<PAGE>
ALARON TRADING COMPANY
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN LIABILITIES SUBORDINATED TO CLAIMS OF GENERAL
CREDITORS
- --------------------------------------------------------------------------------
Subordinated Borrowings at July 31, 1996 $ --
Maturities --
Borrowings --
Subordinated Borrowings at July 31, 1997 --
Maturities --
Borrowings 1,000,000
----------
Subordinated Borrowings at July 31, 1998 1,000,000
Maturities --
Borrowings 100,000
----------
Subordinated Borrowings at April 30, 1999 [Unaudited] $1,100,000
==========
The Accompanying Notes are an Integral Part of these Financial Statements.
F-10
<PAGE>
ALARON TRADING COMPANY
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock
------------------------- Total
Stockholders' Accumulated
Shares Amount Deficit Equity
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance - July 31, 1996 1,800,000 $ 4,341,846 $(2,244,861) $ 2,096,985
Capital Contributions -- 1,325,675 -- 1,325,675
Net Loss -- -- (983,322) (953,322)
----------- ----------- ----------- -----------
Balance - July 31, 1997 1,800,000 5,667,521 (3,198,183) 2,469,338
Issuance of Common Stock 176,285 84,265 -- 84,265
Capital Contributions -- 1,157,984 -- 1,157,984
Capital Withdrawals -- (818,790) -- (818,790)
Net Loss -- -- (1,437,684) (1,437,684)
----------- ----------- ----------- -----------
Balance - July 31, 1998 1,976,285 6,090,980 (4,635,867) 1,455,113
Capital Contributions -- 700,000 -- 700,000
Capital Withdrawals -- (621,052) -- (621,052)
Net Loss -- -- (559,422) (559,422)
----------- ----------- ----------- -----------
Balance - April 30, 1999
[Unaudited] 1,976,285 $ 6,169,928 $(5,195,289) $ 974,639
=========== =========== =========== ===========
</TABLE>
The Accompanying Notes are an Integral Part of these Financial Statements.
F-11
<PAGE>
ALARON TRADING COMPANY
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine months ended Years ended
April 30, July 31,
----------------------- ----------------------
1 9 9 9 1 9 9 8 1 9 9 8 1 9 9 7
------- ------- ------- -------
[Unaudited] [Unaudited]
Operating Activities:
<S> <C> <C> <C> <C>
Net Loss $ (559,422) $(1,095,022) $(1,437,684) $ (953,322)
Adjustments to Reconcile Net Loss to
Net Cash [Used for] Operating Activities:
Depreciation and Amortization 25,313 10,500 14,471 10,564
Provision for Doubtful Accounts 3,837 350,000 465,000 366,507
Issuance of Common Stock as
Compensation -- -- 84,265 --
Changes in Assets and Liabilities:
[Increase] Decrease in:
Securities Owned (3,481,198) 4,381,507 7,349,537 (8,404,054)
Receivable from Clearing Broker 94,442 (2,556,803) 669,685 (241,503)
Receivable from Customers 154,497 (275,132) (278,519) (384,787)
Other Assets 19,080 (179,015) (20,156) 2,973
Increase [Decrease] in:
Payable to Customers 3,016,912 (2,189,623) (8,177,794) 8,915,189
Accounts Payable and Accrued
Expenses (96,378) 133 211,688 (166,217)
Accrued Commissions 20,631 57,029 (52,495) 100,240
----------- ----------- ----------- -----------
Net Cash - Operating Activities (802,286) (1,496,426) (1,172,002) (754,410)
----------- ----------- ----------- -----------
Investing Activities:
Purchase of Equipment -- (26,318) -- (11,939)
----------- ----------- ----------- -----------
Financing Activities:
Capital Contributions 700,000 2,103,515 1,157,984 1,325,675
Capital Withdrawals (621,052) (1,734,322) (818,790) --
Proceeds from Subordinated Borrowing 100,000 1,000,000 1,000,000 --
----------- ----------- ----------- -----------
Net Cash - Financing Activities 178,948 1,369,193 1,339,194 1,325,675
----------- ----------- ----------- -----------
Net [Decrease] Increase in Cash and
Cash Equivalents (623,338) (153,551) 167,192 559,326
Cash and Cash Equivalents - Beginning
of Periods 2,525,421 2,358,229 2,358,229 1,798,903
----------- ----------- ----------- -----------
Cash and Cash Equivalents - End
of Periods $ 1,902,083 $ 2,204,678 $ 2,525,421 $ 2,358,229
=========== =========== =========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the periods for:
Interest $ 93,219 $ 79,740 $ 117,627 $ --
Taxes $ -- $ -- $ -- $ --
The Accompanying Notes are an Integral Part of these Financial Statements.
</TABLE>
F-12
<PAGE>
ALARON TRADING CORPORATION
NOTES TO FINANCIAL STATEMENTS
[Information as of and for the Nine Months ended April 30, 1999 is Unaudited]
- --------------------------------------------------------------------------------
[1] Description of Business
Alaron Corporation [the "Company"] is an Illinois corporation organized in 1989
and provides both "full" and "discount" services to individual and corporate
customers effecting transactions in futures contracts and options. The Company
is registered with the Commodity Futures Trading Commission ["CFTC"] and the
Nation Futures Association ["NFA"]. Trading activity is conducted through an
omnibus account maintained with a clearing member, who is a member of various
commodity exchanges.
[2] Significant Accounting Policies
Cash and Cash Equivalents - Cash and cash equivalents include highly liquid
instruments, with original maturities of less than ninety days, that are not
held for sale in the ordinary course of business.
Securities and Commodities Owned - Proprietary securities and commodities
transactions are recorded on the transaction date; positions are marked to
market with related gains and losses recognized currently in income. Gains and
losses on open commodity futures, options on futures contracts, and forward
contracts, which are marked to market, are recognized currently in income.
Depreciation and Amortization - Depreciation of furniture and equipment is
computed using the straight line method over the estimated useful lives of the
assets. Leasehold improvements are amortized on a straight line basis over the
lesser of the estimated useful lives of the assets or the lease term.
Income Recognition - Commissions and related expenses are recorded on a
half-turn basis for commodity futures and options transactions. Commission
income is presented net of commissions paid or accrued to introducing brokers.
Advertising - The Company expenses the production costs of advertising as the
costs are incurred.
Income Taxes - The Company has elected to be taxed as an "S corporation" under
provisions of the Internal Revenue Code. Under those provisions, the
stockholders are liable for individual federal income taxes on their respective
share of the Company's taxable income. Therefore, no provision or liability is
established for federal income taxes in the Company's financial statements. Due
to net losses incurred, pro forma income tax information is not presented as it
would not be significantly different from actual results of the Company.
Translation of Foreign Currencies - The Company accounts for its transactions
denominated in foreign currencies in accordance with Financial Accounting
Standards Board ["FASB"] Statement of Financial Accounting Standards No. 52,
"Foreign Currency Translation." Assets and liabilities denominated in foreign
currencies are translated at year-end rates of exchange, while the income
statement accounts are translated at the rate at time of trade. Gains or losses
resulting from foreign currency transactions are included in net income.
F-13
<PAGE>
ALARON TRADING CORPORATION
NOTES TO FINANCIAL STATEMENTS, Sheet #2
[Information as of and for the Nine Months ended April 30, 1999 is Unaudited]
- --------------------------------------------------------------------------------
Use of Estimates in the Preparation of Financial Statements - The preparation of
financial statements in conformity with generally accepted accounting principles
["GAAP"] and prevailing industry practices require management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements as well as the reported amounts of revenues
and expenses during the period. Actual results could differ from those
estimates.
Reclassification - Certain previously reported amounts have been reclassified to
conform with current period presentation.
[3] Fair Value of Financial Instruments
Substantially all of the Company's assets and liabilities are considered
financial instruments as defined by Statement of Financial Accounting Standards
No. 107. The financial instruments of the Company are reported in the financial
statements at market or fair value, or at amounts that approximate fair value
because of there short maturity. The fair value estimate of the Company's
subordinated borrowings approximate the current rates offered to the Company
with substantially the same characteristics and maturities.
[4] Assets Segregated or Held in Separate Accounts Under Federal or Other
Regulations
Included in the statement of financial condition are assets segregated or held
in separate accounts under the Commodity Exchange Act and other domestic
regulations as follows:
April 30, July 31,
1 9 9 9 1 9 9 8
---------- ----------
[Unaudited]
Cash and Cash Equivalents $ 268,360 $ 555,447
Securities Owned 21,822,551 18,406,062
---------- ----------
Total Segregated Assets $22,090,911 $18,961,509
----------------------- =========== ===========
[5] Receivables from and Payables to Customers
Receivables from and payables to customers represent balances arising in
connection with commodities transactions, including gains and losses on open
commodity futures contracts. Marketable, customer-owned securities, consisting
primarily of U.S. Government securities, are held by the Company as collateral
for receivables from customers. Customer-owned securities held by the Company
and the net value of customers' options on futures positions are not reflected
in the consolidated statement of financial condition. A portion of these
securities has been deposited as margin with exchange clearing organizations.
F-14
<PAGE>
ALARON TRADING CORPORATION
NOTES TO FINANCIAL STATEMENTS, Sheet #3
[Information as of and for the Nine Months ended April 30, 1999 is Unaudited]
- --------------------------------------------------------------------------------
[6] Securities Owned
The components of securities owned, at market value, are as follows:
April 30, July 31,
1 9 9 9 1 9 9 8
----------- -----------
[Unaudited]
Overnight Investments $16,042,640 $10,517,682
U.S. Treasury Obligations 6,256,360 8,270,319
Marketable Equity Securities -- 33,638
----------- -----------
Totals $22,299,000 $18,821,639
------ =========== ===========
Overnight investments represent the simultaneous purchase and resale of U.S.
Treasury obligations with same day settlement on the purchase and next day
settlement on the resale.
[7] Furniture, Equipment and Leasehold Improvements
Furniture, equipment and leasehold improvements consist of:
July 31,
1 9 9 8
---------
Leasehold Improvements $ 339,643
Furniture and Equipment 78,977
Less: Accumulated Depreciation and Amortization (202,056)
---------
Net $ 216,564
--- =========
Depreciation expense of $14,471 and $10,564 was recorded for the years ended
July 31, 1998 and 1997, respectively.
[8] Liabilities Subordinated to Claims of General Creditors
Liabilities subordinated to claims of general creditors at July 31, 1998
represent a $1,000,000 borrowing from a stockholder pursuant to a subordinated
loan agreement. The borrowing provides for interest at the rate of 12.50%
percent per annum and was renewed subsequent to July 31, 1998 to mature in
September 1999.
Subordinated stockholder borrowings are available in computing adjusted net
capital under the minimum capital requirements. To the extent that such
borrowings are required for the Company's continued compliance with minimum net
capital requirements, they may not be repaid.
For the year ended July 31, 1998, the Company recorded $101,000 in interest
expense related to the subordinated borrowing.
F-15
<PAGE>
ALARON TRADING CORPORATION
NOTES TO FINANCIAL STATEMENTS, Sheet #4
[Information as of and for the Nine Months ended April 30, 1999 is Unaudited]
- --------------------------------------------------------------------------------
The National Futures Association ["NFA"], the Company's Designated
Self-Regulatory Organization, has approved this borrowings as acceptable
regulatory capital. These liabilities are subordinated to the claims of present
and future general creditors, and the loan agreements provide that the notes
cannot be repaid if such repayments will cause the Company to fail to meet the
financial requirements established by the CFTC.
[9] Commitments and Contingencies
Financial instruments sold, not yet purchased, represent obligations of the
Company to deliver specified financial instruments or commodities at contracted
prices, thereby creating commitments to purchase the financial instruments or
commodities in the markets at the prevailing prices. Consequently, the Company's
ultimate obligation to satisfy the sale of financial instruments sold, not yet
purchased, may exceed the amounts recognized in the statement of financial
condition.
The Company leases office space and equipment under lease agreements, two of
which are from an affiliate, expiring December 31, 2004. At July 31, 1998, the
aggregate minimum annual rental commitments under the leases, exclusive of
additional payments that may be required for certain increases in operating
expenses and taxes, are as follows:
Years Ending
July 31, Affiliate Other Amount
-------- ---------- -------- ----------
1999 $ 340,000 $ 63,042 $ 403,042
2000 350,000 58,818 408,818
2001 360,400 44,533 404,933
2002 371,216 21,942 393,158
2003 292,465 -- 292,465
Thereafter 152,082 -- 152,082
---------- -------- ----------
Totals $1,866,163 $188,335 $2,054,498
------ ========== ======== ==========
Rent expense for the year ended July 31, 1998 was $194,430. This includes
$108,134 paid to an affiliate for the year ended July 31, 1998, respectively.
Various legal actions are pending against the Company, many involving ordinary
routine litigation incidental to the business. In the opinion of management,
after consultation with outside counsel, the ultimate liability, if any, in
excess of amount currently recorded, will not have a material effect on the
financial condition, results of operations or liquidity of the Company.
[10] Related Party Transactions
An entity affiliated through common ownership introduces customers to the
Company. For the year ended July 31, 1998, net commissions from customers
introduced to the Company by this affiliate were approximately $519,000.
F-16
<PAGE>
ALARON TRADING CORPORATION
NOTES TO FINANCIAL STATEMENTS, Sheet #5
[Information as of and for the Nine Months ended April 30, 1999 is Unaudited]
- --------------------------------------------------------------------------------
[11] Off-Balance-Sheet Risk and Concentration of Credit Risk
The Company is a futures commission merchant responsible for the credit risk of
the customers it introduces to, and which are carried on an omnibus basis on the
books of, its clearing broker. The Company's customers are primarily individual
investors, some of whom are introduced to the Company by introducing brokers. To
reduce its risk, the Company requires its customers to meet, at a minimum, the
greater of the margin requirements established by each of the exchanges at which
contracts are traded or the margin requirement established by its clearing
broker. In addition, the Company has entered into agreements for accounts
originating from other introducing brokers whereby such amounts are guaranteed
by these brokers. Margin is a good faith deposit from the customer, which
reduces risk to the Company of failure on behalf of the customer to fulfill any
obligation under these contracts. To minimize its exposure to risk of loss due
to market variation, the Company adjusts these margin requirements as needed.
Customers may also be required to deposit additional funds, securities or other
collateral. As a result of market variation, the Company may satisfy margin
requirements by liquidating certain customer positions. Management believes the
margin deposits and collateral held at July 31, 1998 were adequate to minimize
the risk of material loss that could be created by positions held at that time.
The Company enters into various transactions with futures commission merchants
and other financial institutions. In the event counterparties do not fulfill
their obligations, the Company may be exposed to risk. The risk of default
depends on the creditworthiness of the counterparties to these transactions. It
is the Company's policy to monitor the creditworthiness of each counterparty
with which it conducts business.
[12] Concentrations of Credit
The Company is engaged in various trading and brokerage activities whose
counterparties primarily include introducing broker-individual investors, and
financial institutions. In the event counterparties do not fulfill their
obligations, the Company may be exposed to risk. The risk of default depends on
the creditworthiness of the counterparty or issuer of the instrument. It is the
Company's policy to review, as necessary, the credit standing of each
counterparty with which it conducts business.
As a futures commission merchant, the Company is engaged in brokerage activities
whose counterparties primarily include broker-dealers, banks, and other
financial institutions. The Company's exposure to credit risk associated with
nonperformance of the customers in fulfilling their contractual obligations
pursuant to futures transactions can be directly affected by volatile trading
markets that may impair the customer's ability to satisfy their obligations to
the Company.
The Company does not anticipate nonperformance by clients or counterparties in
the preceding situations. If either a customer or a counterparty fails to
perform, the Company may be required to discharge the obligation of the
nonperforming party and, in such circumstances, the Company may sustain a loss.
The Company has a policy of reviewing, as considered necessary, the credit
standing of each counterparty with which it conducts business.
[13] Net Capital Requirements
The Company is subject to the minimum capital rules of several commodity
regulatory organizations. Under the more restrictive of these rules, the Company
is required to maintain "adjusted net capital" equivalent to the greater of
$250,000 or 4 percent of its "funds required to be segregated for the net
capital computation," as these terms are defined. Adjusted net capital and funds
required to be segregated for the net capital computation change from day to
day, but at July 31, 1998, the Company had adjusted net capital and adjusted net
capital requirements of approximately $2,134,000 and $915,000, respectively.
Regulatory net capital requirements may effectively restrict the payment of cash
dividends, the repayment of subordinated loans [Note 8], and the withdrawal of
capital.
F-17
<PAGE>
ALARON TRADING CORPORATION
NOTES TO FINANCIAL STATEMENTS, Sheet #6
[Information as of and for the Nine Months ended April 30, 1999 is Unaudited]
- --------------------------------------------------------------------------------
[14] Prior Period Adjustment
The Company has recorded an adjustment for an error in initially depreciating
its leaseholds improvements over a tax life versus the life of the related lease
term. This resulted in the Company understating the depreciation expense for the
year ended July 31, 1997 in the amount of $23,182. During the year ended July
31, 1998, the Company recorded a charge of approximately $110,000 to adjust
accumulated amortization for lower depreciation expense recorded in prior years.
This resulted in an excess charge of approximately $86,817 being incurred in
operations for the year ended July 31, 1998. The adjustment did not have any
effect on income taxes for the period ended July 31, 1998 and 1997. The balance
sheet, statement of operations, stockholders' equity, and cash flow have been
restated to reflect this adjustment.
[15] New Authoritative Pronouncements
The Financial Accounting Standards Board ["FASB"] issued Statement of Financial
Accounting Standards ["SFAS"] No. 130, "Reporting Comprehensive Income." SFAS
No. 130 is effective for fiscal years beginning after December 15, 1997. Earlier
application is permitted. Reclassification of financial statements for earlier
periods provided for comparative purposes is required. SFAS No. 130 is not
expected to have a material impact on the Company.
The FASB has issued SFAS No. 131, "Disclosures About Segments of an Enterprise
and Related Information." SFAS No. 131 changes how operating segments are
reported in annual financial statements and requires the reporting of selected
information about operating segments in interim financial reports issued to
shareholders. SFAS No. 131 is effective for periods beginning after December 15,
1997, and comparative information for earlier years is to be restated. SFAS No.
131 need not be applied to interim financial statements in the initial year of
its application. SFAS No. 131 is not expected to have a material impact on the
Company.
In February 1998, the FASB issued SFAS No. 132, "Employers Disclosure about
Pension and Other Postretirement Benefits," which is effective for fiscal years
beginning after December 15, 1997. The modified disclosure requirements are not
expected to have a material impact on the Company.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for fiscal years
beginning after June 15, 2000. SFAS No. 133 is not expected to have a material
impact on the Company.
In October 1998, the FASB issued SFAS No. 134, "Accounting for Mortgage-Backed
Securities Retained after the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking Enterprises." SFAS No. 134 is not expected to have a material
impact on the Company.
In February 1999, the FASB issued SFAS No. 135, which is a recission of SFAS No.
75, "Deferral of the Effective Date of Certain Accounting Requirements for
Pension Plans of State and Local Government Units" SFAS No. 135 is not expected
to have a material impact on the Company.
The FASB has had on its agenda a project to address certain practice issues
regarding Accounting Principles Board ["APB"] Opinion No. 25, "Accounting for
Stock Issued to Employees." The FASB plans on issuing various interpretations of
APB Opinion No. 25 to address these practice issues. The proposed effective date
of these interpretations would be the issuance date of the final Interpretation,
which is expected to be in September 1999. If adopted, the Interpretation would
be applied prospectively but would be applied to plan modification and grants
that occur after December 15, 1998. The FASB's tentative interpretations are as
follows:
F-18
<PAGE>
ALARON TRADING CORPORATION
NOTES TO FINANCIAL STATEMENTS, Sheet #7
[Information as of and for the Nine Months ended April 30, 1999 is Unaudited]
- --------------------------------------------------------------------------------
[15] New Authoritative Pronouncements [Continued]
o APB Opinion No. 25 has been applied in practice to include in its
definition of employees, outside members of the board or directors and
independent contractors. The FASB's interpretation of APB Opinion No. 25
will limit the definition of an employee to individuals who meet the
common law definition of an employee [which also is the basis for the
distinction between employees and nonemployees in the current U.S. tax
code]. Outside members of the board of directors and independent
contractors would be excluded from the scope of APB Opinion No. 25
unless they qualify as employees under common law. Accordingly, the cost
of issuing stock options to board members and independent contractors
not meeting the common law definition of an employee will have to be
determined in accordance with FASB Statement No. 123, "Accounting for
Stock-Based Compensation," and usually recorded as an expense in the
period of the grant [the service period could be prospective, however,
depending on the terms of the options].
o Options [or other equity instruments] of a parent company issued to
employees of a subsidiary should be considered options, etc. issued by
the employer corporation in the consolidated financial statements and
accordingly, APB Opinion No. 25 should continue to be applied in such
situations. This interpretation would apply to subsidiary companies
only; it would not apply to equity method investees or joint ventures.
o If the terms of an option [originally accounted for as a fixed option]
are modified during the option term to directly change the exercise
price, the modified option should be accounted for as a variable option.
Variable grant accounting should be applied to the modified option from
the date of the modification until the date of exercise. Consequently,
the final measurement of compensation expense would occur at the date of
exercise. The cancellation of an option and the issuance of a new option
with a lower exercise price shortly thereafter [for example, within six
months] to the same individual should be considered in substance a
modified [variable] option.
o Additional interpretations will address how to measure compensation
expense when a new measurement date is required.
[16] Unaudited Interim Statements
The financial statements as of April 30, 1999 and for the nine months ended
April 30, 1999 and 1998 are unaudited; however in the opinion of management all
adjustments [consisting solely of normal recurring adjustments] necessary to
make the interim financial statements not misleading have been made. The results
of the interim period are not necessarily indicative of the results to be
obtained for a full fiscal year.
[17] Subsequent Events
In February 1999, the Company borrowed $100,000 from a stockholder pursuant to a
subordinated loan agreement. The borrowing provides for interest at the rate of
12.50% percent per annum and is scheduled to mature in February 2000. The NFA
has approved this borrowing as acceptable regulatory capital.
In April 1999, shareholders of the Company entered into an assignment and
contribution agreement with Alaron.com Holding Corporation. This agreement
provides for all outstanding common shares of the Company to be transferred to
Alaron.com Holding Corporation. Accordingly, the Company will operate as a
wholly-owned subsidiary of Alaron.com.
. . . . . . . . . . .
F-19
<PAGE>
We have not authorized any dealer,
salesperson or any other person to give any
information or to represent anything about
this offering which is not already in this
prospectus. You must not rely on any
unauthorized information. This offer
relates only to our securities described in
this prospectus. This prospectus is only
valid in those jurisdictions where our
securities can be legally bought or sold.
The information in this prospectus is ALARON.COM
current as of __________________, 1999. HOLDING
CORPORATION
TABLE OF CONTENTS
-----------------
Page
----
Summary.................................
The Risks You Face...................... 1,500,000 Shares of Common Stock
Forward Looking Statements..............
Alaron.com Holding Corporation..........
Use of Proceeds.........................
Dividend Policy.........................
Dilution ..............................
Capitalization.......................... ----------
Management's Discussion and Analysis
of Financial Condition and
Results of Operations.................
Business................................
Management.............................. PROSPECTUS
Principal Stockholders..................
Certain Transactions....................
Description of Securities...............
Shares Eligible for Future Sale.........
Underwriting............................
Legal Matters...........................
Experts .............................. NATIONAL SECURITIES
Where You Can Find More Information.....
CORPORATION
Dealer Prospectus Delivery Obligation
Until _____, 1999 (25 days after the date
of this prospectus) all dealers that effect ______________________, 1999
transactions in these securities, whether ______________
or not participating in this offering, may
be required to deliver a prospectus. This
is in addition to the dealers' obligation
to deliver a prospectus when acting as
underwriters and with respect to their
unsold allotments or subscriptions.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
The Company's Certificate of Incorporation eliminates the personal
liability of directors to the Company or its stockholders for monetary damages
for breach of fiduciary duty to the extent permitted by Delaware law. The
Company's Certificate of Incorporation and By-Laws provide that the Company
shall indemnify its officers and directors to the extent permitted by Subsection
145 of the General Corporation Law of the State of Delaware, which authorizes a
corporation to indemnify directors, officers, employees or agents of the
Corporation in non-derivative suits if such party acted in good faith and in a
manner such party reasonably believed to be in or not opposed to the best
interest of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection 145 further provides that indemnification shall be provided if the
party in question is successful on the merits or otherwise.
Reference is hereby made to the caption "Management - Limitation of
Liability and Indemnification of Directors" in the prospectus which is a part of
this Registration Statement for a description of indemnification arrangements
between the Company and its directors.
The form of Underwriting Agreement, included as Exhibit 1.1, provides
for indemnification of the Company and certain controlling persons under certain
circumstances, including liabilities under the Securities Act of 1933, as
amended ("Securities Act"). Insofar as indemnification for liabilities under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions of the Underwriting Agreement,
the Company has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and therefore is unenforceable.
Item 25. Other Expenses of Issuance and Distribution.
The estimated expenses of the distribution, all of which are to be
borne by the Company, are as follows:
SEC Registration Fee $ 6,755
*NASD Fee 2,300
*Nasdaq Fees 10,000
*Blue Sky Fees and Expenses 29,000
*Transfer Agent Fees 5,000
*Accounting Fees and Expenses 45,000
*Legal Fees and Expenses 110,000
*Underwriters' Non-Accountable Expense Allowance 450,000
*Printing and Engraving Expenses 75,000
*Miscellaneous Fees and Expenses 66,945
--------
Total $800,000
========
* All amounts are estimates.
II-1
<PAGE>
Item 26. Recent Sales of Unregistered Securities.
In December, 1998, the Registrant was organized and filed its
Certificate of Incorporation with the Secretary of State of the State of
Delaware. In connection with such organization, Steven A. Greenberg received
3,645,000 shares of the Registrant, Michael A. Greenberg received 801,900 shares
of the Registrant, Joel W. Greenberg, as Trustee of the Greenberg Family Trust,
received 2,843,100 shares of the Registrant, Carrie A. Greenberg received
810,000 shares of the Registrant, Joel W. Greenberg received 704,349 shares of
the Registrant and Barry S. Isaacson received 88,934 shares of the Registrant.
All amounts reflect the three-for-two stock split in June, 1999.
In February, 1999, Steven, Michael and Carrie Greenberg purchased from
Robert Stein, now an Associated Person of Alaron Trading, a 65% interest in
Limitup.com, Inc., in exchange for an aggregate of 22,500 shares of Alaron.com
common stock they owned personally. Before the date of this Prospectus, the
Greenberg family contributed their 65% interest in Limitup.com to the Company.
As a result, Limitup.com has become the joint venture between the Company and
Mr. Stein described in this prospectus.
In April, 1999, Steven A. Greenberg, Michael A. Greenberg, Carrie A.
Greenberg and the Greenberg Family Trust contributed all of the outstanding
stock of Alaron Trading Corporation to Alaron.com in a tax-free transfer.
In May and June, 1999, the Registrant privately sold an aggregate of
656,300 shares (948,450 post-split) of common stock at a price of $6.75 ($4.50
post-split) per share to 43 European investors. None of such shares are
registered and, in accordance with the requirements of Regulation S of the
Securities and Exchange Commission, such shares cannot be resold in United
States markets or to United States citizens for at least one year from their
issuance and thereafter they may be sold only if they are registered or are
eligible for an exemption from United States registration. Each investor has
certified to the Registrant such investor's understanding and agreement to those
requirements.
In connection with the placement, the Registrant paid Robert Stein, the
owner of the 35% interest in Limitup.com, a finder's fee of 10% of the gross
proceeds ($426,803) and Prime Asset Management AG of Frankfurt, Germany, has
received 289,644 shares (434,466 post-split) of the Registrant's common stock as
the distributor of the European placement. The shares issued to Prime Asset
Management AG are subject to the same Regulation S restrictions on resale as are
the shares sold to the 43 investors in Europe.
Each of the foregoing transactions was exempt from registration under
the Securities Act of 1933, as amended, pursuant to the provisions of Section
4(2) thereof as not involving a public offering, and with respect to the
European private placement completed in May and June, 1999, Regulation S under
the Securities Act for offers and sales made outside the United States. With
respect to each transaction, no person acting on the Registrant's behalf offered
or sold securities by means of any form of general solicitation or general
advertising.
Item 27. Exhibits.
1.1 Form of Underwriting Agreement
*1.2 Form of Selected Dealers Agreement
II-2
<PAGE>
3.1 Certificate of Incorporation of Alaron.com Corporation and amendment
thereto
3.2 By-laws of Alaron.com Corporation
3.3 Articles of Incorporation of Alaron Trading Corporation and
amendment thereto
3.4 By-laws of Alaron Trading Corporation
4.1 Form of Certificate for Common Stock of Alaron.com Corporation
4.2 Form of Representative's Warrant Agreement
4.3 Form of Escrow Agreement
*5.1 Opinion and consent of Wolin & Rosen, Ltd.
10.1 Assignment, Contribution and Acknowledgment for transfers of shares
of Alaron Trading Corporation to Alaron.com Corporation
10.2 Employment Agreement dated March 1, 1999, between the Registrant and
Steven A. Greenberg
10.3 Employment Agreement dated March 1, 1999, between the Registrant and
Michael A. Greenberg
10.4 Employment Agreement dated March 1, 1999, between the Registrant and
Carrie A. Greenberg
10.5 Employment Agreement dated March 1, 1999, between the Registrant and
Barry S. Isaacson
10.6 Employment Agreement dated March 1, 1999, between the Registrant and
Joel W. Greenberg
10.7 Omnibus Clearing Agreement between Alaron Trading Corporation and
The LIT Division of E.D.&F. Man, Inc., dated October 11, 1996
10.8 Lease dated August 1, 1994 for premises located at 822 West
Washington Blvd., Chicago, Illinois, between Alaron Development,
L.L.C. and Alaron Trading Corporation
10.9 Lease dated October 6, 1997 for premises located at 633 Skokie
Boulevard, Northbrook, Illinois, between Alanorth, L.L.C. and The
Takiff Properties Group, Ltd.
10.10 Lease dated July 1, 1998 for premises located at 660 S. Federal
Highway, Pompano Beach, Florida, between Alaron Development, L.L.C.
and Alaron Trading Corporation
10.11 Lease dated September 1, 1998 for premises located at 442 Post
Street, San Francisco, California, between Kinta Haller and Alaron
Trading Corporation
10.12 Lease dated November 1, 1998 for premises located at 191 Woodport
Road, Sparta, New Jersey, between J&K Realty, Inc. and Alaron
Trading Corporation
10.13a 1999 Employee Stock Option Plan
10.13b 1999 Executive Stock Option Plan
10.14 Software License Agreement between Alaron Trading Corporation and
Rolfe & Nolan (USA) Inc. dated January 1, 1998
10.15 Service Bureau Operation Agreement between Alaron Trading
Corporation and Rolfe & Nolan (USA), Inc. dated January 1, 1998
10.16 Form of Guaranteed Introducing Broker Agreement
10.17a Cash Subordinated Loan Agreement and Amendment thereto between Joel
W. Greenberg and Alaron Trading Corporation dated September 8, 1997
10.17b Cash Subordinated Loan Agreement between Joel W. Greenberg and
Alaron Trading Corp. dated February 16, 1999
10.18 Limitup.com Share Purchase Agreement
10.19 Form of Regulation S Certification regarding European private
placement
10.20 Form of Purchaser's Subscription and Acknowledgment regarding
European private placement
21 List of Subsidiaries
II-3
<PAGE>
23.1 Consent of Moore Stephens, P.C. (page II - 6)
23.2 Consent of Wolin & Rosen, Ltd. (included in Exhibit 5.1)
24.1 Power of Attorney with respect to certain signatures in the
Registration Statement (see signature page to Registration
Statement)
- --------------------------------------------
* To be filed by Amendment
Item 28. Undertakings.
(a) For determining any liability under the Securities Act, the
registrant will treat the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant under Rule 424(b)(1) or (4) or
497(h) under the Securities Act as part of this registration statement as of the
time the Commission declared it effective.
(b) For determining any liability under the Securities Act, the
registrant will treat each post-effective amendment that contains a form of
prospectus as a new registration statement for the securities offered in the
registration statement, and that offering of the securities at that time as the
initial bona fide offering of those securities.
(c) The registrant will file, during any period in which it offers or
sells securities, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereto) that, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in this registration statement; and
(iii) to include any additional or changed material
information on the plan of distribution.
(d) The registrant will file a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
(e) The registrant will provide to the Representative of the
Underwriters at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Representative of the Underwriters to permit prompt delivery to each purchaser.
II-4
<PAGE>
(f) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
(g) In the event that a claim for indemnification against such
liabilities (other than the payment by the small business issuer of expenses
incurred or paid by a director, officer or controlling person of the small
business issuer in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the small business issuer will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-5
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form SB-2
of our report dated February 12, 1999, on our audits of the financial statements
of Alaron Trading Corporation and of our report dated February 12, 1999, except
for Note 4F as to which the date is June 19, 1999, on our audit of the balance
sheet of Alaron.com Holding Corporation. We also consent to the reference to our
firm under the caption "Experts."
By: /s/ Moore Stephens, P.C.
----------------------------------------
Moore Stephens, P.C.
Certified Public Accountants
New York, New York
July 26, 1999
II-6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, State of Illinois, on the 27th day of July,
1999.
ALARON.COM HOLDING CORPORATION
By:___________________________________
Steven A. Greenberg, President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Steven A. Greenberg his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution for him in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this registration statement on Form SB-2 and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission under the Securities Act
of 1933, as amended.
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
- ---------- ----- ----
_______________________ President and Director July 27, 1999
Steven A. Greenberg (Principal Executive Officer)
_______________________ Chairman of the Board July 27, 1999
Joel W. Greenberg of Directors
_______________________ Director and Executive Vice July 27, 1999
Carrie A. Greenberg President (Principal Financial
and Accounting Officer)
_______________________ Director and Chief July 27, 1999
Barry S. Isaacson Operating Officer
_______________________ Director July 27, 1999
Mara Greenberg
II-7
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, State of Illinois, on the 27th day of July,
1999.
ALARON.COM HOLDING CORPORATION
By: /s/ Steven A Greenberg
------------------------------------
Steven A. Greenberg, President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Steven A. Greenberg his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution for him in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this registration statement on Form SB-2 and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission under the Securities Act
of 1933, as amended.
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
- ---------- ----- ----
/s/ Steven A. Greenberg President and Director July 27, 1999
Steven A. Greenberg (Principal Executive Officer)
/s/ Joel W. Greenberg Chairman of the Board July 27, 1999
- -------------------------
Joel W. Greenberg of Directors
/s/ Carrie A. Greenberg Director and Executive Vice July 27, 1999
- ------------------------- President (Principal Financial
Carrie A. Greenberg and Accounting Officer)
/s/ Barry S. Isaacson Director and Chief July 27, 1999
- ------------------------- Operating Officer
Barry S. Isaacson
/s/ Mara Greenberg
- ------------------------- Director July 27, 1999
Mara Greenberg
II-7
<PAGE>
Registration No.
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------------
EXHIBITS
to
FORM SB-2
REGISTRATION STATEMENT
of
ALARON.COM HOLDING CORPORATION
-------------------------------------------
As filed with the Securities and Exchange Commission
on July 27, 1999
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential Exhibit
Page Number Number Document
- ----------- ------ --------
<S> <C> <C>
1.1 Form of Underwriting Agreement
*1.2 Form of Selected Dealers Agreement
3.1 Certificate of Incorporation of Alaron.com Corporation and amendment thereto
3.2 By-laws of Alaron.com Corporation
3.3 Articles of Incorporation of Alaron Trading Corporation and amendment
thereto
3.4 By-laws of Alaron Trading Corporation
4.1 Form of Certificate for Common Stock of Alaron.com Corporation
4.2 Form of Representative's Warrant Agreement
4.3 Form of Escrow Agreement
*5.1 Opinion and consent of Wolin & Rosen, Ltd.
10.1 Assignment, Contribution and Acknowledgment for transfers of shares of
Alaron Trading Corporation to Alaron.com Corporation
10.2 Employment Agreement dated March 1, 1999, between the Registrant and
Steven A. Greenberg
10.3 Employment Agreement dated March 1, 1999, between the Registrant and
Michael A. Greenberg
10.4 Employment Agreement dated March 1, 1999, between the Registrant and
Carrie A. Greenberg
10.5 Employment Agreement dated March 1, 1999, between the Registrant and
Barry S. Isaacson
10.6 Employment Agreement dated March 1, 1999, between the Registrant and Joel
W. Greenberg
10.7 Omnibus Clearing Agreement between Alaron Trading Corporation and The
LIT Division of E.D.&F. Man, Inc., dated October 11, 1996
10.8 Lease dated August 1, 1994 for premises located at 822 West Washington
Blvd., Chicago, Illinois, between Alaron Development, L.L.C. and Alaron
Trading Corporation
10.9 Lease dated October 6, 1997 for premises located at 633 Skokie Boulevard,
Northbrook, Illinois, between Alanorth, L.L.C. and The Takiff Properties
Group, Ltd.
10.10 Lease dated July 1, 1998 for premises located at 660 S. Federal Highway,
Pompano Beach, Florida, between Alaron Development, L.L.C. and Alaron
Trading Corporation
<PAGE>
Sequential Exhibit
Page Number Number Document
- ----------- ------ --------
10.11 Lease dated September 1, 1998 for premises located at 442 Post Street, San
Francisco, California, between Kinta Haller and Alaron Trading Corporation
10.12 Lease dated November 1, 1998 for premises located at 191 Woodport Road,
Sparta, New Jersey, between J&K Realty, Inc. and Alaron Trading Corporation
10.13a 1999 Employee Stock Option Plan
10.13b 1999 Executive Stock Option Plan
10.14 Software License Agreement between Alaron Trading Corporation and Rolfe
& Nolan (USA) Inc. dated January 1, 1998
10.15 Service Bureau Operation Agreement between Alaron Trading Corporation and
Rolfe & Nolan (USA), Inc. dated January 1, 1998
10.16 Form of Guaranteed Introducing Broker Agreement
10.17a Cash Subordinated Loan Agreement and Amendment thereto between Joel W.
Greenberg and Alaron Trading Corporation dated September 8, 1997
10.17b Cash Subordinated Loan Agreement between Joel W. Greenberg and Alaron
Trading Corp. dated February 16, 1999
10.18 Limitup.com Share Purchase Agreement
10.19 Form of Regulation S Certification regarding
European private placement 10.20 Form of Purchaser's
Subscription and Acknowledgment regarding European private placement
21 List of Subsidiaries
23.1 Consent of Moore Stephens, P.C. (page II - 6)
23.2 Consent of Wolin & Rosen, Ltd. (included in Exhibit 5.1)
24.1 Power of Attorney with respect to certain signatures in the Registration
Statement (see signature page to Registration Statement)
- --------------------------------------------
<FN>
* To be filed by Amendment
</FN>
</TABLE>
Exhibit 1.1
1,500,000 Common Shares
ALARON.COM HOLDING CORPORATION
UNDERWRITING AGREEMENT
New York, New York
__________, 1999
National Securities Corporation
As Representative of the Several Underwriters
875 North Michigan Avenue
Suite 1560
Chicago, IL 60611
Ladies and Gentlemen:
Alaron.com Holding Corporation, a Delaware corporation (the "Company"),
hereby agrees with National Securities Corporation ("National") and each of the
underwriters named in Schedule A hereto (collectively, the "Underwriters," which
term shall also include any underwriter substituted as hereinafter provided in
Section 11), for whom National is acting as representative (in such capacity,
National shall hereinafter be referred to as "you" or the "Representative") with
respect to the sale by the Company and the purchase by the Underwriters, acting
severally and not jointly, of 1,500,000 shares of common stock, par value $.01
per share (the "Common Stock"), of the Company. Such 1,500,000 shares of Common
Stock shall hereinafter be referred to as the "Firm Shares." In addition, upon
your request, as provided in Section 2(b) of this Agreement, certain
shareholders of the Company (the "Selling Shareholders") hereby agree that they
shall sell to the Underwriters, acting severally and not jointly, up to 225,000
shares of Common Stock, such Common Stock to be sold for the purpose of covering
over-allotments, if any. Such 225,000 shares are hereinafter referred to as the
"Option Shares." The Firm Shares and the Option Shares are hereinafter referred
to collectively as the "Shares." The Company also proposes to issue and sell to
you warrants (the "Representative's Warrants") pursuant to the Representative's
Warrant Agreement (the "Representative's Warrant Agreement") for the purchase of
an additional 150,000 shares of Common Stock. The shares of Common Stock
issuable upon exercise of the Representative's Warrants are hereinafter referred
to as the "Representative's Shares." The Firm Shares, the Option Shares, the
Representative's Warrants and the Representative's Shares are more fully
described in the Registration Statement and the Prospectus referred to below.
1
<PAGE>
1. Representations and Warranties of the Company and the Selling Shareholders.
A. The Company and the Selling Shareholders represent and warrant to, and
agree with, each of the Underwriters as of the date hereof, and as of the
Closing Date and the Option Closing Date, if any, as follows:
(a) The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and an amendment or
amendments thereto, on Form SB-2 (SEC File No. 333-_____), including any related
preliminary prospectus (the "Preliminary Prospectus"), and a related
registration statement filed with the Commission pursuant to Rule 462(b) of the
Regulations (as defined below) for the registration of the Securities, the
Representative's Warrants and the Representative's Shares (collectively,
hereinafter referred to as the "Registered Securities") under the Securities Act
of 1933, as amended (the "Act"), which registration statement and amendment or
amendments have been prepared by the Company in conformity with the requirements
of the Act, and the Regulations (as defined below) of the Commission under the
Act. The Company will not file any other amendment thereto to which the
Underwriters shall have objected in writing after having been furnished with a
copy thereof. Except as the context may otherwise require, such registration
statements as amended, on file with the Commission at the time the registration
statements become effective (including the prospectus, financial statements,
schedules, exhibits and all other documents filed as a part thereof or
incorporated therein and all information deemed to be a part thereof as of such
time pursuant to paragraph (b) of Rule 430(A) of the Regulations), are
hereinafter called the "Registration Statement," and the form of prospectus in
the form first filed with the Commission pursuant to Rule 424(b) of the
Regulations, is hereinafter called the "Prospectus." For purposes hereof,
"Regulations" mean the rules and regulations adopted by the Commission under
either the Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any of the Preliminary
Prospectus, the Registration Statement or the Prospectus or any part thereof,
and no proceedings for a stop order suspending the effectiveness of the
Registration Statement or any of the Company's securities have been instituted
or are pending or threatened. Each of the Preliminary Prospectus, the
Registration Statement and the Prospectus at the time of filing thereof
conformed in all material respects with the requirements of the Act and the
Regulations, and none of the Preliminary Prospectus, the Registration Statement
or the Prospectus at the time of filing thereof contained an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that this
representation and warranty does not apply to statements made in reliance upon
and in conformity with written information furnished to the Company with respect
to the Underwriters by or on behalf of the Underwriters expressly for use in
such Preliminary Prospectus, Registration Statement or Prospectus.
(c) When the Registration Statement becomes effective and at all times
subsequent thereto up to the Closing Date (as defined in Section 2(c) hereof)
and each Option Closing Date
2
<PAGE>
(as defined in Section 2(b) hereof), if any, and during such longer period as
the Prospectus may be required to be delivered in connection with sales by the
Underwriters or a dealer, the Registration Statement and the Prospectus, as
amended or supplemented as required, will contain all statements which are
required to be stated therein in accordance with the Act and the Regulations,
and will conform in all material respects to the requirements of the Act and the
Regulations; neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that this
representation and warranty does not apply to statements made or statements
omitted in reliance upon and in conformity with information furnished to the
Company in writing by or on behalf of any Underwriter expressly for use in the
Registration Statement or the Prospectus or any amendment thereof or supplement
thereto.
(d) The Company and all subsidiaries in which it owns an interest,
direct or indirect (the "Subsidiaries"), have been duly organized and are
validly existing as corporations in good standing under the laws of the
respective states of their incorporation. The Company does not own or control,
directly or indirectly, any corporation, partnership, trust, joint venture or
other business entity other than the subsidiaries listed in Exhibit 21 of the
Registration Statement. Each of the Company and the Subsidiaries is duly
qualified and licensed and in good standing as a foreign corporation in each
jurisdiction in which its ownership or leasing of any properties or the
character of its operations require such qualification or licensing. Each of the
Company and the Subsidiaries has all requisite power and authority (corporate
and other), and has obtained any and all necessary authorizations, approvals,
orders, licenses, certificates, franchises and permits of and from all
governmental or regulatory officials and bodies (including, without limitation,
those having jurisdiction over environmental or similar matters), to own or
lease its properties and conduct its business as described in the Prospectus;
each of the Company and the Subsidiaries is and has been doing business in
compliance with all such authorizations, approvals, orders, licenses,
certificates, franchises and permits and all federal, state, local and foreign
laws, rules and regulations; and neither the Company nor any of the Subsidiaries
has received any notice of proceedings relating to the revocation or
modification of any such authorization, approval, order, license, certificate,
franchise, or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially and adversely affect
the condition, financial or otherwise, or the business affairs, operations,
properties, or results of operations of the Company and the Subsidiaries, taken
as a whole. The disclosures in the Registration Statement concerning the effects
of federal, state, local, and foreign laws, rules and regulations on the
Company's and the Subsidiaries' businesses as currently conducted and as
contemplated are correct in all material respects and do not omit to state a
material fact necessary to make the statements contained therein not misleading
in light of the circumstances in which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under the headings
"Capitalization" and "Description of Securities," and will have the adjusted
capitalization set forth therein on the Closing Date and the Option Closing
3
<PAGE>
Date, if any, based upon the assumptions set forth therein, and the Company is
not a party to or bound by any instrument, agreement or other arrangement,
including, but not limited to, any voting trust agreement, stockholders
agreement or other agreement or instrument, affecting the Common Stock or rights
or obligations of security holders of the Company or the Subsidiaries or
providing for any of the Company or the Subsidiaries to issue any capital stock,
rights, warrants, options or other securities, except for this Agreement, the
Representative's Warrant Agreement and as described in the Prospectus. The
Common Stock, the Representative's Warrants and the Representative's Shares and
all other securities issued or issuable by each of the Company or the
Subsidiaries conform or, when issued and paid for, will conform, in all material
respects to all statements with respect thereto contained in the Registration
Statement and the Prospectus. All issued and outstanding shares of capital stock
of the Company or any of the Subsidiaries have been duly authorized and validly
issued and are fully paid and nonassessable. Except as disclosed in or
contemplated by the Prospectus and the financial statements of the Company and
the related notes thereto included in the Prospectus, neither the Company nor
any Subsidiary has outstanding any options to purchase, or any preemptive rights
or other rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares of
its capital stock or any such options, rights, convertible securities or
obligations. The description of the Company's stock option, stock bonus and
other stock plans or arrangements and the options or other rights granted and
exercised thereunder as set forth in the Prospectus conforms in all material
respects with the requirements of the Act. All issued and outstanding securities
of the Company have been duly authorized and validly issued and are fully paid
and nonassessable, and the holders thereof have no rights of rescission with
respect thereto and are not subject to personal liability by reason of being
such holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company.
(f) The Registered Securities are not and will not be subject to any
preemptive or other similar rights of any stockholder, have been duly authorized
and, when issued, paid for and delivered in accordance with the terms hereof,
will be validly issued, fully paid and non-assessable and will conform in all
material respects to the description thereof contained in the Prospectus; the
holders thereof will not be subject to any liability solely as such holders; all
corporate action required to be taken for the authorization, issue and sale of
the Registered Securities has been duly and validly taken; and the certificates
representing the Registered Securities will be in due and proper form. Upon the
issuance and delivery pursuant to the terms hereof of the Registered Securities
to be sold by the Company hereunder, the Underwriters or the Representative, as
the case may be, will acquire good and marketable title to such Registered
Securities free and clear of any lien, charge, claim, encumbrance, pledge,
security interest, defect, or other restriction or equity of any kind
whatsoever. No stockholder of the Company has any right which has not been
waived in writing to require the Company to register the sale of any shares
owned by such stockholder under the Act in the public offering contemplated by
this Agreement. No further approval or authority of the stockholders or the
Board of Directors of the Company will be required for the issuance and sale of
the Shares, the Option Shares and the Representative's Warrants to be sold by
the Company as contemplated herein.
4
<PAGE>
(g) The financial statements of each of the Company and the
Subsidiaries, together with the related notes and schedules thereto, included in
the Registration Statement, each Preliminary Prospectus and the Prospectus
fairly present the financial position, changes in stockholders' equity and the
results of operations of the Company and the Subsidiaries at the respective
dates and for the respective periods to which they apply and such financial
statements have been prepared in conformity with generally accepted accounting
principles and the Regulations, consistently applied throughout the periods
involved. There has been no material adverse change or development involving a
material prospective change in the condition, financial or otherwise, or in the
business, affairs, operations, properties, or results of operation of the
Company and the Subsidiaries taken as a whole whether or not arising in the
ordinary course of business since the date of the financial statements included
in the Registration Statement and the Prospectus and the outstanding debt, the
property, both tangible and intangible, and the business of the Company and the
Subsidiaries taken as a whole conform in all respects to the descriptions
thereof contained in the Registration Statement and the Prospectus. Financial
information set forth in the Prospectus under the headings "Prospectus Summary
- -- Summary Combined Financial Information," "Capitalization," "Selected
Financial Data," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," fairly present, on the basis stated in the
Prospectus, the information set forth therein and have been derived from or
compiled on a basis consistent with that of the audited financial statements
included in the Prospectus.
(h) Each of the Company and the Subsidiaries has (i) paid all federal,
state, local, franchise, and foreign taxes for which it is liable, including,
but not limited to, withholding taxes and amounts payable under Chapters 21
through 24 of the Internal Revenue Code of 1986, as amended (the "Code"), and
furnished all information returns it is required to furnish pursuant to the
Code, (ii) established adequate reserves for such taxes which are not due and
payable, and (iii) no tax deficiency or claims outstanding, proposed or assessed
against it.
(i) No transfer tax, stamp duty or other similar tax is payable by or
on behalf of the Underwriters or the Representative in connection with (i) the
issuance by the Company of the Registered Securities, the Representative's
Warrants and the Representative's Shares, (ii) the purchase by the Underwriters
of the Registered Securities from the Company and the purchase by the
Representative of the Representative's Warrants or the Representative's Shares
from the Company, (iii) the consummation by the Company of any of its
obligations under this Agreement or the Representative's Warrant Agreement, or
(iv) resales of the Registered Securities in connection with the distribution
contemplated hereby.
(j) Each of the Company and the Subsidiaries maintains insurance
policies, including, but not limited to, general liability, property and product
liability insurance and surety bonds which insures the Company and the
Subsidiaries and their respective professional staffs against such losses and
risks generally insured against by comparable businesses. Neither the Company
nor any of the Subsidiaries has (A) failed to give notice or present any
insurance claim with respect to any matter, including, but not limited to, the
Company's or any of the Subsidiaries' businesses, property or professional
staff, under any insurance policy or surety bond in a due and timely manner, (B)
any disputes or claims against any underwriter of such
5
<PAGE>
insurance policies or surety bonds or has failed to pay any premiums due and
payable thereunder, or (C) failed to comply with all conditions contained in
such insurance policies and surety bonds. There are no facts or circumstances
under any such insurance policy or surety bond which would relieve any insurer
of its obligation to satisfy in full any valid claim of the Company or any of
the Subsidiaries.
(k) There is no claim, action, suit, proceeding, inquiry, arbitration,
mediation, investigation, litigation, governmental or other proceeding
(including, without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, pending or threatened against (or
circumstances that may give rise to the same), or involving the properties or
businesses of, the Company or any of the Subsidiaries which (i) questions the
validity of the capital stock of the Company or any of the Subsidiaries, this
Agreement or the Representative's Warrant Agreement, or of any action taken or
to be taken by the Company or any of the Subsidiaries or any of the Selling
Shareholders pursuant to or in connection with this Agreement or the
Representative's Warrant Agreement, (ii) is required to be disclosed in the
Registration Statement which is not so disclosed (and such proceedings as are
summarized in the Registration Statement are accurately summarized in all
material respects), or (iii) might materially and adversely affect the
condition, financial or otherwise, or the business, affairs, position,
stockholders' equity, operation, properties, or results of operations of the
Company and the Subsidiaries taken as a whole.
(l) The Company has the full legal right, corporate power and authority
to authorize, issue, deliver, and sell the Registered Securities and to enter
into this Agreement and the Representative's Warrant Agreement, and to
consummate the transactions provided for in such agreements; and this Agreement
and the Representative's Warrant Agreement have each been duly and properly
authorized, executed, and delivered by the Company. Each of this Agreement and
the Representative's Warrant Agreement constitutes a legal, valid and binding
agreement of the Company enforceable against the Company in accordance with
their respective terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors' rights
and the application of equitable principles in any action, legal or equitable,
and except as rights to indemnity or contribution may be limited by applicable
law), and none of the Company's issue and sale of the Registered Securities,
execution, delivery or performance of this Agreement and the Representative's
Warrant Agreement, the consummation of the transactions contemplated herein and
therein, or the conduct by the Company and the Subsidiaries of their businesses
as described in the Registration Statement, the Prospectus, and any amendments
or supplements thereto, conflicts with or will conflict with or results or will
result in any breach or violation of any of the terms or provisions of, or
constitutes or will constitute a default under, or result in the creation or
imposition of any lien, charge, claim, encumbrance, pledge, security interest,
defect or other restriction or equity of any kind whatsoever upon, any property
or assets (tangible or intangible) of the Company or any of the Subsidiaries
pursuant to the terms of (i) the certificates of incorporation or bylaws of the
Company or any of the Subsidiaries, as amended and restated, (ii) any license,
contract, indenture, mortgage, deed of trust, voting trust agreement,
stockholders' agreement, note, loan or credit agreement or any other agreement
or instrument to
6
<PAGE>
which the Company or any of the Subsidiaries is a party or by which any of them
may be bound or to which their properties or assets (tangible or intangible) is
or may be subject, or any indebtedness of either the Company or any of the
Subsidiaries, or (iii) any statute, judgment, decree, order, rule or regulation
applicable to the Company or any of the Subsidiaries of any arbitrator, court,
regulatory body or administrative agency or other governmental agency or body
(including, without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, having jurisdiction over the Company of
any of their activities or properties.
(m) No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body, domestic or
foreign, is required for the issuance of the Registered Securities pursuant to
the Prospectus and the Registration Statement, the performance of this
Agreement, the Representative's Warrant Agreement, and the transactions
contemplated hereby and thereby, including without limitation, any waiver of any
preemptive, first refusal or other rights that any entity or person may have for
the issue and/or sale of any of the Registered Securities, except such as have
been or may be obtained under the Act or may be required under state securities
or Blue Sky laws in connection with the Underwriters' purchase and distribution
of the Registered Securities to be sold hereunder.
(n) All executed agreements, contracts or other documents or copies of
executed agreements, contracts or other documents filed as exhibits to the
Registration Statement to which the Company or any of the Subsidiaries is a
party or by which any of them may be bound or to which either of their assets,
properties or businesses may be subject have been duly and validly authorized,
executed and delivered by the Company or any of the Subsidiaries, as the case
may be, and constitute the legal, valid and binding agreements of the Company or
any of the Subsidiaries, as the case may be, enforceable against the Company or
any of the Subsidiaries, as the case may be, in accordance with their respective
terms (except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as rights to
indemnity or contribution may be limited by applicable law). The descriptions in
the Registration Statement of such agreements, contracts and other documents are
accurate in all material respects and fairly present the information required to
be shown with respect thereto by Form SB-2, and there are no contracts or other
documents which are required by the Act to be described in the Registration
Statement or filed as exhibits to the Registration Statement which are not
described or filed as required, and the exhibits which have been filed are
complete and correct copies of the documents of which they purport to be copies.
(o) Since the respective dates as of which information is given in the
Registration Statement and Prospectus, and except as described in or
specifically contemplated by the Prospectus, neither the Company nor any of the
Subsidiaries (i) has incurred any material liabilities or obligations, indirect,
direct or contingent, or entered into any material verbal or written agreement
or other transaction which is not in the ordinary course of business or which
could result in a material reduction in the future earnings of the Company or
any of the Subsidiaries; (ii) has sustained any material loss or interference
with its business or properties from fire, flood, windstorm, accident or other
calamity, whether or not covered by insurance; (iii)
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has paid or declared any dividends or other distributions with respect to its
capital stock, (iv) is in default in the payment of principal or interest on any
outstanding debt obligations; (v) has had any change in its capital stock (other
than upon the sale of the Firm Shares, the Option Shares and the
Representative's Shares hereunder and upon the exercise of options and warrants
described in the Registration Statement) (other than in the ordinary course of
business) of, or indebtedness material to, the Company or any of the
Subsidiaries; (vi) has issued any securities or incurred any liability or
obligation, primary or contingent, for borrowed money; or (vii) has experienced
any material adverse change in the condition (financial or otherwise) of their
respective businesses, properties, results of operations, or prospects.
(p) Except as disclosed in or specifically contemplated by the
Prospectus, (i) the Company and the Subsidiaries have sufficient trademarks,
trade names, patent rights, copyrights, licenses, approvals and governmental
authorizations to conduct their respective businesses as now conducted; (ii) the
expiration of any trademarks, trade names, patent rights, copyrights, licenses,
approvals or governmental authorizations would not have a material adverse
effect on the condition (financial or otherwise), business, results of
operations or prospects of the Company or any of the Subsidiaries; (iii) the
Company has no knowledge of any infringement by it or its subsidiaries of
trademark, trade name rights, patent rights, copyrights, licenses, trade secret
or other similar rights of others; and (iv) there is no claim being made against
the Company or any of the Subsidiaries regarding trademark, trade name, patent,
copyright, license, trade secret or other infringement which could have a
material adverse effect on the condition (financial or otherwise), business,
results of operations or prospects of the Company or any of the Subsidiaries.
(q) None of the Company or any of the Subsidiaries are, or with the
giving of notice or lapse of time or both, will be, in violation of or in
default under their respective charters or bylaws, and no default exists in the
due performance and observance of any term, covenant or condition of any
license, contract, indenture, mortgage, installment sale agreement, lease, deed
of trust, voting trust agreement, stockholders agreement, note, loan or credit
agreement, or any other material agreement or instrument evidencing an
obligation for borrowed money, or any other material agreement or instrument to
which the Company or any of the Subsidiaries is a party or by which the Company
or any of the Subsidiaries may be bound or to which the property or assets
(tangible or intangible) of the Company or any of the Subsidiaries are subject
or affected.
(r) To the Company's knowledge, there are no pending investigations
involving the Company or any of the Subsidiaries by the U.S. Department of
Labor, or any other governmental agency responsible for the enforcement of such
federal, state, local, or foreign laws and regulations. There is no unfair labor
practice charge or complaint against the Company or any of the Subsidiaries
pending before the National Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or to its knowledge threatened
against or involving the Company or any of the Subsidiaries. No representation
question exists respecting the employees of the Company or any of the
Subsidiaries. No collective bargaining agreement, or modification thereof is
currently being negotiated by the Company or any of the Subsidiaries. No
grievance or arbitration proceeding is pending under any expired or existing
collective
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bargaining agreements of the Company or any of the Subsidiaries. No labor
dispute with the employees of the Company or any of the Subsidiaries exists or
is imminent.
(s) Except as described in the Prospectus, neither the Company nor any
of the Subsidiaries maintains, sponsors or contributes to any program or
arrangement that is an "employee pension benefit plan," an "employee welfare
benefit plan," or a "multi-employer plan" as such terms are defined in Sections
3(2), 3(1) and 3(37), respectively, of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") ("ERISA Plans"). Neither the Company nor any
of the Subsidiaries maintains or contributes to a defined benefit plan, as
defined in Section 3(35) of ERISA. No ERISA Plan (or any trust created
thereunder) has engaged in a "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code, which could subject the
Company or any of the Subsidiaries to any tax penalty on prohibited transactions
and which has not adequately been corrected. Each ERISA Plan is in compliance
with all material reporting, disclosure and other requirements of the Code and
ERISA as they relate to any such ERISA Plan. Determination letters have been
received from the Internal Revenue Service with respect to each ERISA Plan which
is intended to comply with Code Section 401(a), stating that such ERISA Plan and
the attendant trust are qualified thereunder. Neither the Company nor any of the
Subsidiaries has ever completely or partially withdrawn from a "multi-employer
plan."
(t) None of the Company, nor any of the Subsidiaries, nor any of their
employees, directors, stockholders, or affiliates (within the meaning of the
Regulations) of any of the foregoing has taken or will take directly or
indirectly, any action designed to or which has constituted or which might be
expected to cause or result in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Registered
Securities.
(u) Each of the Company and the Subsidiaries has good and marketable
title to, or valid and enforceable leasehold estates in, all items of real and
personal property stated in the Prospectus to be owned or leased by it, free and
clear of all liens, charges, claims, encumbrances, pledges, security interests,
or other restrictions or equities of any kind whatsoever other than those
referred to in the Prospectus and liens for taxes not yet due and payable.
(v) Moore Stephens, P.C. ("Moore Stephens"), whose report is filed with
the Commission as a part of the Registration Statement, are independent
certified public accountants as required by the Act and the Regulations.
(w) There are no claims, payments, arrangements or understandings,
whether oral or written, for services in the nature of a finder's or origination
fee with respect to the sale of the Registered Securities hereunder or any other
arrangements, agreements, understandings, payments or issuance with respect to
the Company, the Subsidiaries, or any of their respective officers, directors,
stockholders, employees or affiliates that may affect the Underwriters'
compensation as determined by the Commission and the National Association of
Securities Dealers, Inc. (the "NASD").
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(x) The Registered Securities have been approved for quotation on the
American Stock Exchange subject only to official notice of issuance.
(y) Each of the Company and the Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(z) None of the Company, the Subsidiaries, nor any of their respective
officers, employees, agents or any other person acting on behalf of the Company
or any of the Subsidiaries has, directly or indirectly, given or agreed to give
any money, gift or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer, supplier,
employee or agent of a customer or supplier, or official or employee of any
governmental agency (domestic or foreign) or instrumentality of any government
(domestic or foreign) or any political party or candidate for office (domestic
or foreign) or other person who was, is, or may be in a position to help or
hinder the business of the Company or any of the Subsidiaries (or assist the
Company or any of the Subsidiaries in connection with any actual or proposed
transaction) which might subject the Company, the Subsidiaries, or any other
such person to any damage or penalty in any civil, criminal or governmental
litigation or proceeding (domestic or foreign). Each of the Company's and the
Subsidiaries' internal accounting controls are sufficient to cause the Company
and the Subsidiaries to comply with the Foreign Corrupt Practices Act of 1977,
as amended.
(aa) Except as set forth in the Prospectus, no officer, director or
stockholder of the Company, the Subsidiaries, or any "affiliate" or "associate"
(as these terms are defined in Rule 405 promulgated under the Regulations) of
any of the foregoing persons or entities has or has had, either directly or
indirectly, (i) an interest in any person or entity which (A) furnishes or sells
services or products which are furnished or sold or are proposed to be furnished
or sold by the Company or any of the Subsidiaries, or (B) purchases from or
sells or furnishes to the Company or any of the Subsidiaries any goods or
services, or (ii) a beneficiary interest in any contract or agreement to which
the Company or any of the Subsidiaries is a party or by which the Company or any
of the Subsidiaries may be bound or affected. Except as set forth in the
Prospectus there are no existing agreements, arrangements, understandings or
transactions, or proposed agreements, arrangements, understandings or
transactions, between or among the Company, the Subsidiaries, and any officer,
director, principal shareholder (as such term is used in the Prospectus) of the
Company, or any affiliate or associate of any of the foregoing persons or
entities.
(bb) None of the Company or any of the Subsidiaries intends to conduct
their respective businesses in a manner in which it would become an "investment
company" within the meaning of the Investment Company Act of 1940, as amended
(the "1940 Act").
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<PAGE>
(cc) Any certificate signed by any officer of the Company and delivered
to the Underwriters or to the Underwriters' Counsel (as defined in Section 4(d)
herein) shall be deemed a representation and warranty by the Company to the
Underwriters as to the matters covered thereby.
(dd) The minute books of each of the Company and the Subsidiaries have
been made available to the Underwriters and contain a complete summary of all
meetings and actions of the directors and stockholders of each of the Company
and the Subsidiaries, since the time of their respective incorporation, and
reflect all transactions referred to in such minutes accurately in all material
respects.
(ee) Neither the Company nor any of the Subsidiaries has distributed
nor will distribute prior to the Closing Date any offering material in
connection with the offering and sale of the Securities in this offering other
than the Prospectus, the Registration Statement and the other materials
permitted by the Act. Except as described in the Prospectus, no holders of any
securities of the Company or any of the Subsidiaries or of any options, warrants
or other convertible or exchangeable securities of the Company or any of the
Subsidiaries have the right to include any securities issued by the Company or
any of the Subsidiaries as part of the Registration Statement or to require the
Company or any of the Subsidiaries to file a registration statement under the
Act and no person or entity holds any anti-dilution rights with respect to any
securities of the Company or any of the Subsidiaries.
(ff) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-198,
An Act Relating to Disclosure of Doing Business with Cuba, and the Company
further agrees that if it commences engaging in business with the government of
Cuba or with any person or affiliate located in Cuba after the date the
Registration Statement becomes or has become effective with the Commission or
with the Florida Department of Banking and Finance (the "Department"), whichever
date is later, or if the information reported or incorporated by reference in
the Prospectus, if any, concerning the Company's business with Cuba or with any
person or affiliate located in Cuba changes in any material way, the Company
will provide the Department notice of such business or change, as appropriate,
in a form acceptable to the Department.
(gg) The Company has purchased "key man" life insurance on the life of
________ ____________ in the amount of [$ ] and the Company is named as the sole
beneficiary of such insurance policy.
(hh) The Company has caused to be duly executed legally binding and
enforceable agreements pursuant to which all persons or entities that directly
or beneficially own Common Stock, as of the effective date of the Registration
Statement, have agreed not to, directly or indirectly, offer, offer to sell,
sell, grant any option for the sale of, transfer, assign, pledge, hypothecate or
otherwise encumber or dispose of any shares of Common Stock or securities
convertible into Common Stock, exercisable or exchangeable for or evidencing any
right to purchase or subscribe for any shares of Common Stock (either pursuant
to Rule 144 of the Regulations or otherwise) or dispose of any interest therein
for a period of 12 months from the
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<PAGE>
date of the Prospectus, without the prior written consent of National (the
"Lock-up Agreements"). The Company will cause the Transfer Agent (as defined
herein) to place "stop transfer" orders on the Company's stock ledgers in order
to effect the Lock-up Agreements.
B. Each of the Selling Shareholders represents and warrants to, and agrees
with, each of the Underwriters as of the date hereof, and as of the Option
Closing Date, if any, as follows:
(a) Such Selling Shareholder has (i) caused a certificate or
certificates for the number of shares of Common Stock to be sold by the Selling
Shareholder hereunder to be delivered to D'Ancona & Pflaum (in its capacity as
escrow agent, the "Escrow Agent"), duly endorsed in blank or together with blank
stock powers duly executed, with the signature of the Selling Shareholder
appropriately guaranteed, such certificate or certificates to be held in escrow
by the Escrow Agent pursuant to an escrow agreement for delivery, pursuant to
the provisions hereof, on the Option Closing Date, if any, and (ii) granted an
irrevocable power of attorney to the Escrow Agent to purchase all requisite
stock transfer tax stamps, to sign this Agreement (including agreeing on the
price at which the Stock and the Additional Stock are to be sold to the
Underwriters) and thereafter to modify and amend this Agreement, to waive any
condition to the obligations of the Selling Shareholder and to execute all other
instruments and documents and to perform all other acts necessary to carry out
the provisions of this Agreement on behalf of the Selling Shareholder (such
escrow agreement together with such irrevocable powers of attorney being herein
called the "Escrow Agreement").
(b) There is no claim, action, suit proceeding, inquiry, arbitration,
mediation, investigation, litigation, governmental or other proceeding, domestic
or foreign, pending or threatened against such Selling Shareholder or any of
business properties, or assets owned by the Selling Shareholder. The Selling
Shareholder is not in violation of, or in default with respect to, any law rule,
regulation, order judgment, or decree; nor is the Selling Shareholder required
to take any action in order to avoid such violation or default.
(c) Such Selling Shareholder has all the requisite power and authority
to execute, deliver, and perform this Agreement and the Escrow Agreement. This
Agreement and the Escrow Agreement have been duly executed and delivered by the
Selling Shareholder, are the legal, valid, and binding obligations of the
Selling Shareholder and are enforceable as to the Selling Shareholder in
accordance with their respective terms. No consent, authorization, approval,
order, license, certificate, or permit of or from, or declaration or filing
with, any federal, state, local, or other governmental authority or any court or
other tribunal is required by the Selling Shareholder for the execution,
delivery, or performance of this Agreement (except filings under the Act which
have been or will be made before the Closing Date and such consents consisting
only of consents under "blue sky" or securities law which have been obtained at
or prior to the date of this Agreement) or the Escrow Agreement by the Selling
Shareholder. No consent of any party to any contract, agreement, instrument,
lease license, arrangement, or understanding to which the Selling Shareholder is
a party, or to which any of the properties or assets of the Selling Shareholder
are subject, is required for the execution, delivery, or performance of this
Agreement or the escrow Agreement; and the execution, delivery, and performance
of this Agreement and the Escrow Agreement will not violate, result in a breach
of,
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<PAGE>
conflict with, or (with or without the giving of notice or the passage of time
or both) entitle any party to terminate or call default under any such contract,
agreement, instrument, lease, license, arrangement, or understanding, or
violate, result in a breach of, or conflict with, any law, rule, regulation,
order, judgment, or decree binding on the operations, business, properties, or
assets of the Selling Shareholder are subject.
(d) Such Selling Shareholder has good title to the Option Shares to be
sold by him or her pursuant to this Agreement, free and clear of all liens,
security interests, pledges, charges, encumbrances, stockholders' agreements,
and voting trusts (except those created by this Agreement and the Escrow
Agreement), and when delivered in accordance with this Agreement, the
Underwriters will receive good title to the Option Shares purchased by them from
such Selling Shareholder, free and clear of all liens, security interests,
pledges, charges, encumbrances, stockholders' agreements, and voting trusts.
2. Purchase, Sale and Delivery of the Common Stock and Representative's
Warrants.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, and each Underwriter,
severally and not jointly, agrees to purchase from the Company, that aggregate
principal amount of Firm Shares set forth opposite the name of such Underwriter
in Schedule A hereto at a price equal to 90% of the principal amount thereof,
subject to such adjustment as the Representative in its discretion shall make to
eliminate any fractional sales or purchases, plus any additional amount of Firm
Shares which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 11 hereof.
(b) In addition, on the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Selling Shareholders hereby grant an option to
the Underwriters, severally and not jointly, to purchase all or any part of an
additional 225,000 shares of Common Stock at a price equal to 90% of the
principal amount thereof from the Closing Date. The maximum number of Option
Shares to be sold by such Selling Shareholders is set forth opposite their
respective names on Schedule B hereof. The option granted hereby will expire 45
days after (i) the date the Registration Statement becomes effective, if the
Company has elected not to rely on Rule 430A under the Regulations, or (ii) the
date of this Agreement if the Company has elected to rely upon Rule 430A under
the Regulations, and may be exercised in whole or in part from time to time only
for the purpose of covering over-allotments which may be made in connection with
the offering and distribution of the Firm Shares upon notice by the
Representative to the Company and the Selling Shareholders setting forth the
aggregate principal amount of Option Shares as to which the several Underwriters
are then exercising the option and the time and date of payment and delivery for
any such Option Shares. Any such time and date of delivery (an "Option Closing
Date") shall be determined by the Representative, but shall not be later than
seven full business days after the exercise of said option, nor in any event
prior to the Closing Date, as hereinafter defined, unless otherwise agreed upon
by the Representative, the Company and the Selling Shareholders. Nothing herein
contained shall obligate the Underwriters to exercise the over-allotment option
described above. No Option Shares shall be delivered unless the Firm
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<PAGE>
Shares shall be simultaneously delivered or shall theretofore have been
delivered as herein provided.
(c) Payment of the purchase price for, and delivery of certificates
for, the Firm Shares shall be made at the offices of National, 875 North
Michigan Avenue, Suite 1560, Chicago, Illinois, or at such other place as shall
be agreed upon by the Representative and the Company. Such delivery and payment
shall be made at 10:00 a.m. (New York time) on ________, 1999 or at such other
time and date as shall be agreed upon by the Representative and the Company, but
no more than four (4) business days after the date hereof (such time and date of
payment and delivery being herein called the "Closing Date"). In addition, in
the event that any or all of the Option Shares are purchased by the
Underwriters, payment of the purchase price for, and delivery of certificates
for, such Option Shares shall be made at the above mentioned office of National
or at such other place as shall be agreed upon by the Representative, the
Company and the Selling Shareholders on each Option Closing Date as specified in
the notice from the Representative to the Company. Delivery of the certificates
for the Firm Shares and the Option Shares, if any, shall be made to the
Underwriters against payment by the Underwriters, of the purchase price for the
Firm Shares and the Option Shares, if any, to the order of the Company or the
Selling Shareholders, as the case may be. In the event such option is exercised,
each of the Underwriters, acting severally and not jointly, shall purchase that
proportion of the total number of Option Shares then being purchased which the
number of Firm Shares set forth in Schedule A hereto opposite the name of such
Underwriter bears to the total number of Firm Shares, subject in each case to
such adjustments as the Representative in their discretion shall make to
eliminate any sales or purchases of fractional shares. Certificates for the Firm
Shares and the Option Shares, if any, shall be in definitive, fully registered
form, shall bear no restrictive legends and shall be in such denominations and
registered in such names as the Underwriters may request in writing at least
three (3) business days prior to Closing Date or the relevant Option Closing
Date, as the case may be. The certificates for the Firm Shares and the Option
Shares, if any, shall be made available to the Representative at such office or
such other place as the Representative may designate for inspection, checking
and packaging no later than 9:30 a.m. on the last business day prior to Closing
Date or the relevant Option Closing Date, as the case may be.
(d) On the Closing Date, the Company shall issue and sell to the
Representative the Representative's Warrants at a purchase price of $.0001 per
warrant, which warrants shall entitle the holders thereof to purchase the
Representative's Shares. The Representative's Warrants shall expire five (5)
years after the effective date of the Registration Statement and shall be
exercisable for a period of four (4) years commencing one (1) year from the
effective date of the Registration Statement at an exercise price equal to 120%
of the initial public offering price of the Shares. The Representative's Warrant
Agreement and form of Warrant Certificate shall be substantially in the form
filed as Exhibit 4.2 to the Registration Statement. Payment for the
Representative's Warrants shall be made on the Closing Date.
3. Public Offering of the Firm Shares.
As soon after the Registration Statement becomes effective as the
Representative deem advisable, the Underwriters shall make a public offering of
the Firm Shares (other than to
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<PAGE>
residents of or in any jurisdiction in which qualification of the Firm Shares is
required and has not become effective) at the price and upon the other terms set
forth in the Prospectus. The Representative may from time to time increase or
decrease the public offering price after distribution of the Firm Shares has
been completed to such extent as the Representative, in its sole discretion,
deems advisable. The Underwriters may enter into one or more agreements as the
Underwriters, in each of their sole discretion, deem advisable with one or more
broker-dealers who shall act as dealers in connection with such public offering.
4. Covenants of the Company and the Selling Shareholders.
The Company and each of the Selling Shareholders covenant and agree
with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and will not at any time, whether before or after the effective date
of the Registration Statement, file any amendment to the Registration Statement
or supplement to the Prospectus or file any document under the Act or Exchange
Act before termination of the offering of the Firm Shares by the Underwriters of
which the Representative shall not previously have been advised and furnished
with a copy, or to which the Representative shall have objected or which is not
in compliance with the Act, the Exchange Act or the Regulations.
(b) As soon as the Company is advised or obtains knowledge thereof, the
Company will advise the Representative and confirm the notice in writing, (i)
when the Registration Statement, as amended, becomes effective, if the
provisions of Rule 430A promulgated under the Act will be relied upon, when the
Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective, (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution of proceedings for that purpose, (iii) of the issuance by the
Commission or by any state securities commission of any proceedings for the
suspension of the qualification of any of the Registered Securities for offering
or sale in any jurisdiction or of the initiation, or the threatening, of any
proceeding for that purpose, (iv) of the receipt of any comments from the
Commission, and (v) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or for
additional information. If the Commission or any state securities commission
authority shall enter a stop order or suspend such qualification at any time,
the Company will use its best efforts to obtain promptly the lifting of such
order.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Representative) in accordance with the requirements of the
Act.
(d) The Company shall give the Representative notice of its intention
to file or prepare any amendment to the Registration Statement (including any
post-effective amendment)
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<PAGE>
or any amendment or supplement to the Prospectus (including any revised
prospectus which the Company proposes for use by the Underwriters in connection
with the offering of the Registered Securities which differs from the
corresponding prospectus on file at the Commission at the time the Registration
Statement becomes effective, whether or not such revised prospectus is required
to be filed pursuant to Rule 424(b) of the Regulations), and will furnish the
Representative with copies of any such amendment or supplement a reasonable
amount of time prior to such proposed filing or use, as the case may be, and
will not file any such amendment or supplement to which the Representative or
D'Ancona & Pflaum LLC ("Underwriters' Counsel") shall reasonably object.
(e) The Company shall endeavor in good faith, in cooperation with the
Representative, at or prior to the time the Registration Statement becomes
effective, to qualify the Registered Securities for offering and sale under the
securities laws of such jurisdictions as the Representative may reasonably
designate to permit the continuance of sales and dealings therein for as long as
may be necessary to complete the distribution, and shall make such applications,
file such documents and furnish such information as may be required for such
purpose; provided, however, the Company shall not be required to qualify as a
foreign corporation or become subject to service of process in any such
jurisdiction. In each jurisdiction where such qualification shall be effected,
the Company will, unless the Representative agrees that such action is not at
the time necessary or advisable, use all reasonable efforts to file and make
such statements or reports at such times as are or may reasonably be required by
the laws of such jurisdiction to continue such qualification.
(f) During the time when a prospectus is required to be delivered under
the Act, the Company shall use all reasonable efforts to comply with all
requirements imposed upon it by the Act, as now and hereafter amended, and by
the Regulations, as from time to time in force, so far as necessary to permit
the continuance of sales of or dealings in the Securities in accordance with the
provisions hereof and the Prospectus, or any amendments or supplements thereto.
If at any time when a prospectus relating to the Securities is required to be
delivered under the Act, any event shall have occurred as a result of which, in
the opinion of counsel for the Company or Underwriters' Counsel, the Prospectus,
as then amended or supplemented, includes an untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, or if it is necessary at any time to amend or
supplement the Prospectus to comply with the Act, the Company will notify the
Representative promptly and prepare and file with the Commission an appropriate
amendment or supplement in accordance with Section 10 of the Act, each such
amendment or supplement to be satisfactory to Underwriters' Counsel, and the
Company will furnish to the Underwriters copies of such amendment or supplement
as soon as available and in such quantities as the Underwriters may request.
(g) As soon as practicable, but in any event not later than 45 days
after the end of the 12-month period beginning on the day after the end of the
fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally
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available to its security holders, in the manner specified in Rule 158(b) of the
Regulations, and to the Representative, an earnings statement which will be in
the detail required by, and will otherwise comply with, the provisions of
Section 11(a) of the Act and Rule 158(a) of the Regulations, which statement
need not be audited unless required by the Act, covering a period of at least 12
consecutive months after the effective date of the Registration Statement.
(h) During a period of five (5) years after the date hereof, the
Company will furnish to its security holders, as soon as practicable, annual
reports (including financial statements audited by independent public
accountants) and unaudited quarterly reports of earnings, and will deliver to
the Representative:
(i) concurrently with furnishing such quarterly reports to its
stockholders, statements of income of the Company for each quarter in the form
furnished to the Company's stockholders;
(ii) concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company as at the end of the preceding
fiscal year, together with statements of operations, stockholders' equity, and
cash flows of the Company for such fiscal year, accompanied by a copy of the
certificate thereon of independent certified public accountants;
(iii) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the American
Stock Exchange or any other securities exchange or quotation system;
(v) every press release and every material news item or
article of interest to the financial community in respect of each of the Company
and the Subsidiaries or their respective affairs which was released or prepared
by or on behalf of the Company or any of the Subsidiaries; and
(vi) any additional information of a public nature concerning
the Company or any of the Subsidiaries (and any future subsidiaries) or their
respective businesses which the Representative may reasonably request.
During such five-year period, if the Company has active subsidiaries,
the foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(i) The Company will maintain a transfer agent (the "Transfer Agent")
and, if necessary under the jurisdiction of incorporation of the Company, a
registrar (which may be the same entity as the transfer agent) for the Common
Stock.
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(j) The Company will furnish to the Representative or on the
Representative's order, without charge, at such place as the Representative may
designate, copies of each Preliminary Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), each
Preliminary Prospectus, the Prospectus, and all amendments and supplements
thereto, including any prospectus prepared after the effective date of the
Registration Statement, in each case as soon as available and in such quantities
as the Representative may reasonably request.
(k) On or before the effective date of the Registration Statement, the
Company shall provide the Representative with true copies of duly executed,
legally binding and enforceable Lock-up Agreements. On or before the Closing
Date, the Company shall deliver instructions to the Transfer Agent authorizing
it to place appropriate stop transfer orders on the Company's ledgers.
(l) The Company shall use its best efforts to cause its officers,
directors, stockholders or affiliates (within the meaning of the Regulations)
not to take, directly or indirectly, any action designed to, or which might in
the future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any securities of the Company.
(m) The Company shall apply the net proceeds from the sale of the
Common Stock substantially in the manner, and subject to the conditions, set
forth under "Use of Proceeds" in the Prospectus.
(n) The Company shall timely file all such reports, forms or other
documents as may be required from time to time under the Act, the Exchange Act,
and the Regulations, and all such reports, forms and documents filed will comply
as to form and substance with the applicable requirements under the Act, the
Exchange Act, and the Regulations.
(o) The Company shall cause the Common Stock to be quoted on the
American Stock Exchange and for a period of two (2) years from the date hereof
shall use its best efforts to maintain the quotation of the Common Stock to the
extent outstanding.
(p) For a period of two (2) years from the Closing Date, the Company
shall furnish to the Representative, at the Company's sole expense, daily
consolidated transfer sheets relating to the Common Stock.
(q) For a period of five (5) years after the effective date of the
Registration Statement the Company shall, at the Company's sole expense, take
all necessary and appropriate actions to further qualify the Company's
securities in all jurisdictions of the United States in order to permit
secondary sales of such securities pursuant to the Blue Sky laws of those
jurisdictions which do not require the Company to qualify as a foreign
corporation or to file a general consent to service of process.
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(r) The Company (i) prior to the effective date of the Registration
Statement, has filed a Form 8-A with the Commission providing for the
registration of the Common Stock under the Exchange Act and (ii) as soon as
practicable, will use its best efforts to take all necessary and appropriate
actions to be included in Standard and Poor's Corporation Descriptions and
Moody's OTC Manual and to continue such inclusion for a period of not less than
five (5) years.
(s) The Company agrees that for a period of thirteen (13) months
following the effective date of the Registration Statement it will not, without
the prior written consent of National, offer, issue, sell, contract to sell,
grant any option for the sale of or otherwise dispose of any Common Stock, or
securities convertible into Common Stock, except for the issuance of the Option
Shares, the Representative's Warrants, and shares of Common Stock upon the
exercise of currently outstanding warrants or options issued under any stock
option plan in effect on the Closing Date or options to purchase shares of
Common Stock granted pursuant to any stock option plan in effect on the Closing
Date.
(t) Until the completion of the distribution of the Securities, none of
the Company nor any of the Subsidiaries shall, without the prior written consent
of National or Underwriters' Counsel, issue, directly or indirectly issue any
press release or other communication or hold any press conference with respect
to the Company, any of the Subsidiaries, their respective activities or the
offering contemplated hereby, other than trade releases issued in the ordinary
course of the Company's business consistent with past practices with respect to
the Company's operations.
(u) For a period equal to the lesser of (i) five (5) years from the
date hereof, and (ii) the sale to the public of the Representative's Shares, the
Company will not take any action or actions which may prevent or disqualify the
Company's use of Form S-1 (or other appropriate form) for the registration under
the Act of the Representative's Shares.
(v) The Company agrees that National shall have the right to designate
two persons to attend all meetings of the Board of Directors of the Company, and
all committees thereof, as observers. Such observers shall be entitled to
receive notices of all such meetings, and all correspondence and communications
sent by the Company to members of its Board of Directors and to attend all such
meetings. Such observers shall be entitled to the same compensation paid to
members of the Company's Board of Directors. In addition, at National's
discretion, which may be exercised at any time, in lieu of such right of
observation, National shall have the power to cause the Company to use its best
efforts, which shall include, but shall not be limited to, the solicitation of
proxies, to elect two (2) designees of National to the Company's Board of
Directors for a period of five (5) years following the date of such election,
provided that such designees are reasonably acceptable to the Company.
(w) The Company agrees that within forty-five (45) days after the
Closing it shall retain a public relations firm which is acceptable to National.
The Company shall keep such public relations firm, or any replacement, for a
period of three (3) years from the Closing. Any replacement public relations
firm shall be retained only with the consent of National.
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(x) The Company agrees that any and all future transactions between the
Company or any of the Subsidiaries and their respective officers, directors,
principal stockholders and the affiliates of the foregoing persons will be on
terms no less favorable to the Company or any of the Subsidiaries than could
reasonably be obtained in arm's length transactions with independent third
parties, and that any such transactions also be approved by a majority of the
Company's or any of the Subsidiaries', as the case may be, outside independent
directors disinterested in the transaction.
(y) The Company shall prepare and deliver, at the Company's sole
expense, to National within the one hundred and twenty (120) day period after
the later of the effective date of the Registration Statement or the latest
Option Closing Date, as the case may be, bound volumes containing all
correspondence with regulatory officials, agreements, documents and all other
materials in connection with the offering as requested by the Underwriters'
Counsel.
(z) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Common Stock in such a manner as
would require the Company or any of the Subsidiaries to register as an
investment company under the 1940 Act.
(aa) Each of the Selling Shareholders shall use the proceeds of the
sale of Option Shares to the Underwriters solely to promptly pay down such
Selling Shareholder's personal bank loans, as described under ________ in the
Prospectus.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the Closing Date and
each Option Closing Date (to the extent not previously paid) all expenses and
fees (other than fees of Underwriters' Counsel, except as provided in (iv)
below) incident to the performance of the obligations of the Company under this
Agreement and the Representative's Warrant Agreement, including, without
limitation, (i) the fees and expenses of accountants and counsel for the
Company, (ii) all costs and expenses incurred in connection with the
preparation, duplication, printing, filing, delivery and mailing (including the
payment of postage with respect thereto) of the Registration Statement and the
Prospectus and any amendments and supplements thereto and the duplication,
mailing (including the payment of postage with respect thereto) and delivery of
this Agreement, the Agreement Among Underwriters, the Selected Dealers
Agreement, the Powers of Attorney, and related documents, including the cost of
all copies thereof and of the Preliminary Prospectuses and the Prospectus and
any amendments thereof or supplements thereto supplied to the Underwriters and
such dealers as the Underwriters may request, in quantities as hereinabove
stated, (iii) the printing, engraving, issuance and delivery of the certificates
representing the Registered Securities, (iv) the qualification of the Registered
Securities under state or foreign securities or Blue Sky laws and determination
of the status of such securities under legal investment laws, including the
costs of printing and mailing the "Preliminary Blue Sky Memorandum," the
"Supplemental Blue Sky Memorandum" and "Legal Investments Survey," if any, and
reasonable disbursements and fees of counsel in connection therewith, (v)
advertising costs and expenses, including but not limited to the costs and
expenses incurred in connection with the "road show," information meetings and
presentations, bound volumes and
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prospectus memorabilia and "tombstone" advertisement expenses, (vi) fees and
expenses of the transfer agent and registrar, (vii) issue and transfer taxes, if
any, (viii) experts, (ix) the fees payable to the Commission, the NASD and (xi)
the fees and expenses incurred in connection with the listing of the Securities
and the Representative's Shares on the American Stock Exchange and any other
market or exchange.
(b) If this Agreement is terminated by the Underwriters in accordance
with the provisions of Section 6, Section 10(a) or Section 12, the Company shall
reimburse and indemnify the Representative for all of its actual out-of-pocket
expenses on an accountable basis, including the fees and disbursements of
Underwriters' Counsel and all Blue Sky counsel fees and Blue Sky filing fees,
less any amounts already paid pursuant to Section 5(c) hereof.
(c) The Company further agrees, with respect to the Firm Shares, that,
in addition to the expenses payable by the Company pursuant to subsection (a) of
this Section 5, they will pay to the Representative on the Closing Date by
certified or bank cashier's check or, at the election of the Representative, by
deduction from the proceeds of the offering contemplated herein, a
non-accountable expense allowance equal to three percent (3%) of the gross
proceeds received by the Company from the sale of the Firm Shares, [$50,000] of
which has been paid to date. In the event the Representative elects to exercise
the over-allotment option described in Section 2(b) hereof, the Company agrees
to pay to the Representative on the Option Closing Date (by certified or bank
cashier's check or, at the Representative's election, by deduction from the
proceeds of the offering) a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds received by the Selling Shareholders from the
sale of the Option Shares.
6. Conditions of the Underwriters' Obligations.
The obligations of the Underwriters hereunder shall be subject to the
continuing accuracy of the representations and warranties of the Company and the
Selling Shareholders herein as of the date hereof and as of the Closing Date and
each Option Closing Date, if any, as if they had been made on and as of the
Closing Date or each Option Closing Date, if any; the accuracy on and as of the
Closing Date and each Option Closing Date, if any, of the statements of officers
of the Company, or the Selling Shareholders made pursuant to the provisions
hereof; and the performance by the Company and the Selling Shareholders on and
as of the Closing Date and each Option Closing Date, if any, of their respective
covenants and obligations hereunder:
(a) The Registration Statement shall have become effective not later
than 5:00 p.m., New York City time, on the date of this Agreement or such later
date and time as shall be consented to in writing by the Representative, and, at
the Closing Date and each Option Closing Date, if any, no stop order suspending
the effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of Underwriters' Counsel. If the Company has elected to rely upon
Rule 430A of the Regulations, the price of the Firm Shares and any price-related
information previously omitted from the effective Registration Statement
pursuant to such Rule 430A shall have been transmitted to the Commission for
filing
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<PAGE>
pursuant to Rule 424(b) of the Regulations within the prescribed time period,
and prior to Closing Date the Company shall have provided evidence satisfactory
to the Representative of such timely filing, or a post-effective amendment
providing such information shall have been promptly filed and declared effective
in accordance with the requirements of Rule 430A of the Regulations.
(b) The Representative shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Representative's opinion, is material, or omits to state a
fact which, in the Representative's opinion, is material and is required to be
stated therein or is necessary to make the statements therein not misleading, or
that the Prospectus, or any supplement thereto, contains an untrue statement of
fact which, in the Representative's reasonable opinion, is material, or omits to
state a fact which, in the Representative's reasonable opinion, is material and
is required to be stated therein or is necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date, the Underwriters shall have
received from Underwriters' Counsel such opinion or opinions with respect to the
organization of the Company, the validity of the Registered Securities, the
Registration Statement, the Prospectus and other related matters as the
Representative may request and Underwriters' Counsel shall have received from
the Company such papers and information as they request to enable them to pass
upon such matters.
(d) At the Closing Date, the Underwriters shall have received the
favorable opinion of Wolin & Rosen Ltd. ("Wolin & Rosen") counsel to the
Company, dated the Closing Date addressed to the Underwriters and in form and
substance satisfactory to Underwriters' Counsel, to the effect that:
(i) each of the Company and the Subsidiaries (A) has been duly
organized and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation, (B) is duly qualified and licensed
and in good standing as a foreign corporation in each jurisdiction in which its
ownership or leasing of any properties or the character of its operations
requires such qualification or licensing, and (C) to the best of such counsel's
knowledge after due inquiry, has all requisite corporate power and authority and
has obtained any and all necessary authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all governmental or regulatory
officials and bodies (including, without limitation, those having jurisdiction
over environmental or similar matters, the absence of which would have a
material adverse effect on the Company), to own or lease its properties and
conduct its business as described in the Prospectus;
(ii) the Company owns one hundred percent (100%) of the
outstanding capital stock of the Subsidiaries free and clear of any liens,
charges, claims, encumbrances, pledges, security interests, defects or other
restrictions or equities of any kind whatsoever;
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(iii) except as described in the Prospectus, and to the best
of such counsel's knowledge after due inquiry, neither the Company nor any of
the Subsidiaries owns an interest in any corporation, limited liability company,
partnership, joint venture, trust or other business entity;
(iv) the Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, and any amendment or supplement
thereto, under "Capitalization" and "Description of Securities," and to the best
of such counsel's knowledge after due inquiry, neither the Company nor any of
the Subsidiaries is a party to or bound by any instrument, agreement or other
arrangement providing for it to issue any capital stock, rights, warrants,
options or other securities, except for this Agreement and the Representative's
Warrant Agreement, and as described in the Prospectus; the Registered
Securities, and all other securities issued or issuable by the Company or any of
the Subsidiaries conform in all material respects to the statements with respect
thereto contained in the Registration Statement and the Prospectus; all issued
and outstanding securities of the Company or any of the Subsidiaries have been
duly authorized and validly issued and are fully paid and nonassessable; the
holders thereof are not subject to personal liability by reason of being such
holders; and none of such securities were issued in violation of the preemptive
rights of any holders of any security of the Company or any of the Subsidiaries,
or to the best of such counsel's knowledge after due inquiry, similar
contractual rights granted by the Company or any of the Subsidiaries or
applicable securities laws; the Registered Securities to be sold by the Company
hereunder and under the Representative's Warrant Agreement are not and will not
be subject to any preemptive or other similar rights of any security holder of
the Company or any of the Subsidiaries; the holders thereof will not be subject
to any liability solely as such holders; all corporate action required to be
taken for the authorization, issue and sale of the Registered Securities has
been duly and validly taken; the certificates representing the Registered
Securities and the Representative's Warrants are in due and proper form; the
Representative's Warrants constitute valid and binding obligations of the
Company to issue and sell, upon exercise thereof and payment therefor, the
number and type of securities of the Company called for thereby (except as the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of equitable
principles in any action, legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law); upon the issuance and
delivery pursuant to this Agreement and the Representative's Warrant Agreement
of the Registered Securities to be sold by the Company hereunder and thereunder,
the Company will convey against payment therefore as provided herein, to the
Underwriters or the Representative, as the case may be, good and marketable
title thereto free and clear of all liens and other encumbrances;
(v) the Registration Statement is effective under the Act; if
applicable, filing of all pricing information has been timely made in the
appropriate form under Rule 430A, and no stop order suspending the use of the
Preliminary Prospectus, the Registration Statement or Prospectus or any part of
any thereof or suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been instituted or are
pending or, to the best of such counsel's knowledge, threatened or contemplated
under the Act;
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(vi) each of the Preliminary Prospectus, the Registration
Statement, and the Prospectus and any amendments or supplements thereto (other
than the financial statements and other financial and statistical data included
therein as to which no opinion need be rendered) comply as to form in all
material respects with the requirements of the Act and the Regulations. Such
counsel shall state that such counsel has participated in conferences with
officers and other representatives of the Company and the Representative and
representatives of the independent public accountants for the Company, at which
conferences the contents of the Preliminary Prospectus, the Registration
Statement, the Prospectus, and any amendments or supplements thereto were
discussed, and, although such counsel is not passing upon and does not assume
any responsibility for the accuracy, completeness or fairness of the
Registration Statement and Prospectus, and any amendments or supplements
thereto, on the basis of the foregoing, no facts have come to the attention of
such counsel which lead them to believe that either the Registration Statement
or amendment became effective or the Preliminary Prospectus or Prospectus or
amendment or supplement thereto as of the date of such opinion contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
(it being understood that such counsel need express no opinion with respect to
the financial statements and schedules and other financial and statistical data
included in the Preliminary Prospectus, the Registration Statement or
Prospectus, and any amendments or supplements thereto);
(vii) to the best of such counsel's knowledge after due
inquiry, (A) there are no agreements, contracts or other documents required by
the Act to be described in the Registration Statement and the Prospectus and
filed as exhibits to the Registration Statement other than those described in
the Registration Statement and the Prospectus and filed as exhibits thereto; (B)
the descriptions in the Registration Statement and the Prospectus and any
supplement or amendment thereto of contracts and other documents to which the
Company or any of the Subsidiaries is a party or by which any of them is bound
are accurate in all material respects and fairly represent the information
required to be shown by Form SB-2; (C) there is not pending or threatened
against the Company or any of the Subsidiaries any action, arbitration, suit,
proceeding, litigation, governmental or other proceeding (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, against the Company or any of the Subsidiaries which (x) is
required to be disclosed in the Registration Statement which is not so disclosed
(and such proceedings as are summarized in the Registration Statement are
accurately summarized in all material respects), (y) questions the validity of
the capital stock of the Company or any of the Subsidiaries or this Agreement or
the Representative's Warrant Agreement, or of any action taken or to be taken by
the Company or any of the Subsidiaries pursuant to or in connection with any of
the foregoing; and (D) there is no action, suit or proceeding pending or
threatened against the Company or any of the Subsidiaries before any court or
arbitrator or governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which may result in a material
adverse change in the financial condition, business, affairs, stockholders'
equity, operations, properties, business or results of operations of the Company
or any of the Subsidiaries, which could adversely affect the present or
prospective ability of the Company to perform its obligations under this
Agreement or the
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Representative's Warrant Agreement or which in any manner draws into question
the validity or enforceability of this Agreement or the Representative's Warrant
Agreement;
(viii) the Company has the corporate power and authority to
enter into each of this Agreement and the Representative's Warrant Agreement and
to consummate the transactions provided for herein and therein; and each of this
Agreement and the Representative's Warrant Agreement has been duly authorized,
executed and delivered by the Company; each of this Agreement and the
Representative's Warrant Agreement, assuming due authorization, execution and
delivery by each other party thereto, constitutes a legal, valid and binding
agreement of the Company enforceable against the Company in accordance with its
terms (except as the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights and the
application of equitable principles in any action, legal or equitable, and
except as rights to indemnity or contribution may be limited by applicable law),
and none of the Company's execution, delivery or performance of this Agreement
and the Representative's Warrant Agreement, its consummation of the transactions
contemplated herein or therein, or the conduct of its business as described in
the Registration Statement, the Prospectus, and any amendments or supplements
thereto conflicts with or results in any breach or violation of any of the terms
or provisions of, or constitutes a default under, or will result in the creation
or imposition of any lien, charge, claim, encumbrance, pledge, security
interest, defect or other restriction or equity of any kind whatsoever upon, any
property or assets (tangible or intangible) of the Company or any of the
Subsidiaries pursuant to the terms of (A) the certificate of incorporation or by
laws of the Company or any of the Subsidiaries, as amended, (B) any license,
contract, indenture, mortgage, deed of trust, voting trust agreement,
stockholders' agreement, note, loan or credit agreement or any other agreement
or instrument known to such counsel to which the Company or any of the
Subsidiaries is a party or by which any of them is bound, or (C) any federal,
state or local statute, rule or regulation applicable to the Company or any of
the Subsidiaries or any judgment, decree or order known to such counsel of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of the Subsidiaries or any of their
activities or properties;
(ix) no consent, approval, authorization or order, and no
filing with, any court, regulatory body, government agency or other body (other
than such as may be required under federal securities or Blue Sky laws, as to
which no opinion need be rendered) is required in connection with the issuance
of the Registered Securities as contemplated by the Prospectus and the
Registration Statement, the performance of the Agreement and the
Representative's Warrant Agreement and the transactions contemplated hereby and
thereby;
(x) to the best of such counsel's knowledge after due inquiry,
the properties and businesses of the Company and the Subsidiaries conform in all
material respects to the description thereof contained in the Registration
Statement and the Prospectus;
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(xi) to the best knowledge of such counsel, and except as
disclosed in the Registration Statement and the Prospectus, none the Company nor
any of the Subsidiaries is in breach of, or in default under, any term or
provision of any license, contract, indenture, mortgage, installment sale
agreement, deed of trust, lease, voting trust agreement, stockholders'
agreement, note, loan or credit agreement or any other agreement or instrument
evidencing an obligation for borrowed money, or any other agreement or
instrument to which the Company or any of the Subsidiaries is a party or by
which the Company or any of the Subsidiaries is bound or to which the property
or assets (tangible or intangible) of the Company or any of the Subsidiaries is
subject; and none the Company nor any of the Subsidiaries is in violation of any
term or provision of its certificate of incorporation or bylaws, as amended, nor
to the best of such counsel's knowledge after due inquiry, in violation of any
franchise, license, permit, judgment, decree, order, statute, rule or
regulation, which would have a material adverse effect on the Company;
(xii) the statements in the Prospectus under "Dividend Policy"
and "Description of Securities," have been reviewed by such counsel, and insofar
as they refer to statements of law, descriptions of statutes, licenses, rules or
regulations or legal conclusions, are correct in all material respects;
(xiii) the Common Stock has been approved for listing on the
American Stock Exchange, subject only to official notice of issuance;
(xiv) to the best of such counsel's knowledge and based upon a
review of the outstanding securities and the contracts furnished to such counsel
by the Company, no person, corporation, trust, partnership, association or other
entity has the right to include and/or register any securities of the Company in
the Registration Statement, require the Company to file any registration
statement or, if filed, to include any security in such registration statement;
and
(xv) the Company is not an "investment company" or "promoter"
or "principal underwriter" for or an "affiliated person" of, an "investment
company" as such terms are defined in the 1940 Act.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws, rules and regulations of
the United States and the laws, rules and regulations of the State of Delaware,
to the extent such counsel deems proper and to the extent specified in such
opinion, if at all, upon an opinion or opinions (in form and substance
satisfactory to Underwriters' Counsel) of other counsel acceptable to
Underwriters' Counsel, familiar with the applicable laws provided, however, that
if the laws, rules and regulations of jurisdictions other than the United States
and Delaware on which such other counsel opines differ materially from the laws,
rules and regulations of the United States and Delaware, the opinion of such
other counsel shall be modified to contain all provisions customarily included
in such opinions in such jurisdiction; (B) as to matters of fact, to the extent
they deem proper, on certificates and written statements of responsible officers
of the Company and certificates or other written statements of officers of
departments of various jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company, provided that
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copies of any such statements or certificates shall be delivered to
Underwriters' Counsel if requested. The opinion of such counsel shall state that
knowledge shall not include the knowledge of a director or officer of the
Company who is affiliated with such firm in his or her capacity as an officer or
director of the Company. The opinion of such counsel for the Company shall state
that the opinion of any such other counsel is in form satisfactory to such
counsel.
(e) At each Option Closing Date, if any, the Underwriters shall have
received the favorable opinion of _____________, counsel to the Selling
Shareholders, dated the Option Closing Date, addressed to the Underwriters and
in form and substance satisfactory to Underwriters' Counsel to the effect that:
(i) each Selling Shareholder has full power and authority to
execute, deliver, and perform this Agreement and the Escrow Agreement. This
Agreement and the Escrow Agreement have been duly executed and delivered by the
Selling Shareholder and are the legal, valid, and binding obligations of the
Selling Shareholder, and (subject to applicable bankruptcy, insolvency, and
other laws affecting the enforceability of creditors' rights generally) are
enforceable as to it in accordance with their respective terms. No consent,
authorization, approval, order, license, certificate, or permit of or from, or
declaration or filing with, any federal, state, local, or other governmental
authority or any court or other tribunal is required by the Selling Shareholder
for the execution, delivery, or performance of this Agreement (except filings
under the Act, all of which have been made, and such consents consisting only of
consents under "blue sky" or securities laws) or the Escrow Agreement by the
Selling Shareholder. No consent of any party to any contract, agreement,
instrument, lease, license, arrangement, or understanding known to such counsel
to which the Selling Shareholder is a party, or to which the Selling
Shareholder's properties or assets are subject, is required for the execution,
delivery, or performance of this Agreement or the Escrow Agreement; and the
execution, delivery, and performance of this Agreement and the Escrow Agreement
will not violate, result in a breach of, conflict with, or (with or without the
giving of notice or the passage of time or both) entitle any party to terminate
or call a default under any such contract, agreement, instrument, lease,
license, arrangement, or understanding, or violate, result in a breach of, or
conflict with any law, rule, regulation, order, judgment, or decree binding on
the Selling Shareholder or to which the Selling Shareholder's operations,
business, properties, or assets are subject; and
(ii) Upon the issuance and delivery pursuant to this Agreement
of the Registered Securities to be sold by each Selling Shareholder, the Selling
Shareholder will convey, against payment therefor as provided herein, to the
Underwriters and the Representative, respectively, good and marketable title to
the Registered Securities free and clear of all liens and other encumbrances.
In rendering such opinion, such counsel may rely (A) as to matters involving the
application of laws other than the laws, rules and regulations of the United
States and the laws, rules and regulations of the State of Delaware, to the
extent such counsel deems proper and to the extent specified in such option, if
at all, upon an opinion or opinions (in form and substance satisfactory to
Underwriters' Counsel) of other counsel acceptable to Underwriters' Counsel,
familiar with the applicable laws provided, however, that if the laws, rules and
regulations of jurisdictions
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other than the United States and Delaware on which such other counsel opines
differ materially from the laws, rules and regulations of the United States and
Delaware, the opinion of such other counsel shall be modified to contain all
provisions customarily included in such opinions in such jurisdiction; (B) as to
matters of fact, to the extent they deem proper, on certificates and written
statements of responsible officers of the Company and certificates or other
written statements of officers of department of various jurisdictions having
custody of documents respecting the corporate existence or good standing of the
Company, provided that copies of any such statements or certificates shall be
delivered to Underwriters' Counsel if requested. The opinion of such counsel
shall state that knowledge shall not include the knowledge of a director or
officer of the Company who is affiliated with such firm in his or her capacity
as an officer or director of the Company. The opinion of such counsel for the
Company shall state that the opinion of any such other counsel is in form
satisfactory to such counsel.
(f) On or prior to each of the Closing Date and the Option Closing
Date, if any, Underwriters' Counsel shall have been furnished such documents,
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in subsection (c)
of this Section 6 or in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions of the
Company herein contained.
(g) Prior to each of the Closing Date and each Option Closing Date, if
any, (i) there shall have been no material adverse change nor development
involving a prospective change in the condition, financial or otherwise,
prospects, stockholders' equity or the business activities any of the Company
and the Subsidiaries, whether or not in the ordinary course of business, from
the latest dates as of which such condition is set forth in the Registration
Statement and Prospectus; (ii) there shall have been no transaction, not in the
ordinary course of business, entered into by any of the Company or the
Subsidiaries, from the latest date as of which the financial condition of the
Company and the Subsidiaries is set forth in the Registration Statement and
Prospectus which is adverse to the Company and the Subsidiaries taken as a
whole; (iii) none of the Company or the Subsidiaries shall be in default under
any provision of any instrument relating to any outstanding indebtedness which
default has not been waived; (iv) none of the Company or the Subsidiaries shall
have issued any securities (other than Registered Securities) or declared or
paid any dividend or made any distribution in respect of its capital stock of
any class, nor has there been any change in the capital stock, or any material
increase in the debt (long or short term) or liabilities or obligations of any
of the Company or the Subsidiaries (contingent or otherwise); (v) no material
amount of the assets of any of the Company or the Subsidiaries shall have been
pledged or mortgaged, except as set forth in the Registration Statement and
Prospectus; (vi) no action, suit or proceeding, at law or in equity, shall have
been pending or threatened (or circumstances developed giving rise to same)
against any of the Company or the Subsidiaries, or affecting any of their
respective properties or businesses before or by any court or federal, state or
foreign commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may materially adversely affect the business,
operations, prospects or financial condition or any income of the Company or any
of the Subsidiaries, except as set forth in the Registration Statement and
Prospectus; and (vii) no stop
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order shall have been issued under the Act and no proceedings therefor shall
have been initiated, threatened or contemplated by the Commission.
(h) At each of the Closing Date and each Option Closing Date, if any,
the Underwriters shall have received a certificate of the Company signed on
behalf of the Company by the principal executive officer of the Company, dated
the Closing Date or Option Closing Date, as the case may be, to the effect that
such executive has carefully examined the Registration Statement, the
Prospectus, this Agreement and the Representative's Warrant Agreement, and that:
(i) The representations and warranties of the Company in this
Agreement and the Representative's Warrant Agreement are true and correct, as if
made on and as of the Closing Date or the Option Closing Date, as the case may
be, and the Company has complied with all agreements and covenants and satisfied
all conditions contained in this Agreement and the Representative's Warrant
Agreement on its part to be performed or satisfied at or prior to such Closing
Date or Option Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no proceedings
for that purpose have been instituted or are pending or, to the best of each of
such person's knowledge after due inquiry, are contemplated or threatened under
the Act;
(iii) The Registration Statement and the Prospectus and, if
any, each amendment and each supplement thereto, contain all statements and
information required by the Act to be included therein, and none of the
Registration Statement, the Prospectus nor any amendment or supplement thereto
includes any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading and neither the Preliminary Prospectus or any supplement, as of
their respective dates, thereto included any untrue statement of a material fact
or omitted to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, (a) none
of the Company or the Subsidiaries has incurred up to and including the Closing
Date or the Option Closing Date, as the case may be, other than in the ordinary
course of its business, any material liabilities or obligations, direct or
contingent; (b) none of the Company or the Subsidiaries has paid or declared any
dividends or other distributions on its capital stock; (c) none of the Company
or the Subsidiaries has entered into any transactions not in the ordinary course
of business; (d) there has not been any change in the capital stock or material
increase in long-term debt or any increase in the short-term borrowings (other
than any increase in the short-term borrowings in the ordinary course of
business) of any of the Company or the Subsidiaries, (e) none of the Company or
the Subsidiaries has sustained any loss or damage to its property or assets,
whether or not insured, (f) there is no litigation which is pending or
threatened (or circumstances giving rise to same) against the Company, or any of
the Subsidiaries or any affiliated party of any of the foregoing
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<PAGE>
which is required to be set forth in an amended or supplemented Prospectus which
has not been set forth, and (g) there has occurred no event required to be set
forth in an amended or supplemented Prospectus which has not been set forth.
References to the Registration Statement and the Prospectus in this
subsection (h) are to such documents as amended and supplemented at the date of
such certificate.
(i) At each Option Closing Date, if any, the Underwriters shall have
received a certificate from the Selling Shareholders, dated the Option Closing
Date, to the effect that the Selling Shareholders have carefully examined the
Registration Statement, the Prospectus and this Agreement, and that the
representations and warranties of the Selling Shareholders in this Agreement are
true and correct, as if made on and as of the Option Closing Date, and the
Selling Shareholders have complied with all agreements and covenants and
satisfied all conditions contained in this Agreement on its part to be performed
or satisfied at or prior to such Option Closing Date.
(j) By the Closing Date, the Underwriters will have received clearance
from the NASD as to the amount of compensation allowable or payable to the
Underwriters.
(k) At the time this Agreement is executed, the Underwriters shall have
received a letter, dated such date, addressed to the Underwriters in form and
substance satisfactory in all respects (including the non-material nature of the
changes or decreases, if any, referred to in clause (iii) below) to the
Underwriters and Underwriters' Counsel, from Moore Stephens:
(i) confirming that they are independent certified public
accountants with respect to the Company within the meaning of the Act and the
Exchange Act and the applicable Regulations;
(ii) stating that it is their opinion that the financial
statements and supporting schedules of the Company and the Subsidiaries included
in the Registration Statement comply as to form in all material respects with
the applicable accounting requirements of the Act and the Regulations thereunder
and that the Representative may rely upon the opinion of Moore Stephens with
respect to the financial statements and supporting schedules included in the
Registration Statement;
(iii) stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim financial
statements of the Company and the Subsidiaries (with an indication of the date
of the latest available unaudited interim financial statements), a reading of
the latest available minutes of the stockholders and board of directors and the
various committees of the board of directors of the Company and the
Subsidiaries, consultations with officers and other employees of each of the
Company and the Subsidiaries responsible for financial and accounting matters
and other specified procedures and inquiries, nothing has come to their
attention which would lead them to believe that (A) the unaudited financial
statements and supporting schedules of the Company and the Subsidiaries, if any,
included in the Registration Statement, do not comply as to form in all material
respects with the applicable
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accounting requirements of the Act and the Regulations or are not fairly
presented in conformity with generally accepted accounting principles applied on
a basis substantially consistent with that of the audited financial statements
of the Company and the Subsidiaries included in the Registration Statement, or
(B) at a specified date not more than five (5) days prior to the effective date
of the Registration Statement, there has been any change in the capital stock or
material increase in long-term debt any of the Company or the Subsidiaries, or
any material decrease in the stockholders' equity or net current assets or net
assets of the Company as compared with amounts shown in the ____________, 19__,
balance sheet included in the Registration Statement, other than as set forth in
or contemplated by the Registration Statement, or, if there was any change or
decrease, setting forth the amount of such change or decrease;
(iv) stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements and other
financial information pertaining to each of the Company and the Subsidiaries set
forth in the Prospectus in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the general
accounting records, including work sheets, of each of the Company and the
Subsidiaries and excluding any questions requiring an interpretation by legal
counsel, with the results obtained from the application of specified readings,
inquiries and other appropriate procedures (which procedures do not constitute
an examination in accordance with generally accepted auditing standards) set
forth in the letter and found them to be in agreement; and
(v) statements as to such other material matters incident to
the transaction contemplated hereby as the Representative may reasonably
request.
(l) At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received from Moore Stephens a letter, dated as of the
Closing Date or the Option Closing Date, as the case may be, to the effect that
they reaffirm that statements made in the letter furnished pursuant to
Subsection (i) of this Section 6, except that the specified date referred to
shall be a date not more than five (5) days prior to Closing Date or the Option
Closing Date, as the case may be, and, if the Company has elected to rely on
Rule 430A of the Rules and Regulations, to the further effect that they have
carried out procedures as specified in clause (iv) of Subsection (k) of this
Section 6 with respect to certain amounts, percentages and financial information
as specified by the Representative and deemed to be a part of the Registration
Statement pursuant to Rule 430A(b) and have found such amounts, percentages and
financial information to be in agreement with the records specified in such
clause (iv).
(m) On the Closing Date and each Option Closing Date, if any, there
shall have been duly tendered to the Representative for the several
Underwriters' accounts the appropriate number of Registered Securities.
(n) No order suspending the sale of the Registered Securities in any
jurisdiction designated by the Representative pursuant to subsection (e) of
Section 4 hereof shall have been issued on the Closing Date or each Option
Closing Date, if any, and no proceedings for that purpose shall have been
instituted or shall be contemplated.
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(o) On or before the Closing Date, the Company shall have executed and
delivered to the Representative, (i) the Representative's Warrant Agreement,
substantially in the form filed as Exhibit 4.2 to the Registration Statement, in
final form and substance satisfactory to the Representative, and (ii) the
Representative's Warrants in such denominations and to such designees as shall
have been provided to the Company.
(p) On or before Closing Date, the shares of Common Stock shall have
been duly approved for quotation on the American Stock Exchange.
(q) On or before Closing Date, there shall have been delivered to the
Representative all of the Lock-up Agreements in final form and substance
satisfactory to Underwriters' Counsel.
If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case may be, is not so fulfilled, the Representative may terminate this
Agreement or, if the Representative so elects, it may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
7. Indemnification.
(a) The Company and the Selling Shareholders, as of the date hereof and
as of the Option Closing Date, if any, agree to indemnify and hold harmless each
of the Underwriters (for purposes of this Section 7, "Underwriters" shall
include the officers, directors, partners, employees, agents and counsel of the
Underwriters, including specifically each person who may be substituted for an
Underwriter as provided in Section 11 hereof), and each person, if any, who
controls the Underwriter ("controlling person") within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, from and against any and all
loss, liability, claim, damage, and expense whatsoever (including, but not
limited to, reasonable attorneys' fees and any and all reasonable expense
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever and any and all
amounts paid in settlement of any claim or litigation provided that the
indemnified persons may not agree to any such settlement without the prior
written consent of the Company), as and when incurred, arising out of, based
upon or in connection with (i) any untrue statement or alleged untrue statement
of a material fact contained (A) in any Preliminary Prospectus, the Registration
Statement or the Prospectus (as from time to time amended and supplemented); or
(B) in any application or other document or communication (in this Section 7
collectively called "application") executed by or on behalf of the Company or
the Selling Shareholders or based upon written information furnished by or on
behalf of the Company or the Selling Shareholders in any jurisdiction in order
to qualify the Registered Securities under the securities laws thereof or filed
with the Commission, any state securities commission or agency, the American
Stock Exchange or any other securities exchange or quotation system; or any
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading (in the case
of the Prospectus, in the light of the circumstances under which they were
made), unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company with respect to any
Underwriter by or on behalf of such Underwriter expressly for use in any
Preliminary Prospectus, the Registration Statement or
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Prospectus, or any amendment thereof or supplement thereto, or in any
application, as the case may be; or (ii) any breach of any representation,
warranty, covenant or agreement of the Company or the Selling Shareholders
contained in this Agreement. The indemnity agreement in this subsection (a)
shall be in addition to any liability which the Company or the Selling
Shareholders may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not jointly, to
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, and each other person, if
any, who controls the Company, within the meaning of the Act, and the Selling
Shareholders, to the same extent as the foregoing indemnity from the Company and
the Selling Shareholders to the Underwriters but only with respect to statements
or omissions, if any, made in any Preliminary Prospectus, the Registration
Statement or Prospectus or any amendment thereof or supplement thereto or in any
application made in reliance upon, and in strict conformity with, written
information furnished to the Company with respect to any Underwriter by such
Underwriter or the Representative expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any such application, provided that such written
information or omissions only pertain to disclosures in the Preliminary
Prospectus, the Registration Statement or Prospectus directly relating to the
transactions effected by the Underwriters in connection with this Offering. The
Company and each of the Selling Shareholders acknowledge that the statements
with respect to the public offering of the Securities set forth under the
heading "Underwriting" and the stabilization legend in the Prospectus have been
furnished by the Underwriters expressly for use therein and constitute the only
information furnished in writing by or on behalf of the Underwriters or the
Representative for inclusion in the Prospectus. The indemnity agreement in this
subsection (b) shall be in addition to any liability which the Underwriters may
have at common law or otherwise.
(c) Promptly after receipt by an indemnified party under this Section 7
of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this Section 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure to so notify an indemnifying party shall not relieve it from any
liability which it may have otherwise or which it may have under this Section 7,
except to the extent that it has been prejudiced in any material respect by such
failure). In case any such action is brought against any indemnified party, and
it notifies an indemnifying party or parties of the commencement thereof, the
indemnifying party or parties will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense of such action at the expense of the indemnifying party, (ii) the
indemnifying parties shall not have employed counsel reasonably
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<PAGE>
satisfactory to such indemnified party to have charge of the defense of such
action within a reasonable time after notice of commencement of the action, or
(iii) such indemnified party or parties shall have reasonably concluded, based
on the advice of counsel, that there may be defenses available to it or them
which are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying parties shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events the reasonable fees and expenses of one
additional counsel shall be borne by the indemnifying parties. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. Anything in this Section 7 to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its written consent; provided, however,
that such consent was not unreasonably withheld.
(d) In order to provide for just and equitable contribution in any case
in which (i) an indemnified party makes claim for indemnification pursuant to
this Section 7, but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) (A) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified on the other hand, from the offering of
the Registered Securities, or (B) if the allocation provided by clause (A) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of each of the contributing parties, on the one hand, and the
party to be indemnified on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages, expenses or
liabilities, as well as any other relevant equitable considerations. In any case
where the Company and/or the Selling Shareholders on the one hand, is a
contributing party and the Underwriters on the other hand, are the indemnified
party, the relative benefits received by the Company and the Selling
Shareholders on the one hand, and the Underwriters, on the other, shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Registered Securities (before deducting expenses other than underwriting
discounts and commissions) bear to the total underwriting discounts received by
the Underwriters hereunder, in each case as set forth in the table on the Cover
Page of the Prospectus. Relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company and/or the Selling Shareholders on the one
hand, or by the Underwriters on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, expenses or liabilities
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<PAGE>
(or actions in respect thereof) referred to above in this subdivision (d) shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subdivision (d), the
Underwriters shall not be required to contribute any amount in excess of the
underwriting discount applicable to the Registered Securities purchased by the
Underwriters hereunder. No person guilty of fraudulent misrepresentation (within
the meaning of Section 12(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For purposes
of this Section 7, each person, if any, who controls the Company within the
meaning of the Act, each officer of the Company who has signed the Registration
Statement, and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to this subparagraph (d). Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect to
which a claim for contribution may be made against another party or parties
under this subparagraph (d), notify such party or parties from whom contribution
may be sought, but the omission so to notify such party or parties shall not
relieve the party or parties from whom contribution may be sought from any
obligation it or they may have hereunder or otherwise than under this
subparagraph (d), or to the extent that such party or parties were not adversely
affected by such omission. The contribution agreement set forth above shall be
in addition to any liabilities which any indemnifying party may have at common
law or otherwise.
8. Representations and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this
Agreement or contained in certificates of officers of the Company or the Selling
Shareholders submitted pursuant hereto, shall be deemed to be representations,
warranties and agreements of the Company and the Selling Shareholders at the
Closing Date and as of each Option Closing Date, as the case may be, and such
representations, warranties and agreements of the Company and the respective
indemnity and contribution agreements contained in Section 7 hereof shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any Underwriter, the Company, the Selling Shareholders or any
controlling person of any of the Underwriters or the Company, and shall survive
termination of this Agreement or the issuance and delivery of the Registered
Securities to the Underwriters and the Representative, as the case may be.
9. Effective Date.
This Agreement shall become effective at 4:00 p.m., New York City time,
on the date hereof. For purposes of this Section 9, the Securities to be
purchased hereunder shall be deemed to have been so released upon the earlier of
dispatch by the Representative of telegrams to securities dealers releasing such
Registered Securities for offering or the release by the Representative for
publication of the first newspaper advertisement which is subsequently published
relating to the Registered Securities.
10. Termination.
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(a) Subject to subsection (b) of this Section 10, the Representative
shall have the right to terminate this Agreement, (i) if any domestic or
international event or act or occurrence has materially disrupted, or in the
Representative's reasonable opinion, will in the immediate future materially
disrupt the financial markets; or (ii) any material adverse change in the
financial markets shall have occurred; or (iii) if trading on the New York Stock
Exchange, the American Stock Exchange, or in the over-the-counter market shall
have been suspended, or minimum or maximum prices for trading shall have been
fixed, or maximum ranges for prices for securities shall have been required on
the over-the-counter market by the NASD or by order of the Commission or any
other government authority having jurisdiction; or (iv) if the United States
shall have become involved in a war or major hostilities, or if there shall have
been an escalation in an existing war or major hostilities or a national
emergency shall have been declared in the United States; or (v) if a banking
moratorium has been declared by a state or federal authority; or (vi) if the
Company shall have sustained a loss material or substantial to the Company by
fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity
or malicious act which, whether or not such loss shall have been insured, will,
in the Representative's opinion, make it inadvisable to proceed with the
delivery of the Registered Securities; or (vii) if there shall have been such a
material adverse change in the prospects or conditions of the Company or any of
the Subsidiaries, or such material adverse change in the general market,
political or economic conditions, in the United States or elsewhere as in the
Representative's judgment would make it inadvisable to proceed with the
offering, sale and/or delivery of the Registered Securities.
(b) If this Agreement is terminated by the Representative in accordance
with any of the provisions of Section 6, Section 10(a) or Section 12, the
Company and/or the Selling Shareholders shall promptly reimburse and indemnify
the Underwriters pursuant to Section 5(b) hereof. Notwithstanding any contrary
provision contained in this Agreement, any election hereunder or any termination
of this Agreement (including, without limitation, pursuant to Sections 6, 10, 11
and 12 hereof), and whether or not this Agreement is otherwise carried out, the
provisions of Section 5 and Section 7 shall not be in any way affected by such
election or termination or failure to carry out the terms of this Agreement or
any part hereof.
11. Substitution of the Underwriters or the Selling Shareholders.
If one or more of the Underwriters or the Selling Shareholders shall
fail (otherwise than for a reason sufficient to justify the termination of this
Agreement under the provisions of Section 6, Section 10 or Section 12 hereof) to
purchase the Securities which it or they are obligated to purchase on such date
under this Agreement (the "Defaulted Securities"), the Representative shall have
the right, within 24 hours thereafter, to make arrangement for one or more of
the non-defaulting Underwriters, or any other underwriters, to purchase all, but
not less than all, of the Defaulted Securities in such amounts as may be agreed
upon and upon the terms herein set forth. If, however, the Representative shall
not have completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
total number of Securities to be purchased on such date, the non-defaulting
Underwriters shall be obligated to
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purchase the full amount thereof in the proportions that their respective
underwriting obligations hereunder bear to the underwriting obligations of all
non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the total
number of Securities to be purchased on such date, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriters.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
In the event of any such default which does not result in a
termination of this Agreement, the Representative shall have the right to
postpone the Closing Date for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements.
12. Default by the Company or the Selling Shareholders.
If the Company or the Selling Shareholders shall fail at the Closing
Date or at any Option Closing Date, as applicable, to sell and deliver the
number of Registered Securities which it is obligated to sell hereunder on such
date, then this Agreement shall terminate (or, if such default shall occur with
respect to any Option Shares to be purchased on an Option Closing Date, the
Underwriters may at the Representative's option, by notice from the
Representative to the Selling Shareholders terminate the Underwriters'
obligation to purchase Option Shares from the Selling Shareholders on such date)
without any liability on the part of any non-defaulting party other than
pursuant to Section 5, Section 7 and Section 10 hereof. No action taken pursuant
to this Section shall relieve the Company or any Selling Shareholder from
liability, if any, in respect of such default.
13. Notices.
All notices and communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be deemed to have been duly
given if mailed or transmitted by any standard form of telecommunication.
Notices to the Underwriters shall be directed to the Representative, c/o
National Securities Corporation, 875 North Michigan Avenue, Suite 1560, Chicago,
Illinois 60611, Attention: Steven Rothstein, with a copy, which shall not
constitute notice, D'Ancona & Pflaum LLC, 111 East Wacker Drive, Suite 2800,
Chicago, Illinois 60601, Attention: Arthur Don. Notices to the Company shall be
directed to the Company at 822 West Washington Boulevard, Chicago, Illinois
60607, Attention: Steven A. Greenberg, with a copy, which shall not constitute
notice, to Wolin & Rosen Ltd., 2 North LaSalle Street, Suite 1776, Chicago,
Illinois 60602, Attention Gerald L. Fishman. . 14. Parties.
This Agreement shall inure solely to the benefit of and shall be
binding upon the Underwriters, the Company and the Selling Shareholders, and the
controlling persons, directors
37
<PAGE>
and officers referred to in Section 7 hereof and their respective successors,
legal representatives and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provisions herein contained. No
purchaser of Registered Securities from any Underwriter shall be deemed to be a
successor by reason merely of such purchase.
15. Construction.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware without giving effect to the
choice of law or conflict of laws principles.
16. Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, and all of which taken together shall
be deemed to be one and the same instrument.
17. Entire Agreement; Amendments.
This Agreement and the Representative's Warrant Agreement constitute
the entire agreement of the parties hereto and supersede all prior written or
oral agreements, understandings and negotiations with respect to the subject
matter hereof. This Agreement may not be amended except in a writing, signed by
the Representative, the Company and the Selling Shareholders.
If the foregoing correctly sets forth the understanding among the
Underwriters, the Company and the Selling Shareholders, please so indicate in
the space provided below for that purpose, whereupon this letter shall
constitute a binding agreement among us.
38
<PAGE>
Any person executing and delivering this Agreement as Attorney-in-Fact
for a Selling Shareholder represents by doing that he has been duly appointed as
Attorney-in-Fact by such Selling Shareholder pursuant to a validly existing and
binding Power of Attorney which authorizes such Attorney-in-Fact to take such
action.
Very truly yours,
ALARON.COM HOLDING CORPORATION
By:________________________________________
Name:
Title:
SELLING SHAREHOLDERS LISTED ON SCHEDULE B
By:________________________________________
Attorney-in-fact
CONFIRMED AND ACCEPTED AS OF
THE DATE FIRST ABOVE WRITTEN:
NATIONAL SECURITIES CORPORATION
By:________________________________________________
Name: Steven A. Rothstein
Title: Chairman
For itself and as Representative of the Underwriters named in Schedule A hereto.
39
<PAGE>
SCHEDULE A
FIRM SHARES
Number of Shares to be Total Number of
Name of Purchased Shares to
Underwriters from the Company be Purchased
------------ ---------------- ------------
National Securities 1,000,000 1,000,000
Corporation
TOTAL
40
<PAGE>
SCHEDULE B
SCHEDULE OF SELLING SHAREHOLDERS
Selling Shareholder Option Shares to Be Sold
------------------- ------------------------
Steven A. Greenberg
Carrie A. Greenberg
Greenberg Family Trust
41
EXHIBIT 3.1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "ALARON.COM CORPORATION", FILED IN THIS OFFICE ON THE FOURTH
DAY OF DECEMBER, A.D. 1998, AT 9 O'CLOCK A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE RENT COUNTY
RECORDER OF DEEDS.
<PAGE>
CERTIFICATE OF INCORPORATION
OF
ALARON.COM CORPORATION
The undersigned, a natural person, for purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particular Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified, and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the corporation (hereinafter called the
"Corporation") is ALARON.COM CORPORATION.
SECOND: The address, including street, number, city, and
county, of the registered office of the Corporation in the State of Delaware
19901, County Kent; and the name of the registered agent of the Corporation in
the State of Delaware at such address is National Registered Agents, Inc.
THIRD: The nature of the business and the purposes to be
conducted and promoted by the corporation, shall be to conduct any lawful
business, to promote any lawful purpose, and to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares which the Corporation shall
have authority to issue are 25,000,000 shares of $.01 par value common stock and
10,000,000 shares of $.01 par value preferred stock (the "Preferred Stock").
Shares of Preferred Stock may be divided into and issued in
series or classes from time to time determined by the Board of Directors of the
Corporation, the shares of each series or class to have such voting rights,
designations, preferences, and relative, participating, optional or special
rights, and qualifications, limitations or restrictions thereof as determined by
the Board of Directors of the Corporation is hereinafter provided.
Each series or class shall be so designated as to distinguish
the shares thereof from the shares of all other series and classes.
Authority is hereby expressly granted to the Board of
Directors of the Corporation, subject to the provisions of this Article FOURTH
and to the limitations prescribed by the General Corporation Law of Delaware, to
authorize the issuance of one or more series or classes of Preferred Stock and
with respect to each such series or class to fix for such series or class the
voting powers, designations, preferences and relative, participating, optional
or other special rights, and qualifications, limitations or restrictions
thereof. The authority of the Board of Directors of the Corporation with respect
to each series or class shall include, but not be limited to, the determination
or fixing of the following:
the designation of such series or class;
the dividend rate of such series or class, the conditions and
dates upon which such dividends shall be payable, the relation which such
dividends shall bear to the dividends payable on any other class or classes of
stock or any other series of any class of stock of the Corporation, and whether
such dividends shall be cumulative or non-cumulative;
<PAGE>
whether the shares of such series or class shall be subject to
redemption by the Corporation and, if made subject to such redemption, the
times, prices and other terms and conditions of such redemption;
the terms and amount of an sinking fund provided for the
purchase or redemption of the shares of such series or class;
whether or not the shares of such series or class shall be
convertible into or exchangeable for shares of any other class or classes of any
stock or any other series of any class of stock of the Corporation, and, if
provision is made for conversion or exchange, the times, prices, rates,
adjustments, and other terms and conditions of such conversion or exchange;
the extent, if any, to which the holders of shares of such
series or class shall be entitled to vote with respect to the election of
directors or otherwise;
the restrictions, if any, on the issue or reissue of any
additional Preferred Stock; and
the rights of the holders of the shares of such series or
class upon the liquidation, dissolution, or distribution of assets of the
corporation.
FIFTH: The name and the mailing address of the incorporation
are as follows: Jeffrey A. Hechtman, Esq, 333 West Wacker Drive, Suite 2800,
Chicago, Illinois 60606.
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed
between the Corporation and its creditors or any class of them made/or between
the Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in a
summary way of the Corporation or of any creditor or stockholder thereof or on
the application of any receiver or receivers appointed for the Corporation under
ss. 279 of Title 8 of Delaware Code order a meeting of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case maybe, to be summoned in such manner as the said court
directs. If a majority in number representing three fourth in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of the Corporation as consequence of such
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
EIGHTH: For the management of the business and for the conduct
of the affairs of the Corporation, and in further definition, limitation, and
regulation of the powers of the Corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
The management of the business and the conduct of the affairs
of the Corporation shall be vested in its Board of Directors. The number of
directors which s hall constitute the whole Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed by,
or in the manner provided in, the Bylaws. The phrase "whole Board" and the
phrase "total number of directors" shall be deemed to have the same meaning, to
wit, the total number of directors" shall be deemed to have the same meaning, to
wit, the total number of directors which the Corporation would have if there
were no vacancies.
No election of directors need be by written ballot.
After the original or other Bylaws of the Corporation have
been adopted, amended, or repealed, as the case may be, in accordance with the
provisions of ss. 109 of the General Corporation Law of the State of Delaware,
and, after the Corporation has received any payment for any of its stock, the
power to adopt, amend, or repeal the Bylaws of the Corporation may be exercised
by the Board of Directors of the
<PAGE>
Corporation provided, however, that any provision for the classification of
directors of the Corporation for staggered terms pursuant to the provisions of
subsection (d) or ss. 141 of the General Corporation Law of the State of
Delaware shall be set forth in an initial Bylaw or in a Bylaw adopted by the
stockholders entitled to vote of the Corporation unless provisions for such
classification shall be set forth in this certificate of incorporation.
Whenever the Corporation shall be authorized to issue more
than one class of stock, the priorities of each class of stock shall be set at
the discretion of the Board of Directors. Whenever the Corporation shall be
authorized to issue more than one class of stock, no outstanding share of any
class of stock which is denied voting power by the Board of Directors shall
entitle the holder thereof the right to vote at any meeting of stockholders
except as the provisions of paragraph (2) of subsection (b) of ss. 242 of the
General Corporation Law of the State of Delaware shall otherwise require;
provided, that no share of any such class which is otherwise denied voting power
shall entitle the holder thereof to vote upon the increase or decrease in the
number of authorized shares of said class.
NINTH: The personal liability of the directors of the
Corporation is hereby eliminated to the fullest extent permitted by the
provisions of paragraph (78) of subsection (b) of ss. 102 of the General
Corporation Law of the State of Delaware, as the same may be amended and
supplemented.
TENTH: The Corporation shall, to the fullest extent permitted
by the provisions of ss. 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities, or other maters referred to in
or covered by said section, and the indemnification provided for herein shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled under any Bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in such person's official capacity and
as to action in another capacity while holding such office, 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, executors, and administrators of such
person.
ELEVENTH: From time to time any of the provisions of this
certificate of incorporation may be amended, altered, or repealed, and other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted in the manner and at the time prescribed by said laws,
and all rights at any time conferred upon the stockholders of the Corporation by
this certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH.
The effective time of the certificate of incorporation of the
Corporation, and the time when the existence of the Corporation shall commence,
shall be the date of filing.
Signed on December 3, 1998.
________________________________________
Jeffrey A. Hechtman, Esq., Incorporator
EXHIBIT 3.2
BY-LAWS
OF
ALARON.COM CORPORATION
a Delaware corporation
ARTICLE I
Offices
Section 1.1 Registered Office. The registered office of the Corporation
in the State of Delaware shall be located at 9 East Loockerman Street, Dover,
Delaware, County of Kent. The name of the Corporation's registered agent at such
address shall be National Registered Agents, Inc.
Section 1.2 Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
Stockholders
Section 2.1 Annual Meetings. An annual meeting of stockholders shall be
held each year for the election of directors at such date, time and place either
within or without the State of Delaware as shall be designated by the Board of
Directors. Any other proper business may be transacted at the annual meeting of
stockholders.
Section 2.2 Special Meetings. Special meetings of stockholders may be
called at any time by the Board of Directors, the Chairman, if any, or the
President and shall be called by the Chairman, the President or the Secretary at
the request, in writing, stating the purpose or purposes of the meeting, of
stockholders who hold a majority of the outstanding shares of each class of
capital stock entitled to vote at the meeting. Each special meeting shall be
held at such date, time and place either within or without the State of Delaware
as shall be designated by the person or persons calling such meeting at least
ten days prior to such meeting.
Section 2.3 Notice of Meeting. Unless otherwise provided by law,
whenever stockholders are required or permitted to take any action at a meeting,
a written notice of the meeting shall be given which shall state the date, time
and place of the meeting and, in the case of a special meeting,
<PAGE>
the purpose or purposes for which the meeting is called. Unless otherwise
provided by law, the written notice of any meeting shall be given not less than
ten nor more than sixty days before the date of the meeting to each stockholder
entitled to vote at the meeting. If mailed, notice is given when deposited in
the United States mail, postage prepaid, directed to the stockholder at his
address as it appears on the records of the Corporation.
Other business may be transacted at the annual meeting (but not at any
special meeting), only if the Secretary of the Corporation has received from the
sponsoring stockholder (a) not less than sixty nor more than ninety days before
the date designated for the annual meeting or, if such date has not been
publicly disclosed at least seventy-five days in advance, then not less than
fifteen days after such initial public disclosure, a written notice setting
forth (i) as to each matter the stockholder proposes to bring before the annual
meeting, a brief description of the proposal desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business, (iii) the class and number of shares
which are beneficially owned by the stockholder on the date of such
stockholder's notice and (iv) any material interest of the stockholder in such
proposal, and (b) not more than ten days after receipt by the sponsoring
stockholder of a written request from the Secretary, such additional information
as the Secretary may reasonably require. Notwithstanding anything in these
by-laws to the contrary, no business shall be brought before or conducted at an
annual meeting except in accordance with the provisions of this Section 2.3. The
officer of the Corporation or other person presiding over the annual meeting
shall, if the facts so warrant, determine and declare to the meeting that
business was not properly brought before the meeting in accordance with the
provisions of this Section 2.3 and, if he or she should so determine, such
officer shall so declare to the meeting and any business so determined to be not
properly brought before the meeting shall not be transacted.
Candidates for election to the Board of Directors of the Corporation
(other than nominees proposed by the Board of Directors) may be nominated at the
annual meeting (but not at any special meeting), only if the Secretary of the
Corporation has received from the nominating stockholder (a) not less than sixty
nor more than ninety days before the date designated for the annual meeting or,
if such date has not been publicly disclosed at least seventy-five days in
advance, then not less than fifteen days after such initial public disclosure, a
written notice setting forth (i) with respect to each person whom such
stockholder proposes to nominate for election or re-election as a director, all
information relating to such person that would be required to be disclosed in
solicitations of proxies for election of directors, or would otherwise be
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Securities Exchange Act"), if such Regulation 14A
were applicable (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected) or any
successor regulation or statute, (ii) the name and address, as they appear on
the Corporation's books, of the stockholder proposing such business and (iii)
the class and number of shares which are beneficially owned by the stockholder
on the date of such stockholder's notice, and (b) not more than ten days after
receipt by the nominating stockholder of a written request from the Secretary,
such additional information as the Secretary may reasonably require.
Notwithstanding anything in these by-laws to the contrary,
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<PAGE>
no person shall be eligible for election as a director except in accordance with
the provisions of this Section 2.3. The officer of the Corporation or other
person presiding over the annual meeting shall, if the facts so warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the provisions of this Section 2.3 and, if he or she should so
determine, such officer shall so declare to the meeting and any such defective
nomination shall be disregarded.
Section 2.4 Adjournments. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 2.5 Quorum. Unless otherwise provided by law or the certificate
of incorporation, at each meeting of stockholders, the presence in person or
representation by proxy of the holders of a majority of the outstanding shares
of each class of capital stock entitled to vote at the meeting shall constitute
a quorum for the transaction of business. For purposes of the foregoing, two or
more classes or series of capital stock shall be considered a single class if
the holders thereof are entitled to vote together as a single class at the
meeting. In the absence of a quorum, the stockholders so present and represented
may, by vote of the holders of a majority of the shares of capital stock of the
Corporation so present and represented, adjourn the meeting from time to time
until a quorum shall attend, and the provisions of Section 2.4 of these by-laws
shall apply to each such adjournment. Shares of its own capital stock belonging
on the record date for the meeting to the Corporation or to another corporation,
if a majority of the shares entitled to vote in the election of directors of
such other corporation is held, directly or indirectly, by the Corporation,
shall neither be entitled to vote nor be counted for quorum purposes; provided,
however, that the foregoing shall not limit the right of the Corporation to vote
stock, including but not limited to its own stock, held by it in a fiduciary
capacity.
Section 2.6 Organization. Meetings of stockholders shall be presided
over by the Chairman, if any, or in his absence, by the President, or in the
absence of the foregoing persons by a chairman designated by the Board of
Directors, or in the absence of such designation by a chairman chosen at the
meeting. The Secretary shall act as secretary of the meeting, but in his absence
the chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 2.7 Voting; Proxies. Unless otherwise provided by the
certificate of incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one vote for each share of capital stock
held by him which has voting power on the subject matter submitted to a vote at
the meeting. Each stockholder entitled to vote at a meeting of stockholders or
to express consent or dissent to corporate action in writing without a meeting
may authorize another person or persons to act for him by proxy, but no such
proxy shall be voted or acted upon after three years from its date, unless the
proxy provides for a longer period. A duly executed proxy
-3-
<PAGE>
shall be irrevocable if it states that it is irrevocable and if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A stockholder may revoke any proxy which is not irrevocable
by attending the meeting and voting in person or by filing an instrument in
writing revoking the proxy or another duly executed proxy bearing a later date
with the Secretary before the proxy is voted. Unless otherwise required by law,
voting of stockholders for the election of directors need not be by written
ballot. Voting of stockholders for all other matters need not be by written
ballot unless so determined at a stockholders meeting by the vote of the holders
of a majority of the outstanding shares of each class of capital sock present in
person or represented by proxy at the meeting and entitled to vote on the
subject matter submitted to a vote at the meeting. Unless otherwise provided by
law or the certificate of incorporation, the vote of the holders of a majority
of the shares of capital stock of the Corporation present in person or
represented by proxy at a meeting at which a quorum is present and entitled to
vote on the subject matter submitted to a vote at the meeting shall be the act
of the stockholders.
Section 2.8 Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be more than sixty
nor less than ten days before the date of such meeting or more than ten days
after the date upon which the resolution fixing the record date with respect to
the taking of corporate action by written consent without a meeting is adopted
by the Board of Directors nor more than sixty days prior to any other action. If
no record date is fixed: (a) the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held; (b) the record date for determining stockholders
entitled to express consent to corporate action in writing without a meeting,
when no prior action by the Board of Directors is necessary, shall be the day on
which the first written consent is expressed; (c) the record date for
determining stockholders entitled to express consent to corporate action in
writing without a meeting, when prior action by the Board of Directors is
required, shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action; and (d) the record
date for determining stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 2.9 List of Stockholders Entitled to Vote. The Secretary shall
make, at least ten days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a
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<PAGE>
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof and may be inspected by any
stockholder who is present.
Section 2.10 Consent of Stockholders in Lieu of Meeting. Unless
otherwise provided by the certificate of incorporation, any action required by
law to be taken at any annual or special meeting of stockholders of the
Corporation, or any action which may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III
Board of Directors
Section 3.1 Powers; Number; Qualifications. Unless otherwise provided
by law or the certificate of incorporation, the business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors. Unless otherwise provided by the certificate of incorporation, the
Board of Directors shall consist of such number of directors as the Board of
Directors shall from time to time designate, provided, the Board shall at all
times be comprised of at least two members whom shall be "disinterested" persons
within the meaning of Rule 16b-3 under the Securities Exchange Act. Unless
otherwise provided by the certificate of incorporation, directors need not be
stockholders.
Section 3.2 Election; Term of Office; Resignation; Removal; Vacancies.
Each director shall hold office until his successor is elected and qualified or
until his earlier death, resignation or removal. Any director may resign at any
time upon written notice to the Corporation directed to the Board of Directors
or the Secretary. Such resignation shall take effect at the time specified
therein, and unless otherwise specified therein no acceptance of such
resignation shall be necessary to make it effective. Any director or the entire
Board of Directors may be removed, with or without cause, by the vote of the
holders of a majority of shares of capital stock then entitled to vote at an
election of directors. Whenever the holders of shares of any class or series of
capital stock are entitled to elect one or more directors by the provisions of
the certificate of incorporation, the provisions of the preceding sentence shall
apply, in respect to the removal without cause of a director or directors so
elected, to the vote of the holders of the outstanding shares of that class or
series of capital stock and not to the vote of the holders of the outstanding
shares of capital stock as a whole. Unless otherwise provided by the certificate
of incorporation or by these bylaws, vacancies and newly created
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<PAGE>
directorships resulting from any increase in the authorized number of directors
or any other cause may be filled by the vote of a majority of the directors then
in office, although less than a quorum, or by the vote of the sole remaining
director. Whenever the holders of shares of any class or classes of capital
stock or series thereof are entitled to elect one or more directors by the
provisions of the certificate of incorporation, vacancies and newly created
directorships of such class or classes or series thereof may be filled by the
vote of a majority of the directors elected by such class or classes or series
thereof then in office, or by the vote of the sole remaining director so
elected.
Section 3.3 Regular Meetings. Regular meetings of the Board of
Directors shall be held at such dates, times and places either within or without
the State of Delaware as the Board of Directors shall from time to time
determine.
Section 3.4 Special Meetings. Special meetings of the Board of
Directors may be called at any time by the Chairman, if any, the President or by
any two members of the Board of Directors. Each special meeting shall be held at
such date, time and place either within or without the State of Delaware as
shall be fixed by the person or persons calling the meeting.
Section 3.5 Notice of Meetings. Written notice of each meeting of the
Board of Directors shall be given which shall state the date, time and place of
the meeting. The written notice of any meeting shall be given at least
twenty-four hours in advance of the meeting to each director. Notice may be
given by letter, telegram, telex or facsimile and shall be deemed to have been
given when deposited in the United States mail, delivered to the telegraph
company or transmitted by telex or facsimile, as the case may be.
Section 3.6 Telephonic Meetings Permitted. Members of the Board of
Directors or any committee designated by the Board of Directors may participate
in a meeting of the Board of Directors or of such committee by means of
conference telephone or similar communication equipment by means of which all
persons participating in the meeting can hear each other, and participation in
the meeting pursuant to this by-law shall constitute presence in person at such
meeting.
Section 3.7 Quorum; Vote Required for Action. Unless otherwise required
by law, at each meeting of the Board of Directors, the presence of a majority of
the total number of directors shall constitute a quorum for the transaction of
business. The vote 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, unless the vote
of a greater number is required by law or the certificate of incorporation. In
case at any meeting of the Board of Directors a quorum shall not be present, the
members of the Board of Directors present may by majority vote to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall attend.
Section 3.8 Organization. Meetings of the Board of Directors shall be
presided over by the Chairman, if any, or in his absence by the President, or in
their absence by a chairman chosen
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<PAGE>
at the meeting. The Secretary shall act as secretary of the meeting, but in his
absence the chairman of the meeting may appoint any person to act as secretary
of the meeting.
Section 3.9 Action by Directors Without a Meeting. Unless otherwise
provided by the certificate of incorporation, any action required or permitted
to be taken at any meeting of the Board of Directors or any committee designated
by the Board of Directors may be taken without a meeting if all members of the
Board of Directors or of such committee consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors or such committee.
Section 3.10 Compensation of Directors. Unless otherwise provided by
the certificate of incorporation, the Board of Directors shall have the
authority to fix the compensation of directors, which compensation may include
the reimbursement of expenses incurred in connection with meetings of the Board
of Directors or a committee thereof.
ARTICLE IV
Committees
Section 4.1 Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member of such committee at any meeting thereof. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in place of any such absent or disqualified
member.
Section 4.2 Power of Committees. Any committee designated by the Board
of Directors, to the extent provided in a resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation and
may authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority to take any
action which by law may only be taken by the Board of Directors or to take any
action with reference to: amending the certificate of incorporation (except that
a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board of Directors,
fix the designation and any of the preferences or rights of such shares relating
to dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the Corporation or fix the number of shares of any series
of stock or authorize the increase or decrease of the shares of any series),
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially
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<PAGE>
all of the Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of dissolution, removing or
indemnifying directors or amending these by-laws; and, unless a resolution of
the Board of Directors expressly so provides, no such committee shall have the
power or authority to declare a dividend, to authorize the issuance of stock or
to adopt a certificate of ownership and merger pursuant to Section 253 of the
General Corporation Law of the State of Delaware.
Section 4.3 Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board of Directors may adopt, amend
and repeal rules for the conduct of its business. In the absence of a resolution
by the Board of Directors or a provision in the rules of such committee to the
contrary, the presence of a majority of the total number of members of such
committee shall constitute a quorum for the transaction of business, and the
vote of a majority of the members present at a meeting at which a quorum is
present shall be the act of such committee.
Section 4.4 Audit Committee. The Board of Directors shall establish an
Audit Committee which shall consist of three members of the Board of Directors,
two of whom shall be "disinterested" persons within the meaning of Rule 16b-3
under the Securities Exchange Act. The Audit Committee shall have the authority
to nominate the Corporation's independent accountants for approval by the Board
of Directors and shall be responsible for reviewing the scope, results and costs
of the audit with the Corporation's independent accountants and for reviewing
the financial statements, audit practices and internal controls of the
Corporation.
Section 4.5 Compensation Committee. The Board of Directors shall
establish a Compensation Committee which shall consist of three members of the
Board of Directors, two of whom shall be "disinterested" persons within the
meaning of Rule 16b-3 under the Securities Exchange Act. The Compensation
Committee shall be responsible for recommending compensation and benefits for
the executive officers of the Corporation.
Section 4.6 Stock Option Committee. The Board of Directors shall
establish a Stock Option Committee which shall consist of two members of the
Board of Directors, both of whom shall be "disinterested" persons within the
meaning of Rule 16b-3 under the Securities Exchange Act. The Stock Option
Committee shall have the authority to determine, subject to the terms of the
Corporation's stock option plans, the persons to whom stock options are granted,
the number of options granted to each optionee, and the terms and conditions of
each option, including its duration.
ARTICLE V
Officers
Section 5.1 Officers; Elections. As soon as practicable after the
annual meeting of stockholders in each year, the Board of Directors shall elect
from its membership or outside thereof a President and a Secretary. The Board of
Directors may also elect from its membership a Chairman
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<PAGE>
of the Board of Directors (herein called "Chairman"), and from its membership or
outside thereof a Chief Strategist, one or more Executive Vice Presidents, one
or more Vice Presidents, one or more Assistant Secretaries, a Treasurer and one
or more Assistant Treasurers and such other officers or agents as it may
determine. Unless otherwise provided by the certificate of incorporation, any
number of offices may be held by the same person.
Section 5.2 Term of Office; Resignation; Removal; Vacancies. Except as
otherwise provided by the Board of Directors when electing any officer, each
officer shall hold office until the first meeting of the Board of Directors
after the annual meeting of stockholders next succeeding his election, or until
his successor is elected and qualified or until his earlier resignation or
removal. Any officer may resign at any time upon written notice to the
Corporation directed to the Board of Directors and the Secretary. Such
resignation shall take effect at the time specified therein, and unless
otherwise specified therein no acceptance of such resignation shall be necessary
to make it effective. The Board of Directors may remove any officer or agent
with or without cause at any time. Any such removal shall be without prejudice
to the contractual rights of such officer or agent, if any, with the
Corporation, but the election of an officer or agent shall not of itself create
any contractual rights. Any vacancy occurring in any office of the Corporation
by death, resignation, removal or otherwise may be filled for the unexpired
portion of the term by the Board of Directors.
Section 5.3 Powers and Duties. The officers of the Corporation shall
have such powers and duties in the management of the Corporation as shall be
stated in these by-laws or in a resolution of the Board of Directors which is
not inconsistent with these by-laws and, to the extent not so stated, as
generally pertain to their respective offices, subject to the control of the
Board of Directors. The Secretary shall have the duty to record in a book to be
kept for that purpose the proceedings of the meetings of the stockholders, the
Board of Directors and any committees designated by the Board of Directors. The
duties and powers of the officers shall be as follows:
Chairman
The Chairman shall preside at all meetings of the stockholders and
Board of Directors. The Chairman shall be responsible for reviewing the general
policies and programs of the Corporation. The Chairman shall sign, execute and
acknowledge, in the name of the Corporation, deeds, mortgages, bonds, contracts
or other instruments authorized by the Board of Directors and shall have such
duties and responsibilities as may be assigned by the Board of Directors from
time to time.
President
The President shall be the chief executive officer and chief operating
officer of the Corporation and shall be responsible for formulating general
policies and programs of the Corporation for submission to the Board of
Directors and for carrying out the programs and policies approved by the Board
of Directors. The President shall sign, execute and acknowledge, in the name of
the Corporation, deeds, mortgages, bonds, contracts or other instruments,
authorized by the Board
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<PAGE>
of Directors and shall perform all duties incident to the office of President,
and such other duties as from time to time may be assigned by the Board of
Directors.
Chief Strategist
The Chief Strategist shall provide consultation to the Board of
Directors, Chairman, President and other senior officers in the strategic
direction of the Corporation and in administering and coordinating the
operations of the Corporation. The Chief Strategist shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
Executive Vice Presidents
The Executive Vice Presidents shall, in the order determined by the
Board of Directors, perform the duties of the President and the Chief
Strategist, in their absence, and such other duties as may from time to time be
assigned to them by the Board of Directors, Chairman or the President.
Vice Presidents
The Vice Presidents shall perform such duties as may from time to time
be assigned to them by the Board of Directors, Chairman or the President.
Secretary
The Secretary, or in his or her absence an Assistant Secretary, shall
attend all meetings of the stockholders and the Board of Directors and shall
record the proceedings of the stockholders and the Board of Directors and of
committees of the Board of Directors in a book or books to be kept for that
purpose. He or she shall give, or cause to be given, notice of all meetings as
required by law and properly keep records and reports and perform such other
duties as the Board of Directors, Chairman or President may prescribe from time
to time.
Treasurer
The Treasurer shall have or provide for the custody of the funds or
other property of the Corporation and shall keep a separate book account of the
same as Treasurer. The Treasurer shall collect and receive or provide for the
collection and receipt of moneys earned by or in any manner due to or received
by the Corporation and deposit all funds in his or her custody as Treasure in
such banks or other places of deposit as the Board of Directors may from time to
time designate. Whenever required by the Board of Directors the Treasurer shall
render an accounting showing his or her transactions as Treasurer and the
financial condition of the Corporation. The Treasurer shall perform such other
duties as the Board of Directors, Chairman or the President may prescribe from
time to time.
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<PAGE>
Section 5.4 Other Officers; Security. The other officers, if any, of
the Corporation shall have such duties and powers as generally pertain to their
respective offices and such other duties and powers as the Board of Directors
shall from time to time delegate to each such officer. The Board of Directors
may require any officer, agent or employee to give security, by bond or
otherwise, for the faithful performance of his duties.
Section 5.5 Compensation of Officers. The compensation of each officer
shall be fixed by the Board of Directors and no officer shall be prevented from
receiving such compensation by virtue of his also being a director.
ARTICLE VI
Stock
Section 6.1 Certificates. Every holder of one or more shares of capital
stock of the Corporation shall be entitled to have a certificate signed by or in
the name of the Corporation by the Chairman, if any, or the President or an
Executive Vice President, and by the Treasurer or an Assistant Treasurer, if
any, or the Secretary or an Assistant Secretary, certifying the number of shares
owned by him in the Corporation. Any or all of the signatures on the certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 6.2 Lost, Stolen or Destroyed Stock Certificates; Issuance of
New Certificates. The Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or his legal representative, to give the
Corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE VII
Indemnification of Directors, Officers and Other Authorized
Representatives
Section 7.1 Indemnification of Authorized Representatives in Third
Party Proceedings. The Corporation shall indemnify any person who was or is an
authorized representative of the Corporation and who was or is a party, or is
threatened to be made a party to any third party proceeding by reason of the
fact that such person was or is an authorized representative of the Corporation,
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such third party
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in, or not opposed to, the
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<PAGE>
best interests of the Corporation and, with respect to any criminal third party
proceeding, had no reasonable cause to believe such conduct was unlawful. The
termination of any third party proceeding by judgment, order, settlement
indictment, conviction or upon a plea of nolo contendere or its equivalent,
shall not of itself create a presumption that the authorized representative did
not act in good faith and in a manner which such person reasonably believed to
be in, or not opposed to, the best interests of the Corporation, and, with
respect to any criminal third party proceeding, had reasonable cause to believe
that such conduct was unlawful.
Section 7.2 Indemnification of Authorized Representatives in Corporate
Proceedings. The Corporation shall indemnify any person who was or is an
authorized representative of the Corporation and who was or is a party or is
threatened to be made a party to any corporate proceeding by reason of the fact
that such person was or is an authorized representative of the Corporation,
against expenses actually and reasonably incurred by such person in connection
with the defense or settlement of such corporate proceeding if such person acted
in good faith and in a manner 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 person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery or the court in which such corporate proceeding was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such authorized
representative is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
Section 7.3 Mandatory Indemnification of Authorized Representatives. To
the extent that an authorized representative of the Corporation has been
successful on the merits otherwise in defense of any third party proceeding or
corporate proceeding or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses actually and reasonably incurred by
such person in connection therewith.
Section 7.4 Determination of Entitlement to Indemnification. Any
indemnification under Section 7.1, 7.2 or 7.3 above (unless ordered by a court)
shall be made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the authorized representative is proper in
the circumstances because such person has wither met the applicable standard of
conduct set forth in Section 7.1 or 7.2 or has been successful on the merits, or
otherwise as set forth in Section 7.3 and that the amount requested has been
actually and reasonably incurred.
Such determination shall be made:
(1) By the board of directors by a majority of a quorum
consisting of directors who were not parties to such third party
proceeding or corporate proceeding, or
(2) If such a quorum is not obtainable, or, even if
obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or
(3) By the stockholders.
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<PAGE>
Section 7.5 Advancing Expenses.
(a) Expenses actually and reasonably incurred by an officer or director
in defending any third party proceeding or corporate proceeding shall be paid on
behalf of an officer or director by the Corporation in advance of the final
disposition of such third party proceeding or corporate proceeding upon receipt
of an undertaking by or on behalf of such officer or director to repay such
amount if it shall ultimately be determined that such person is not entitled to
be indemnified by the Corporation as authorized in this Article.
(b) Expenses actually and reasonably incurred in defending any third
party proceeding or corporate proceeding shall be paid on behalf of an
authorized representative other than an officer or director by the Corporation
in advance of the final disposition of such third party proceeding or corporate
proceeding as authorized by the board of directors upon receipt of an
undertaking by or on behalf of such authorized representative to repay such
amount if it shall ultimately a be determined that such person is not entitled
to be indemnified by the Corporation as authorized in this Article.
(c) The financial ability of any authorized representative to make a
repayment contemplated by this Section shall not be a prerequisite to the making
of an advance.
Section 7.6 Definitions. For purposes of this Article:
(1) "authorized representative" shall mean a director or
officer of the Corporation, or a person serving at the request of the
Corporation as a director, officer or trustee of another corporation,
partnership, joint venture, trust or other enterprise, past, present or
future;
(2) "Corporation" shall include, in addition to the resulting
Corporation, any constituent corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors,
officers, employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation,
or is or was serving at the request of such constituent corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in
the same position under the provisions of this Article with respect to
the resulting or surviving corporation as such person would have with
respect to such constituent corporation if its separate existence had
continued;
(3) "corporate proceeding" shall mean any threatened, pending
or completed action or suit by or in the right of the Corporation to
procure a judgment in its favor or investigative proceeding by the
Corporation;
(4) "criminal third party proceeding" shall include any action
or investigation which could or does lead to a criminal third party
proceeding;
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<PAGE>
(5)"expenses" shall include attorneys' fees and disbursements;
(6) "fines" shall include any excise taxes assessed on a
person with respect to an employee benefit plan;
(7) "not opposed to the best interests of the Corporation"
shall include actions taken in good faith and in a manner the
authorized representative reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan;
(8) "other enterprises" shall include employee benefit plans;
(9) "party" shall include the giving of testimony or similar
involvement;
(10) "serving at the request of the Corporation" shall include
any service as a director, officer or employee of the Corporation which
imposes duties on, or involves services by, such director, officer or
employee with respect to an employee benefit plan, its participants, or
beneficiaries; and
(11) "third party proceeding" shall mean any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative, other than an action by or
in the right of the Corporation.
Section 7.7 Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power or the obligation to
indemnify such person against such liability under the provisions of this
Article.
Section 7.8 Scope of Article. The indemnification of authorized
representatives and advancement of expenses, as authorized by the preceding
provisions of this Article, shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses may be entitled
under any by-laws, statute, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office. The indemnification and
advancement of expenses provided by or granted pursuant to this Article, shall,
unless otherwise provided when authorized or ratified, continue as to a person
who has ceased to be an authorized representative and shall inure to the benefit
of the heirs, executors and administrators of such a person.
Section 7.9 Reliance on Provisions. Each person who shall act as an
authorized representative of the Corporation shall be deemed to be doing so in
reliance upon rights of indemnification provided by this Article.
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<PAGE>
ARTICLE VIII
Miscellaneous
Section 8.1 Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
Section 8.2 Seal. The Corporation may have a corporate seal which shall
have the name of the Corporation inscribed thereon and shall be in such form as
may be approved from time to time by the Board of Directors.
Section 8.3 Waiver of Notice of Meetings of Stockholders, Directors and
Committees. Whenever notice is required to be given by law, the certificate of
incorporation or these by-laws, a written waiver thereof, signed by the person
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Unless otherwise provided by the certificate of incorporation or these
by-laws, neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver of notice.
Section 8.4 Interested Directors, Officers, Quorum. No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership,
association or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the contract or transaction, or solely because his or
their votes are counted for such purpose, if: (a) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (b) the material facts as to
his relationship or interest and as to the contract or transaction are disclosed
or are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders;
or (c) the contract or transaction is fair as to the Corporation as of the time
it is authorized, approved or ratified, by the Board of Directors, a committee
thereof or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
Section 8.5 Books and Records. The books and records of the Corporation
may be kept within or without the State of Delaware at such place or places as
may be designated from time to
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time by the Board of Directors. Any records maintained by the Corporation in the
regular course of its business, including its stock ledger, books of account and
minute books, may be kept on, or be in the form of, punch cards, magnetic tape,
photographs, microphotographs or any other information storage device provided
that the records so kept can be converted into clearly legible form within a
reasonable time. The Corporation shall so convert any records so kept upon the
request of any person entitled to inspect the same.
Section 8.6 Amendment of By-Laws. These By-laws may be amended or
repealed, and new by-laws adopted, by the Board of Directors, but the
stockholders entitled to vote may adopt additional by-laws and may amend or
repeal any by-law whether or not adopted by them.
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EXHIBIT 3.3
FILE NUMBER:5551-932-3
STATE OF ILLINOIS
OFFICE OF
THE SECRETARY OF STATE
WHEREAS, ARTICLES OF INCORPORATION OF ALARON TRADING CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF ILLINOIS HAVE BEEN FILED IN THE
OFFICE OF THE SECRETARY OF STATE AS PROVIDED BY THE BUSINESS CORPORATION ACT OF
ILLINOIS, IN FORCE JULY 1, A.D.
1984.
NOW, THEREFORE, I, Jim Edgar, Secretary of State of the State of
Illinois by virtue of the powers vested in me by law, do hereby issue this
certificate and attach hereto a copy of the Application of the aforesaid
corporation.
In testimony Whereof, Theretoset my hand and cause to be affirmed the
Great Seal of the State of Illinois at the City of Springfield this 15th day of
May AD 1989 and of the Independence of the United States the two hundred and
13th.
Jim Edgar
_________________________________________
Secretary of State
<PAGE>
BCA-2.10 (Rev. Jul. 1984) File #
JIM EDGAR
Secretary of State
State of Illinois
ARTICLES OF INCORPORATION
Payment must be made This Space for Use By
by Certified Check, Secretary of State
Cashiers' Check or a Date C-15-89
Money Order, payable License Fee $ .50
to "Secretary of Franchise Tax $ 25.00
State". Filing Fee $ 75.00
DO NOT SEND CASH! --------
$ 100.50
Clerk: NV
Submit in Duplicate
Pursuant to the provisions of "The Business Corporation Act of 1983", the
undersigned incorporator(s) hereby adopt the following Articles of
Incorporation.
ARTICLE ONE The name of the corporation is ALARON TRADING CORPORATION
(Shall contain in word "corporation", company, "Incorporated"
_________________________________________________________________
"limited, or an abbreviation thereof
ARTICLE TWO The name and address of the initial registered agent and its
registered office are:
Registered Agent: Berton N. Ring
----------------------------------
First Name Middle Name Last Name
Registered Office: 309 W. Washington, Suite 6-00_____
----------------------------------
Number Street Suite #(A P.O. Box
alone is not acceptable)
Chicago, Illinois 60605 Cook
----------------------------------
City Zip Code County
ARTICLE THREE The purposes for which the corporation is organized are:
If not sufficient space to cover this point
add one or more sheets of this size
For all legal and lawful purposes under the Illinois Business Corporation Act as
amended.
ARTICLE FOUR Paragraph 1: The authorized shares shall be:
Class *Par Value per share Number of shares
-----------------------------------------------------
authorized
----------
Common NA 2,000,000
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Paragraph 2: The preferences, qualifications,
limitations, restrictions and the special or relative
rights in respect of the shares of each class are:
If not sufficient space to cover this point,
add one or more sheets of this size
All common shares shall have voting rights and preemptive rights.
ARTICLE FIVE The number of shares to be issued initially, and
the consideration to be received by the corporation
therefore, are:
*Par Value Number of shares Consideration to be
Class per share Proposed to be issued received therefor
----- --------- --------------------- ------------------
Common NA 1,000,000
-------------------------------------------------------------
$1,000
------
$
-------------------------------------------------------------
$
-------------------------------------------------------------
$
-------------------------------------------------------------
$1,000.00
---------
<PAGE>
A declaration as to a "par value" is optional. This space may be marked "N/A"
when no reference to a par value is desired.
ARTICLE SIX OPTIONAL
The number of directors constituting the initial
board of directors of the corporation is
_____________ and the names and addresses of the
persons who are to serve as directors until the first
annual meeting of shareholders or until their
successors be elected and qualify are:
Name Residential Address
--------------------------------------------
ARTICLE SEVEN OPTIONAL
(a) It is estimated that the value of all
property to be owned by the corporation $___________
for the following year wherever located
will be:
(b) It is estimated that the value of the
property to be located within the State of $___________
Illinois during the following year will
be:
(c) It is estimated that the gross amount of
business which will be transacted by the $___________
corporation during the following year will
be:
(d) It is estimated that the gross amount of business which will be
transacted from places of business in the State of
Illinois during the following year will ____________
be:
ARTICLE EIGHT OPTIONAL
Attach a separate sheet of this size for any other
provision to be included in the Articles of
Incorporation, e.g., authorizing pre- emprive rights;
denying cumulative voting; regulating internal
affairs; voting majority requirements; fixing a
duration other than perpetual; etc.
NAMES AND ADDRESSES OF INCORPORATORS
The undersigned incorporator(s) hereby declare(s), under penalties of
perjury, that the statements made in the foregoing Articles of Incorporation are
true.
Dated: 5-4-89 , 19
-------------------- ----
Signatures and names Post Office Address
1. 1.309 W. Washington, #600
------------------------------- -----------------------------
Berton N. Ring Chicago, Illinois 60606
------------------------------- -----------------------------
Name(please print) City/Town StateZip
2. 2.
------------------------------- -----------------------------
------------------------------- -----------------------------
Name(please print) City/Town StateZip
3. 3.
------------------------------- -----------------------------
<PAGE>
------------------------------- -----------------------------
Name(please print) City/Town StateZip
(Signatures must be in ink on original document. Carbon copy, xerox or rubber
stamp signatures may only be used on conformed copies).
NOTE: If a corporation acts as Incorporator, the name of the corporation and the
state of Incorporation shall be shown and the execution shall be by its
President or Vice-President and verified by him, and attested by its Secretary
or an Assistant Secretary.
Form BCA-2.10
File No. __________________________________________________
ARTICLES OF INCORPORATION
The following fees are required to be paid at the time of issuing the
Certificate of Incorporation: FILING FEE $75.00; INITIAL LICENSE FEE OF 1/20th
of 1% of the consideration to be received for initial issued shares (see Art 5),
MINIMUM $.50; INITIAL FRANCHISE TAX of 1/10th of 1% of the consideration to be
received for initial issued shares (see Art 5), MINIMUM $25.00.
EXAMPLES OF TOTAL DUE
Consideration to Total
be Received Due*
up to $ 1,000 $100.50
- -----------------------------------------------------------------------------
$ 5,000 $102.50
- -----------------------------------------------------------------------------
$ 10,000 $105.00
- -----------------------------------------------------------------------------
$ 25,000 $112.50
- -----------------------------------------------------------------------------
$ 50,000 $150.00
- -----------------------------------------------------------------------------
$100,000 $225.00
- -----------------------------------------------------------------------------
*Includes Filing Fee + License Fee + Franchise Tax
RETURN TO:
Corporation Department
Secretary of State
Springfield, Illinois 62756
<PAGE>
Telephone (217) 782-6961
================================================================================
File Number: 5551-932-3
STATE OF ILLINOIS
OFFICE OF
THE SECRETARY OF STATE
Whereas, ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF ALARON
TRADING CORPORATION INCORPORATED UNDER THE LAWS OF THE STATE OF ILLINOIS HAVE
BEEN FILED IN THE OFFICE OF THE SECRETARY OF STATE AS PROVIDED BY THE BUSINESS
CORPORATION ACT OF ILLINOIS, IN FORCE JULY 1, A.D. 1984.
Now Therefore, I, George H. Ryan, Secretary of State of the State of Illinois,
by virtue of the powers vested in me by law, do hereby issue this certificate
and attached hereto a copy of the Application of the aforesaid corporation.
In Testimony Whereof, I hereto set my hand and cause to be affixed the
Great Seal of the State of Illinois, at the city of Springfield, this 12th day
of August A.D. 1998 and the Independence of the United States the two hundred
23rd.
George H. Ryan
-------------------------------
Secretary of State
<PAGE>
Form BCA-10.30
(Rev. Jan. 1995) ARTICLES OF AMENDMENT File # 5551-932.3
George H. Ryan
Secretary of State SUBMIT IN DUPLICATE
Department of Business Services
Remit payment in check or money This space for use by
order, payable to "Secretary of Secretary of State
State". Date 8-12-98
Franchise Tax $
*The filing fee for articles of Filing Fee $
amendment - $25.00 Penalty $
Approved:
1. CORPORATE NAME: Alaron Trading Corporation
2. MANNER OF ADOPTION OF AMENDMENT:
The following amendment of the Articles of Incorporation was adopted on
April 7, 1998 in the manner indicated below. ("X" one box only)
By a majority of the INCORPORATORS, provided no directors were named in
the articles of incorporation and no directors have been elected;
(Note 2)
By a majority of the board of directors, in accordance with Section 10.10,
the corporation having issued no shares as of the time of adoption of
this amendment;
(Note 2)
By a majority of the board of directors, in accordance with Section 10.15,
shares having been issued but shareholder action not being required for
the adoption of the amendment;
(Note 3)
By the shareholders, in accordance with Section 10.20, a resolution of the
board of directors having been duly adopted and submitted to the
shareholders. At a meeting of shareholders, not less than the minimum
number of votes required by statue and by the articles of incorporation
were voted in favor of the amendment;
(Note 4)
By the shareholders, in accordance with Sections 10.20 and 7.10, a
resolution of the board of directors having been duly adopted and
submitted to the shareholders. A consent in writing has been signed by
the shareholders having not less than the minimum number of votes
required by statute and by the articles of incorporation. Shareholders
who have not consented in writing have been given notice in accordance
with Section 7.10;
(Note 4&5)
By the shareholders, in accordance with Sections 10.20 and 7.10, a
resolution of the board of directors having been duly adopted and
submitted to the shareholders. A consent in writing has been signed by
all the shareholders entitled to vote on this amendment.
(Note 5)
3. TEXT OF AMENDMENT:
a. When amendment effects a name change, insert the new corporate
name below. Use Page 2 for all other amendments.
<PAGE>
Article I: The name of the corporation is:
N/A
- --------------------------------------------------------------------------------
(NEW NAME)
All changes other than name, include on page 2
(over)
<PAGE>
Text of Amendment
b. (If amendment affects the corporate purpose, the amended
purpose is required to be set forth in its entirety. If there
is not sufficient space to do so, add one or more sheets of
this size.)
See Exhibit A Attached Hereto And Made A Part Hereof.
<PAGE>
4. The manner, if not set forth in Article 3b, in which any exchange,
reclassification or cancellation of issued shares, or a reduction of
the number of authorized shares of any class below the number of issued
shares of that class provided for or effected by this amendment, is as
follows:
(If not applicable, insert "No change").
No Change
5. (a) The manner, if not set forth in Article 3b, in which said amendment
effects a change in the amount of paid-in capital (Paid-in capital
replaces the terms Stated Capital and Paid-in Surplus and is equal to
the total of these accounts) is as follows: (If not applicable, insert
"No Change").
No Change
(b) The amount of paid-in capital (Paid-in Capital replaces the terms
Stated Capital and Paid-in Surplus and is equal to the total of these
accounts) as changed by this amendment is as follows: (If not
applicable, insert "No Change")
Before Amendment After Amendment
Paid-in Capital $ N/A $ N/A
-------------------- -----------------
(Complete either item 6 or 7 below. All signatures must be in
BLACK INK.)
6. The undersigned corporation has caused this statement to be signed by
its duly authorized officers, each of whom affirms, under penalties of
perjury, that the facts stated herein are true.
Dated April 30 , 1998 Alaron Trading Corporation
---------- --- --------------------------------------------
(Exact name of Corporation at date of execution)
attested by by
------------------------ ------------------------------
(Secretary or Assistant (Signature of President or Vice
Secretary) President)
---------------------------- ----------------------------
(Type or Print Name and Title) (Type or Print Name and Title)
7. If amendment is authorized pursuant to Section 10.10 by the
incorporators, the incorporators must sign below, and type or print
name and title.
OR
If amendment is authorized by the directors pursuant to Section 10.10
and there are no officers, then a majority of the directors or such
directors as may be designated by the board, must sign below, and type
or print name and title.
The undersigned affirms, under the penalties of perjury, that the facts
stated herein are true.
Dated , 19
--------------------------------------- -----------
--------------------------------------- ---------------
--------------------------------------- ---------------
<PAGE>
NOTES AND INSTRUCTIONS
NOTE 1: State the true exact corporate name as it appears on the
records of the office of the Secretary of State, BEFORE any
amendments herein reported.
NOTE 2: Incorporators are permitted to adopt amendments ONLY before
any shares have been issued and before any directors have been
named or elected.
(ss. 10.10)
NOTE 3: Directors may adopt amendments without shareholder approval
in only seven instances, as follows:
(a) to remove the names and addresses of directors
named in the articles of incorporation;
(b) to remove the name and address of the initial
registered agent and registered office provided a
statement pursuant to ss. 5.10 is also filed;
(c) to increase, decrease, create or eliminate the par
value of the shares of any class, so long as no class
or series of shares is adversely affected;
(d) to split the issued whole shares and unissued
authorized shares by multiplying them by a whole
number, so long as no class or series is adversely
affected thereby;
(e) to change the corporate name by substituting the word
"corporation", "incorporated", "company", "limited",
or the abbreviation "corp.", "inc.", "co.", or "ltd."
for a similar word or abbreviation in the name, or by
adding a geographical attribution to the name;
to reduce the authorized shares of any class pursuant to
a cancellation statement filed in accordance with ss.
9.05,
to restate the articles of incorporation as currently
amended. (ss.10.15)
NOTE 4: All amendments not adopted underss.10.10 orss.10.15
require (1) that the board of directors adopt a
resolution setting forth the proposed amendment and (2)
that the shareholders approve the amendment.
Shareholder approval may be (1) by vote at a shareholder's
meeting (either annual or special) or (2) by consent, in
writing, without a meeting.
To be adopted, the amendment must receive the affirmative
<PAGE>
vote or consent of the holders of at least 2/3 of the
outstanding shares entitled to vote on the amendment (but if
class voting applies, then also at least a 2/3 vote within
each class is required).
The articles of incorporation may supersede the 2/3 vote
requirement by specifying any smaller or larger vote
requirement not less than a majority of the outstanding shares
entitled to vote and not less than a majority within each
class when class voting applies.
(ss.10.20)
NOTE 5: When a shareholder approval is by consent, all
shareholders be given notice of the proposed amendment at
least 5 days before the consent is signed. If the
amendment is adopted, shareholders who have not signed
the consent must be promptly notified of the passage of
the amendment. (ss.ss.7.10 & 10.20)
C-173.9
<PAGE>
EXHIBIT A
ILLINOIS ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION FOR
ALARON TRADING CORPORATION
NUMBER 3 (b)
WHEREAS, the Board of Directors of the Corporation recommends
and the shareholders agree that the Articles of Incorporation
of the Corporation filed with the Illinois Secretary of State
on May 15, 1989 be amended to authorize an additional
18,000,000 shares of no par value common stock (the
"Amendment").
NOW, THEREFORE, BE IT RESOLVED, that the Amendment be,
and hereby is, authorized and approved;
FURTHER RESOLVED, that following the Amendment, the total
shares authorized of the Corporation's common stock shall be
20,000,000; and
FURTHER RESOLVED, that Steven A. Greenberg, as President of
the Corporation, and Carrie A. Greenberg, as Secretary of the
Corporation, be, and each of them hereby is, authorized,
empowered and directed to execute and deliver, in the name and
on behalf of the Corporation, any and all such documents and
instruments, and to do all such acts and things as shall be
necessary or appropriate to give effect to the foregoing
resolutions.
<PAGE>
File #D5551 9323
Form BCA-5.10
NFP-105.10
(Rev. April 1995)
George H. Ryan
Secretary of State
Department of Business Services
Springfield,, IL 62756
Telephone (217) 782-3647
Http:www.sos.srate.il.us
SUBMIT IN DUPLICATE
STATEMENT OF
CHANGE OF
REGISTERED AGENT
AND/OR
REGISTERED OFFICE
This space for use by
Secretary of State
Date 6/18/97
Filing Fee $5
Approved:
Remit payment in check or
money order, payable to
"Secretary of State."
Type or print in black ink only.
See reverse side for signature(s).
1. CORPORATE NAME:ALARON TRADING CORPORATION
------------------------------------------
2. STATE OR COUNTRY OF INCORPORATION: ILLINOIS
----------------------
Name and address of the registered agent and registered office as they appear on
the records of the office of the Secretary of State (before change):
Registered Agent JEFREY A. HECHTMAN
-------------------------------------------------------
First Name Middle Name Last Name
Registered Office 333 West Wacker Drive: Suite 2800
----------------------------------------------------
Number Street Suite No.(A P.O. Box alone is not
acceptable)
Chicago 60606 Cook
-----------------------------------------
City Zip Code County
<PAGE>
Name and address of the registered agent and registered office as they appear on
the records of the office of the Secretary of State (before change):
Registered Agent CHERYL B. FITZPATRICK
-----------------------------------------------------
First Name Middle Name Last Name
Registered Office 822 West Washington Boulevard
-----------------------------------------------------
Number Street Suite No.(A P.O. Box alone is not
acceptable)
Chicago 60607 Cook
------------------------------------------------
City Zip Code County
The address of the registered office and the address of the business office of
the registered agent, as changed, will be identical.
The above change was authorized by: ("X one box only")
o By resolution duly adopted by the board of directors. (Note 5)
o By action of the registered agent. (Note 6)
Note: When the registered agent changes, the signatures of both president and
secretary are required.
(If authorized by the board of directors, sign here. See Note 5)
The undersigned corporation has caused this statement to be signed by
its duly authorized officers, each of whom affirms, under penalties of perjury,
that the facts stated herein are true.
Dated , 19 97 ALARON TRADING CORPORATION
------------------- -- -------------------------------
(Exact Name of Corporation)
Attested by
---------------------------------- ----------------------
(Signature of Secretary (Signature of President
or Assistant Secretary or Vice President
CARRIE GREENBERG, SECRETARY STEVEN GREENBERG, PRESIDENT
--------------------------- ---------------------------
(Type or Print Name and Title) (Type or Print Name or Title)
(If change of registered office by registered agent, sign here. See Note 6)
The undersigned, under penalties of perjury, affirms that the fats
stated herein are true.
Dated , 19
----------------------- -----------------------------------------
(Signature of Registered Agent of Record)
NOTES
The registered office may, but need not be the same as the principal office of
the corporation. However, the registered office and the office address of the
registered agent must be the same.
The registered office must include a street or road address; a post office box
number alone is not acceptable.
A corporation cannot act as its own registered agent.
If the registered office is changed from one county to another, then the
corporation must file with the recorder of deeds of the new county a certified
copy of the articles of incorporation and a certified copy of the statement of
change of registered office. Such certified copies may be obtained ONLY from the
Secretary of State.
<PAGE>
Any change of registered agent must be by resolution adopted by the board of
directors. This statement must then be signed by the president (or
vice-president) and by the secretary (or an assistant secretary).
The registered agent may report a change of the registered office of the
corporation for which he or she is registered agent. When the agent reports such
a change, this statement must be signed by the registered agent.
EXHIBIT 3.4
AMENDED AND RESTATED BY-LAWS
OF
ALARON TRADING CORPORATION
an Illinois corporation
ARTICLE I
Offices
Section 1.1 Registered Office. The registered office of the Corporation
in the State of Illinois shall be located at 822 West Washington Street,
Chicago, Cook County, 60607. The name of the Corporation's registered agent at
such address shall be Cheryl B. Fitzpatrick.
Section 1.2 Other Offices. The Corporation may also have offices at
such other places both within and without the State of Illinois as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
Shareholders
Section 2.1 Annual Meetings. An annual meeting of shareholders shall be
held each year for the election of directors at such date, time and place either
within or without the State of Illinois as shall be designated by the Board of
Directors. Any other proper business may be transacted at the annual meeting of
shareholders.
Section 2.2 Special Meetings. Special meetings of shareholders may be
called at any time by the Board of Directors, the Chairman, if any, or the
President and shall be called by the Chairman, the President or the Secretary at
the request, in writing, stating the purpose or purposes of the meeting, of
shareholders who hold a majority of the outstanding shares of each class of
capital stock entitled to vote at the meeting. Each special meeting shall be
held at such date, time and place either within or without the State of Illinois
as shall be designated by the person or persons calling such meeting at least
ten days prior to such meeting.
<PAGE>
Section 2.3 Notice of Meeting. Unless otherwise provided by law,
whenever shareholders are required or permitted to take any action at a meeting,
a written notice of the meeting shall be given which shall state the date, time
and place of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called. Unless otherwise provided by law, the
written notice of any meeting shall be given not less than ten nor more than
sixty days before the date of the meeting to each shareholder entitled to vote
at the meeting. If mailed, notice is given when deposited in the United States
mail, postage prepaid, directed to the shareholder at his address as it appears
on the records of the Corporation.
Other business may be transacted at the annual meeting (but not at any
special meeting), only if the Secretary of the Corporation has received from the
sponsoring shareholder (a) not less than sixty nor more than ninety days before
the date designated for the annual meeting or, if such date has not been
publicly disclosed at least seventy-five days in advance, then not less than
fifteen days after such initial public disclosure, a written notice setting
forth (i) as to each matter the shareholder proposes to bring before the annual
meeting, a brief description of the proposal desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and address, as they appear on the Corporation's books,
of the shareholder proposing such business, (iii) the class and number of shares
which are beneficially owned by the shareholder on the date of such
shareholder's notice and (iv) any material interest of the shareholder in such
proposal, and (b) not more than ten days after receipt by the sponsoring
shareholder of a written request from the Secretary, such additional information
as the Secretary may reasonably require. Notwithstanding anything in these
by-laws to the contrary, no business shall be brought before or conducted at an
annual meeting except in accordance with the provisions of this Section 2.3. The
officer of the Corporation or other person presiding over the annual meeting
shall, if the facts so warrant, determine and declare to the meeting that
business was not properly brought before the meeting in accordance with the
provisions of this Section 2.3 and, if he or she should so determine, such
officer shall so declare to the meeting and any business so determined to be not
properly brought before the meeting shall not be transacted.
Candidates for election to the Board of Directors of the Corporation
(other than nominees proposed by the Board of Directors) may be nominated at the
annual meeting (but not at any special meeting), only if the Secretary of the
Corporation has received from the nominating shareholder (a) not less than sixty
nor more than ninety days before the date designated for the annual meeting or,
if such date has not been publicly disclosed at least seventy-five days in
advance, then not less than fifteen days after such initial public disclosure, a
written notice setting forth (i) with respect to each person whom such
shareholder proposes to nominate for election or re-election as a director, all
information relating to such person that would be required to be disclosed in
solicitations of proxies for election of directors, or would otherwise be
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Securities Exchange Act"), if such Regulation 14A
were applicable (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected) or any
successor regulation or statute, (ii) the name and address, as they appear on
the Corporation's books, of the shareholder proposing such business and (iii)
the class and number of shares which are beneficially owned by
-2-
<PAGE>
the shareholder on the date of such shareholder's notice, and (b) not more than
ten days after receipt by the nominating shareholder of a written request from
the Secretary, such additional information as the Secretary may reasonably
require. Notwithstanding anything in these by-laws to the contrary, no person
shall be eligible for election as a director except in accordance with the
provisions of this Section 2.3. The officer of the Corporation or other person
presiding over the annual meeting shall, if the facts so warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
provisions of this Section 2.3 and, if he or she should so determine, such
officer shall so declare to the meeting and any such defective nomination shall
be disregarded.
Section 2.4 Adjournments. Any meeting of shareholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each shareholder of record entitled to vote at the meeting.
Section 2.5 Quorum. Unless otherwise provided by law or the articles of
incorporation, at each meeting of shareholders, the presence in person or
representation by proxy of the holders of a majority of the outstanding shares
of each class of capital stock entitled to vote at the meeting shall constitute
a quorum for the transaction of business. For purposes of the foregoing, two or
more classes or series of capital stock shall be considered a single class if
the holders thereof are entitled to vote together as a single class at the
meeting. In the absence of a quorum, the shareholders so present and represented
may, by vote of the holders of a majority of the shares of capital stock of the
Corporation so present and represented, adjourn the meeting from time to time
until a quorum shall attend, and the provisions of Section 2.4 of these by-laws
shall apply to each such adjournment. Shares of its own capital stock belonging
on the record date for the meeting to the Corporation or to another corporation,
if a majority of the shares entitled to vote in the election of directors of
such other corporation is held, directly or indirectly, by the Corporation,
shall neither be entitled to vote nor be counted for quorum purposes; provided,
however, that the foregoing shall not limit the right of the Corporation to vote
stock, including but not limited to its own stock, held by it in a fiduciary
capacity.
Section 2.6 Organization. Meetings of shareholders shall be presided
over by the Chairman, if any, or in his absence, by the President, or in the
absence of the foregoing persons by a chairman designated by the Board of
Directors, or in the absence of such designation by a chairman chosen at the
meeting. The Secretary shall act as secretary of the meeting, but in his absence
the chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 2.7 Voting; Proxies. Unless otherwise provided by the articles
of incorporation, each shareholder entitled to vote at any meeting of
shareholders shall be entitled to one vote for each share of capital stock held
by him which has voting power on the subject matter submitted to a vote at the
meeting. Each shareholder entitled to vote at a meeting of shareholders or to
express consent
-3-
<PAGE>
or dissent to corporate action in writing without a meeting may authorize
another person or persons to act for him by proxy, but no such proxy shall be
voted or acted upon after three years from its date, unless the proxy provides
for a longer period. A duly executed proxy shall be irrevocable if it states
that it is irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A shareholder may
revoke any proxy which is not irrevocable by attending the meeting and voting in
person or by filing an instrument in writing revoking the proxy or another duly
executed proxy bearing a later date with the Secretary before the proxy is
voted. Unless otherwise required by law, voting of shareholders for the election
of directors need not be by written ballot. Voting of shareholders for all other
matters need not be by written ballot unless so determined at a shareholders
meeting by the vote of the holders of a majority of the outstanding shares of
each class of capital sock present in person or represented by proxy at the
meeting and entitled to vote on the subject matter submitted to a vote at the
meeting. Unless otherwise provided by law or the articles of incorporation, the
vote of the holders of a majority of the shares of capital stock of the
Corporation present in person or represented by proxy at a meeting at which a
quorum is present and entitled to vote on the subject matter submitted to a vote
at the meeting shall be the act of the shareholders.
Section 2.8 Fixing Date for Determination of Shareholders of Record. In
order that the Corporation may determine the shareholders entitled to notice of
or to vote at any meeting of shareholders or any adjournment thereof or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be more than sixty
nor less than ten days before the date of such meeting or more than ten days
after the date upon which the resolution fixing the record date with respect to
the taking of corporate action by written consent without a meeting is adopted
by the Board of Directors nor more than sixty days prior to any other action. If
no record date is fixed: (a) the record date for determining shareholders
entitled to notice of or to vote at a meeting of shareholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held; (b) the record date for determining shareholders
entitled to express consent to corporate action in writing without a meeting,
when no prior action by the Board of Directors is necessary, shall be the day on
which the first written consent is expressed; (c) the record date for
determining shareholders entitled to express consent to corporate action in
writing without a meeting, when prior action by the Board of Directors is
required, shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action; and (d) the record
date for determining shareholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto. A determination of shareholders of record entitled to notice
of or to vote at a meeting of shareholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 2.9 List of Shareholders Entitled to Vote. The Secretary shall
make, at least ten days before every meeting of shareholders, a complete list of
the shareholders entitled to vote at the
-4-
<PAGE>
meeting, arranged in alphabetical order, and showing the address of each
shareholder and the number of shares registered in the name of each shareholder.
Such list shall be open to the examination of any shareholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof and may be inspected by any shareholder who is
present.
Section 2.10 Consent of Shareholders in Lieu of Meeting. Unless
otherwise provided by the articles of incorporation, any action required by law
to be taken at any annual or special meeting of shareholders of the Corporation,
or any action which may be taken at any annual or special meeting of such
shareholders, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those shareholders who have not
consented in writing.
Section 2.11 Cumulative Voting. In all elections for directors, every
shareholder shall have the right to vote in person or by proxy, the number of
shares owned by him, for each director to be elected. Shareholders shall not be
allowed to cumulate their votes for any one candidate.
ARTICLE III
Board of Directors
Section 3.1 Powers; Number; Qualifications. Unless otherwise provided
by law or the articles of incorporation, the business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors. Unless otherwise provided by the articles of incorporation, the Board
of Directors shall consist of such number of directors as the Board of Directors
shall from time to time designate, provided, the Board shall at all times be
comprised of at least two members whom shall be "disinterested" persons within
the meaning of Rule 16b-3 under the Securities Exchange Act. Unless otherwise
provided by the articles of incorporation, directors need not be shareholders.
Section 3.2 Election; Term of Office; Resignation; Removal; Vacancies.
Each director shall hold office until his successor is elected and qualified or
until his earlier death, resignation or removal. Any director may resign at any
time upon written notice to the Corporation directed to the Board of Directors
or the Secretary. Such resignation shall take effect at the time specified
therein, and unless otherwise specified therein no acceptance of such
resignation shall be necessary to make it effective. Any director or the entire
Board of Directors may be removed, with or without cause,
-5-
<PAGE>
by the vote of the holders of a majority of shares of capital stock then
entitled to vote at an election of directors. Whenever the holders of shares of
any class or series of capital stock are entitled to elect one or more directors
by the provisions of the articles of incorporation, the provisions of the
preceding sentence shall apply, in respect to the removal without cause of a
director or directors so elected, to the vote of the holders of the outstanding
shares of that class or series of capital stock and not to the vote of the
holders of the outstanding shares of capital stock as a whole. Unless otherwise
provided by the articles of incorporation or by these bylaws, vacancies and
newly created directorships resulting from any increase in the authorized number
of directors or any other cause may be filled by the vote of a majority of the
directors then in office, although less than a quorum, or by the vote of the
sole remaining director. Whenever the holders of shares of any class or classes
of capital stock or series thereof are entitled to elect one or more directors
by the provisions of the articles of incorporation, vacancies and newly created
directorships of such class or classes or series thereof may be filled by the
vote of a majority of the directors elected by such class or classes or series
thereof then in office, or by the vote of the sole remaining director so
elected.
Section 3.3 Regular Meetings. Regular meetings of the Board of
Directors shall be held at such dates, times and places either within or without
the State of Illinois as the Board of Directors shall from time to time
determine.
Section 3.4 Special Meetings. Special meetings of the Board of
Directors may be called at any time by the Chairman, if any, the President or by
any two members of the Board of Directors. Each special meeting shall be held at
such date, time and place either within or without the State of Illinois as
shall be fixed by the person or persons calling the meeting.
Section 3.5 Notice of Meetings. Written notice of each meeting of the
Board of Directors shall be given which shall state the date, time and place of
the meeting. The written notice of any meeting shall be given at least
twenty-four hours in advance of the meeting to each director. Notice may be
given by letter, telegram, telex or facsimile and shall be deemed to have been
given when deposited in the United States mail, delivered to the telegraph
company or transmitted by telex or facsimile, as the case may be.
Section 3.6 Telephonic Meetings Permitted. Members of the Board of
Directors or any committee designated by the Board of Directors may participate
in a meeting of the Board of Directors or of such committee by means of
conference telephone or similar communication equipment by means of which all
persons participating in the meeting can hear each other, and participation in
the meeting pursuant to this by-law shall constitute presence in person at such
meeting.
Section 3.7 Quorum; Vote Required for Action. Unless otherwise required
by law, at each meeting of the Board of Directors, the presence of a majority of
the total number of directors shall constitute a quorum for the transaction of
business. The vote 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, unless the vote
of a greater number is required by law or the articles of incorporation. In case
at any meeting of the
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Board of Directors a quorum shall not be present, the members of the Board of
Directors present may by majority vote to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall
attend.
Section 3.8 Organization. Meetings of the Board of Directors shall be
presided over by the Chairman, if any, or in his absence by the President, or in
their absence by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
Section 3.9 Action by Directors Without a Meeting. Unless otherwise
provided by the articles of incorporation, any action required or permitted to
be taken at any meeting of the Board of Directors or any committee designated by
the Board of Directors may be taken without a meeting if all members of the
Board of Directors or of such committee consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors or such committee.
Section 3.10 Compensation of Directors. Unless otherwise provided by
the articles of incorporation, the Board of Directors shall have the authority
to fix the compensation of directors, which compensation may include the
reimbursement of expenses incurred in connection with meetings of the Board of
Directors or a committee thereof.
ARTICLE IV
Committees
Section 4.1 Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, designate one or more
committees, each committee to consist of two or more of the directors of the
Corporation. Unless the appointment by the Board of Directors requires a greater
number, a majority of any committee shall constitute a quorum and a majority of
a quorom is necessary for committee action. A committee may act by unanimous
consent in writing without a meeting and, subject to the provisions of these
bylaws or action by the Board of Directors, the committee by majority vote of
its members shall determine the time and place of meetings and the notice
required therefor.
Section 4.2 Power of Committees. Any committee designated by the Board
of Directors, to the extent provided in a resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation and
may authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority to take any
action which by law may only be taken by the Board of Directors or to take any
action with reference to: authorizing distributions, except for dividends to be
paid with respect to shares of any preferred or special classes or any series
thereof; approve or recommend to shareholders any act required by law to be
approved
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by shareholders; fill vacancies on the Board of Directors or on any of its
committees; elect or remove officers or fix the compensation of any member of
the committee; adopt, amend or repeal these by-laws; approve a plan of merger
not requiring shareholder approval; authorize or approve reacquisition of
shares, except according to a general formula or method prescribed by the Board
of Directors; authorize or approve the issuance or sale, or contract for sale,
of shares or determine the designation and relative rights, preferences, and
limitations of a series of shares, except that the Board of Directors may direct
a committee to fix the specific terms of the issuance or sale or contract for
sale or the number of shares to be allocated to particular employees under an
employee benefit plan; or amend, alter, repeal or take action inconsistent with
any resolution or action of the Board of Directors when the resolution or action
of the Board of Directors provides by its terms that it shall not be amended,
altered or repealed by action of a committee.
Section 4.3 Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board of Directors may adopt, amend
and repeal rules for the conduct of its business. In the absence of a resolution
by the Board of Directors or a provision in the rules of such committee to the
contrary, the presence of a majority of the total number of members of such
committee shall constitute a quorum for the transaction of business, and the
vote of a majority of the members present at a meeting at which a quorum is
present shall be the act of such committee.
ARTICLE V
Officers
Section 5.1 Officers; Elections. As soon as practicable after the
annual meeting of shareholders in each year, the Board of Directors shall elect
from its membership or outside thereof a President and a Secretary. The Board of
Directors may also elect from its membership a Chairman of the Board of
Directors (herein called "Chairman"), and from its membership or outside thereof
a Chief Strategist, one or more Executive Vice Presidents, one or more Vice
Presidents, one or more Assistant Secretaries, a Treasurer and one or more
Assistant Treasurers and such other officers or agents as it may determine.
Unless otherwise provided by the articles of incorporation, any number of
offices may be held by the same person.
Section 5.2 Term of Office; Resignation; Removal; Vacancies. Except as
otherwise provided by the Board of Directors when electing any officer, each
officer shall hold office until the first meeting of the Board of Directors
after the annual meeting of shareholders next succeeding his election, or until
his successor is elected and qualified or until his earlier resignation or
removal. Any officer may resign at any time upon written notice to the
Corporation directed to the Board of Directors and the Secretary. Such
resignation shall take effect at the time specified therein, and unless
otherwise specified therein no acceptance of such resignation shall be necessary
to make it effective. The Board of Directors may remove any officer or agent
with or without cause at any time. Any such removal shall be without prejudice
to the contractual rights of such officer or agent, if any, with the
Corporation, but the election of an officer or agent shall not of itself create
any
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contractual rights. Any vacancy occurring in any office of the Corporation by
death, resignation, removal or otherwise may be filled for the unexpired portion
of the term by the Board of Directors.
Section 5.3 Powers and Duties. The officers of the Corporation shall
have such powers and duties in the management of the Corporation as shall be
stated in these by-laws or in a resolution of the Board of Directors which is
not inconsistent with these by-laws and, to the extent not so stated, as
generally pertain to their respective offices, subject to the control of the
Board of Directors. The Secretary shall have the duty to record in a book to be
kept for that purpose the proceedings of the meetings of the shareholders, the
Board of Directors and any committees designated by the Board of Directors. The
duties and powers of the officers shall be as follows:
Chairman
The Chairman shall preside at all meetings of the shareholders and
Board of Directors. The Chairman shall be responsible for reviewing the general
policies and programs of the Corporation. The Chairman shall sign, execute and
acknowledge, in the name of the Corporation, deeds, mortgages, bonds, contracts
or other instruments authorized by the Board of Directors and shall have such
duties and responsibilities as may be assigned by the Board of Directors from
time to time.
President
The President shall be the chief executive officer and chief operating
officer of the Corporation and shall be responsible for formulating general
policies and programs of the Corporation for submission to the Board of
Directors and for carrying out the programs and policies approved by the Board
of Directors. The President shall sign, execute and acknowledge, in the name of
the Corporation, deeds, mortgages, bonds, contracts or other instruments,
authorized by the Board of Directors and shall perform all duties incident to
the office of President, and such other duties as from time to time may be
assigned by the Board of Directors.
Chief Strategist
The Chief Strategist shall provide consultation to the Board of
Directors, Chairman, President and other senior officers in the strategic
direction of the Corporation and in administering and coordinating the
operations of the Corporation. The Chief Strategist shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
Executive Vice Presidents
The Executive Vice Presidents shall, in the order determined by the
Board of Directors, perform the duties of the President and the Chief
Strategist, in their absence, and such other duties as may from time to time be
assigned to them by the Board of Directors, Chairman or the President.
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Vice Presidents
The Vice Presidents shall perform such duties as may from time to time
be assigned to them by the Board of Directors, Chairman or the President.
Secretary
The Secretary, or in his or her absence an Assistant Secretary, shall
attend all meetings of the shareholders and the Board of Directors and shall
record the proceedings of the shareholders and the Board of Directors and of
committees of the Board of Directors in a book or books to be kept for that
purpose. He or she shall give, or cause to be given, notice of all meetings as
required by law and properly keep records and reports and perform such other
duties as the Board of Directors, Chairman or President may prescribe from time
to time.
Treasurer
The Treasurer shall have or provide for the custody of the funds or
other property of the Corporation and shall keep a separate book account of the
same as Treasurer. The Treasurer shall collect and receive or provide for the
collection and receipt of moneys earned by or in any manner due to or received
by the Corporation and deposit all funds in his or her custody as Treasure in
such banks or other places of deposit as the Board of Directors may from time to
time designate. Whenever required by the Board of Directors the Treasurer shall
render an accounting showing his or her transactions as Treasurer and the
financial condition of the Corporation. The Treasurer shall perform such other
duties as the Board of Directors, Chairman or the President may prescribe from
time to time.
Section 5.4 Other Officers; Security. The other officers, if any, of
the Corporation shall have such duties and powers as generally pertain to their
respective offices and such other duties and powers as the Board of Directors
shall from time to time delegate to each such officer. The Board of Directors
may require any officer, agent or employee to give security, by bond or
otherwise, for the faithful performance of his duties.
Section 5.5 Compensation of Officers. The compensation of each officer
shall be fixed by the Board of Directors and no officer shall be prevented from
receiving such compensation by virtue of his also being a director.
ARTICLE VI
Stock
Section 6.1 Certificates. Every holder of one or more shares of capital
stock of the Corporation shall be entitled to have a certificate signed by or in
the name of the Corporation by the Chairman, if any, or the President or an
Executive Vice President, and by the Treasurer or an Assistant Treasurer, if
any, or the Secretary or an Assistant Secretary, certifying the number of shares
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owned by him in the Corporation. Any or all of the signatures on the certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 6.2 Lost, Stolen or Destroyed Stock Certificates; Issuance of
New Certificates. The Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or his legal representative, to give the
Corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE VII
Indemnification of Directors, Officers and Other Authorized Representatives
Section 7.1 Indemnification of Authorized Representatives in Third
Party Proceedings. The Corporation shall indemnify any person who was or is an
authorized representative of the Corporation and who was or is a party, or is
threatened to be made a party to any third party proceeding by reason of the
fact that such person was or is an authorized representative of the Corporation,
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such third party
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in, or not opposed to, the best interests of the
Corporation and, with respect to any criminal third party proceeding, had no
reasonable cause to believe such conduct was unlawful. The termination of any
third party proceeding by judgment, order, settlement indictment, conviction or
upon a plea of nolo contendere or its equivalent, shall not of itself create a
presumption that the authorized representative did not act in good faith and in
a manner which such person reasonably believed to be in, or not opposed to, the
best interests of the Corporation, and, with respect to any criminal third party
proceeding, had reasonable cause to believe that such conduct was unlawful.
Section 7.2 Indemnification of Authorized Representatives in Corporate
Proceedings. The Corporation shall indemnify any person who was or is an
authorized representative of the Corporation and who was or is a party or is
threatened to be made a party to any corporate proceeding by reason of the fact
that such person was or is an authorized representative of the Corporation,
against expenses actually and reasonably incurred by such person in connection
with the defense or settlement of such corporate proceeding if such person acted
in good faith and in a manner 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 person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery or the court in which such corporate proceeding was
brought shall determine
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upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such authorized representative is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
Section 7.3 Mandatory Indemnification of Authorized Representatives. To
the extent that an authorized representative of the Corporation has been
successful on the merits otherwise in defense of any third party proceeding or
corporate proceeding or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses actually and reasonably incurred by
such person in connection therewith.
Section 7.4 Determination of Entitlement to Indemnification. Any
indemnification under Section 7.1, 7.2 or 7.3 above (unless ordered by a court)
shall be made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the authorized representative is proper in
the circumstances because such person has wither met the applicable standard of
conduct set forth in Section 7.1 or 7.2 or has been successful on the merits, or
otherwise as set forth in Section 7.3 and that the amount requested has been
actually and reasonably incurred.
Such determination shall be made:
(1) By the board of directors by a majority of a quorum
consisting of directors who were not parties to such third party
proceeding or corporate proceeding, or
(2) If such a quorum is not obtainable, or, even if
obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or
(3) By the shareholders.
Section 7.5 Advancing Expenses.
(a) Expenses actually and reasonably incurred by an officer or director
in defending any third party proceeding or corporate proceeding shall be paid on
behalf of an officer or director by the Corporation in advance of the final
disposition of such third party proceeding or corporate proceeding upon receipt
of an undertaking by or on behalf of such officer or director to repay such
amount if it shall ultimately be determined that such person is not entitled to
be indemnified by the Corporation as authorized in this Article.
(b) Expenses actually and reasonably incurred in defending any third
party proceeding or corporate proceeding shall be paid on behalf of an
authorized representative other than an officer or director by the Corporation
in advance of the final disposition of such third party proceeding or corporate
proceeding as authorized by the board of directors upon receipt of an
undertaking by or on behalf of such authorized representative to repay such
amount if it shall ultimately a be determined that such person is not entitled
to be indemnified by the Corporation as authorized in this Article.
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(c) The financial ability of any authorized representative to make a
repayment contemplated by this Section shall not be a prerequisite to the making
of an advance.
Section 7.6 Definitions. For purposes of this Article:
(1) "authorized representative" shall mean a director or
officer of the Corporation, or a person serving at the request of the
Corporation as a director, officer or trustee of another corporation,
partnership, joint venture, trust or other enterprise, past, present or
future;
(2) "Corporation" shall include, in addition to the resulting
Corporation, any constituent corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors,
officers, employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation,
or is or was serving at the request of such constituent corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in
the same position under the provisions of this Article with respect to
the resulting or surviving corporation as such person would have with
respect to such constituent corporation if its separate existence had
continued;
(3) "corporate proceeding" shall mean any threatened, pending
or completed action or suit by or in the right of the Corporation to
procure a judgment in its favor or investigative proceeding by the
Corporation;
(4) "criminal third party proceeding" shall include any action
or investigation which could or does lead to a criminal third party
proceeding;
(5) "expenses" shall include attorneys'fees and disbursements;
(6) "fines" shall include any excise taxes assessed on a
person with respect to an employee benefit plan;
(7) "not opposed to the best interests of the Corporation"
shall include actions taken in good faith and in a manner the
authorized representative reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan;
(8) "other enterprises" shall include employee benefit plans;
(9) "party" shall include the giving of testimony or similar
involvement;
(10) "serving at the request of the Corporation" shall include
any service as a director, officer or employee of the Corporation which
imposes duties on, or involves
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services by, such director, officer or employee with respect to an
employee benefit plan, its participants, or beneficiaries; and
(11) "third party proceeding" shall mean any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative, other than an action by or
in the right of the Corporation.
Section 7.7 Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power or the obligation to
indemnify such person against such liability under the provisions of this
Article.
Section 7.8 Scope of Article. The indemnification of authorized
representatives and advancement of expenses, as authorized by the preceding
provisions of this Article, shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses may be entitled
under any by-laws, statute, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office. The indemnification and
advancement of expenses provided by or granted pursuant to this Article, shall,
unless otherwise provided when authorized or ratified, continue as to a person
who has ceased to be an authorized representative and shall inure to the benefit
of the heirs, executors and administrators of such a person.
Section 7.9 Reliance on Provisions. Each person who shall act as an
authorized representative of the Corporation shall be deemed to be doing so in
reliance upon rights of indemnification provided by this Article.
ARTICLE VIII
Miscellaneous
Section 8.1 Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
Section 8.2 Seal. The Corporation may have a corporate seal which shall
have the name of the Corporation inscribed thereon and shall be in such form as
may be approved from time to time by the Board of Directors.
Section 8.3 Waiver of Notice of Meetings of Shareholders, Directors and
Committees. Whenever notice is required to be given by law, the articles of
incorporation or these by-laws, a
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written waiver thereof, signed by the person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Unless otherwise
provided by the articles of incorporation or these by-laws, neither the business
to be transacted at, nor the purpose of, any regular or special meeting of the
shareholders, directors or members of a committee of directors need be specified
in any written waiver of notice.
Section 8.4 Interested Directors, Officers, Quorum. No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership,
association or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the contract or transaction, or solely because his or
their votes are counted for such purpose, if: (a) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (b) the material facts as to
his relationship or interest and as to the contract or transaction are disclosed
or are known to the shareholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the shareholders;
or (c) the contract or transaction is fair as to the Corporation as of the time
it is authorized, approved or ratified, by the Board of Directors, a committee
thereof or the shareholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
Section 8.5 Books and Records. The books and records of the Corporation
may be kept within or without the State of Illinois at such place or places as
may be designated from time to time by the Board of Directors. Any records
maintained by the Corporation in the regular course of its business, including
its stock ledger, books of account and minute books, may be kept on, or be in
the form of, punch cards, magnetic tape, photographs, microphotographs or any
other information storage device provided that the records so kept can be
converted into clearly legible form within a reasonable time. The Corporation
shall so convert any records so kept upon the request of any person entitled to
inspect the same.
Section 8.6 Amendment of By-Laws. These By-laws may be amended or
repealed, and new by-laws adopted, by the Board of Directors, but the
shareholders entitled to vote may adopt additional by-laws and may amend or
repeal any by-law whether or not adopted by them.
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EXHIBIT 4.1
Alaron.com Holding Corporation
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
AUTHORIZED SHARES 25,000,000, $.01 PAR VALUE
NO. _________ ___________ SHARES
CUSIP _____________
SEE REVERSE FOR
CERTAIN DEFINITIONS
SPECIMEN
THIS CERTIFIES THAT ____________________________________________________________
is the owner of ________________________________________________________________
full paid and non-assessable shares of the Common Capital Stock of
Alaron.com Holding Corporation
transferable on the books of the Corporation in person or by duly authorized
Attorney upon surrender of this Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to
be signed by its duly authorized officers and sealed with the Seal of the
Corporation,
this _________________ day of _______________, A.D.
19______
______________________________
______________________________
SECRETARY PRESIDENT
CORPORATE SEAL
<PAGE>
Alaron.com Corporation
TRANSFER FEE: $10.00 PER CERTIFICATE ISSUED
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN - as joint tenants with rights of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT - _______Custodian_______
(Cust) (Minor)
under Uniform Gifts to
Minors Act ___________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received ___________________________________ hereby sell,
assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE____________________________________________
________________________________________________________________________________
_______________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE
_______________________________________________________________________________
________________________________________________________________________________
_______________________________________________________________________________
Shares of the Common Stock represented by the within Certificate and do hereby
irrevocably constitute and appoint______________________________________________
Attorney to transfer the said stock on the books of the within-named
Corporation, with full power of substitution in the premises.
Dated: __________, 19___.
X ______________________________________
X ______________________________________
Signature Guaranteed:
NOTICE: The signature to this assignment
correspond with the name as written
upon the face of the Certificate in
every particular, without alteration
or enlargement or any change
whatsoever.
IMPORTANT: SIGNATURE MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
WHICH IS A PARTICIPANT IN A SECURITIES TRANSFER ASSOCIATION RECOGNIZED PROGRAM.
EXHIBIT 4.2
-----------------------------------------------------
ALARON.COM HOLDING CORPORATION
AND
NATIONAL SECURITIES CORPORATION
FORM OF
REPRESENTATIVE'S
WARRANT AGREEMENT
DATED AS OF JULY ____, 1999
-----------------------------------------------------
<PAGE>
REPRESENTATIVE'S WARRANT AGREEMENT dated as of July ___, 1999, between
ALARON.COM HOLDING CORPORATION, a Delaware corporation (the "Company"), and
NATIONAL SECURITIES CORPORATION and its assignees or designees (each hereinafter
referred to variously as a "Holder" or "Representative").
W I T N E S S E T H:
WHEREAS, the Representative has agreed pursuant to the underwriting
agreement (the "Underwriting Agreement") between the Representative and the
Company, to act as the representative of the several underwriters listed therein
(the "Underwriters") in connection with the Company's proposed public offering
of 1,500,000 shares of the Company's Common Stock (as hereinafter defined).
WHEREAS, pursuant to the Underwriting Agreement, upon the
Representative's request, certain stockholders of the Company proposes to issue
up to an additional 225,000 shares of Common Stock for the purpose of
over-allotments, if any;
WHEREAS, pursuant to the Underwriting Agreement, the Company proposes
to issue warrants to the Representative to purchase up to an aggregate of
150,000 shares of Common Stock (the "Representative's Warrants"); and
WHEREAS, the Representative's Warrants to be issued pursuant to this
Agreement will be issued on the Closing Date (as such term is defined in the
Underwriting Agreement) by the Company to the Representative in consideration
for, and as part of the Underwriters' compensation in connection with, the
Representative acting as the representative pursuant to the Underwriting
Agreement.
NOW, THEREFORE, in consideration of the premises, the payment by the
Representative to the Company of an aggregate of fifteen dollars ($15.00), the
agreements herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. GRANT. The Representative is hereby granted the right to purchase,
at any time from ______________, 2000 (the first anniversary of the issuance of
the Representative's Warrants) until 5:00 p.m., New York time, on
______________, 2004 (5 years from the Closing Date), at which time the
Representative's Warrants expire, up to an aggregate 150,000 shares of Common
Stock, subject to adjustment as provided in Section 11 hereof (the
"Representative's Securities"). Each Representative's Warrant shall entitle the
holder thereof to purchase one (1) share of common stock, par value $.01 per
share, of the Company (the "Common Stock"), at an initial exercise price of
$____ per share (120% of the offering price per share) (the "Common Stock
Exercise Price").
2. REPRESENTATIVE'S WARRANT CERTIFICATES. The Representative's warrant
certificates (the "Warrant Certificates") delivered and to be delivered pursuant
to this Agreement shall be in the form set forth in Exhibit A, attached hereto
and made a part hereof,
2
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with such appropriate insertions, omissions, substitutions, and other variations
as required or permitted by this Agreement.
3. REGISTRATION OF WARRANT. The Representative's Warrants shall be
numbered and shall be registered on the books of the Company when issued.
4. EXERCISE OF REPRESENTATIVE'S WARRANT.
4.1 METHOD OF EXERCISE. The Representative's Warrants initially are
exercisable at the Common Stock Exercise Price (subject to adjustment as
provided in Section 11 hereof) per Representative's Warrant set forth in Section
8 hereof payable by certified or official bank check in New York Clearing House
funds. Upon surrender of a Representative's Warrant Certificate with the annexed
Form of Election to Purchase duly executed, together with payment of the Common
Stock Exercise Price for shares of Common Stock purchased at the Company's
principal offices presently located at 822 West Washington Boulevard, Chicago,
IL 60607, the registered holder of a Representative's Warrant Certificate
("Holder" or "Holders") shall be entitled to receive a certificate or
certificates for the shares of Common Stock so purchased. The purchase rights
represented by each Representative's Warrant Certificate are exercisable at the
option of the Holder thereof, in whole or in part (but not as to fractional
shares underlying the Representative's Warrants). In the case of the purchase of
less than all of the shares purchasable under any Representative's Warrant
Certificate, the Company shall cancel said Representative's Warrant Certificate
upon the surrender thereof and shall execute and deliver a new Representative's
Warrant Certificate of like tenor for the balance of the shares purchasable
thereunder.
5. ISSUANCE OF CERTIFICATES. Upon the exercise of the Representative's
Warrant, the issuance of certificates for securities, properties or rights
underlying such Representative's Warrant shall be made forthwith (and in any
event within five (5) business days thereafter) without charge to the Holder
thereof including, without limitation, any tax which may be payable in respect
of the issuance thereof, and such certificates shall (subject to the provisions
of Sections 7 and 9 hereof) be issued in the name of, or in such names as may be
directed by, the Holder thereof; 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 certificates in a name other
than that of the Holder and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons 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 Representative's Warrant Certificates and the certificates
representing the securities, property or rights issued upon exercise of the
Representative's Warrant shall be executed on behalf of the Company by the
manual or facsimile signature of the then present President or any Vice
President of the Company under its corporate seal reproduced thereon, attested
to by the manual or facsimile signature of the then present Secretary or any
Assistant Secretary of the Company. Representative's Warrant Certificates shall
be dated the date of execution by the Company upon initial issuance, division,
exchange, substitution or transfer.
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6. TRANSFER OF REPRESENTATIVE'S WARRANT. The Representative's Warrant
shall be transferable only on the books of the Company maintained at its
principal office, where its principal office may then be located, upon delivery
thereof duly endorsed by the Holder or by its duly authorized attorney or
representative accompanied by proper evidence of succession, assignment or
authority to transfer. Upon any registration of transfer, the Company shall
execute and deliver the new Representative's Warrant to the person entitled
thereto.
7. RESTRICTION ON TRANSFER OF REPRESENTATIVE'S WARRANT. The
Holder of a Representative's Warrant Certificate, by its acceptance thereof,
covenants and agrees that the Representative's Warrant is being acquired as an
investment and not with a view to the distribution thereof, and that the
Representative's Warrant may not be sold, transferred, assigned, hypothecated or
otherwise disposed of, in whole or in part, for the term of the Representative's
Warrant, except to officers or partners of the Representative, Underwriters, or
members of the selling group or by operation of law, and only after twelve
months from the date of closing.
8. EXERCISE PRICE AND NUMBER OF SECURITIES. Except as otherwise
provided in Section 11 hereof, each Representative's Warrant is exercisable to
purchase one share of Common Stock at an initial exercise price equal to the
Common Stock Exercise Price. The Common Stock Exercise Price, and the number of
shares for which the Representative's Warrant may be exercised shall be the
price and the number of shares which shall result from time to time from any and
all adjustments in accordance with the provisions of Section 11 hereof.
9. REGISTRATION RIGHTS.
9.1 REGISTRATION UNDER THE SECURITIES ACT OF 1933. Each
Representative's Warrant Certificate and each certificate representing
securities issuable upon exercise of the Representative's Warrant (collectively,
the "Warrant Shares") shall bear the following legend unless (i) such
Representative's Warrant or Warrant Shares are distributed to the public or sold
to the underwriters for distribution to the public pursuant to this Section 9 or
otherwise pursuant to a registration statement filed under the Securities Act of
1933, as amended (the "Act"), or (ii) the Company has received an opinion of
counsel, in form and substance reasonably satisfactory to counsel for the
Company, that such legend is unnecessary for any such certificate:
THE REPRESENTATIVE'S WARRANT REPRESENTED BY THIS CERTIFICATE
AND THE OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (THE
"ACT"), (II) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH
ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES), OR (III) AN OPINION OF COUNSEL,
IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL
FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER
SUCH ACT IS AVAILABLE.
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THE TRANSFER OR EXCHANGE OF THE REPRESENTATIVE'S WARRANT
REPRESENTED BY THE CERTIFICATE IS RESTRICTED IN ACCORDANCE
WITH THE REPRESENTATIVE'S WARRANT AGREEMENT REFERRED TO
HEREIN.
9.2 PIGGYBACK REGISTRATION. If, at any time commencing after the
effective date of the Registration Statement and expiring five (5) years
thereafter, the Company proposes to register any of its securities under the Act
(other than in connection with a merger or pursuant to Form S-4 or Form S-8), it
will give written notice by registered mail, at least thirty (30) days prior to
the filing of each such registration statement, to the Holders of the
Representative's Warrants and/or the Warrant Shares of its intention to do so.
If any of the Holders of the Representative's Warrants and/or Warrant Shares
notify the Company within twenty (20) days after mailing of any such notice of
its or their desire to include any such securities in such proposed registration
statement, the Company shall afford such Holders of the Representative's
Warrants and/or Warrant Shares the opportunity to have any such Representative's
Warrants and/or Warrant Shares registered under such registration statement. In
the event that the managing underwriter for said offering advises the Company in
writing that in its opinion the number of securities requested to be included in
such registration exceeds the number which can be sold in such offering without
causing a diminution in the offering price or otherwise adversely affecting the
offering, the Company will include in such registration (a) FIRST, the
securities the Company proposes to sell, (b) SECOND, the securities held by the
entities that made the demand for registration, (c) THIRD, the Representative's
Warrants and/or Warrant Shares requested to be included in such registration
which in the opinion of such underwriter can be sold, PRO RATA among the Holders
of Representative's Warrants and/or Warrant Shares on the basis of the number of
Representative's Warrants and/or Warrant Shares requested to be registered by
such Holders, and (d) FOURTH, other securities requested to be included in such
registration.
Notwithstanding the provisions of this Section 9.2, the Company shall
have the right at any time after it shall have given written notice pursuant to
this Section 9.2 (irrespective of whether a written request for inclusion of any
such securities shall have been made) to elect not to file any such proposed
registration statement or to withdraw the same after the filing but prior to the
effective date thereof.
9.3 DEMAND REGISTRATION.
(a) At any time commencing one (1) year after the effective
date of the Registration Statement and expiring five (5) years from the
effective date of Closing, the Holders of the Representative's Warrants and/or
Warrant Shares representing a "Majority" (as hereinafter defined in Section
9.4(k) hereof) of the Representative's Warrants and/or Warrant Shares shall have
the right (which right is in addition to the registration rights under Section
9.2 hereof), exercisable by written notice to the Company, to have the Company
prepare and file with the Securities and Exchange Commission (the "Commission"),
on one occasion, a registration statement and such other documents, including a
prospectus, as may be necessary in the opinion of both counsel for the Company
and counsel for the Holders, in order to comply with the provisions of the Act,
so as to
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permit a public offering and sale by such Holders and any other Holders of the
Representative's Warrant and/or Warrant Shares who notify the Company within
fifteen (15) days after the Company mails notice of such request pursuant to
Section 9.3(b) hereof (collectively, the "Requesting Holders") of their
respective Warrant Shares for the earlier of (i) six (6) consecutive months or
(ii) until the sale of all of the Warrant Shares requested to be registered by
the Requesting Holders.
(b) The Company covenants and agrees to give written notice of
any registration request under this Section 9.3 by any Holder or Holders
representing a Majority of the Representative's Warrants and/or Warrant Shares
to all other registered Holders of the Representative's Warrants and the Warrant
Shares within ten (10) days from the date of the receipt of any such
registration request.
(c) In addition to the registration rights under Section 9.2
and subsection (a) of this Section 9.3, at any time commencing one (1) year
after the effective date of the Registration Statement and expiring five (5)
years from the effective date of the Registration Statement, the Holders of a
Majority of the Representative's Warrants and/or Warrant Shares shall have the
right on one occasion, exercisable by written request to the Company, to have
the Company prepare and file with the Commission a registration statement so as
to permit a public offering and sale by such Holders of their respective Warrant
Shares for the earlier of (i) six (6) consecutive months or (ii) until the sale
of all of the Warrant Shares requested to be registered by such Holders;
provided, however, that the provisions of Section 9.4(b) hereof shall not apply
to any such registration request and registration and all costs incident thereto
shall be at the expense of the Holder or Holders making such request. If the
Holders have exercised their rights under Section 9.3(a) then the Holders may
not exercise their rights under Section 9.3(c) for a period of six (6) months
following the effective date of any registration statement filed pursuant to
Section 9.3(a).
(d) Notwithstanding anything to the contrary contained herein,
if the Company shall not have filed a registration statement for the Warrant
Shares within the time period specified in Section 9.4(a) hereof pursuant to the
written notice specified in Section 9.3(a) of the Holders of a Majority of the
Representative's Warrants and/or Warrant Shares, the Company, at its option, may
repurchase (i) any and all Warrant Shares at the higher of the Market Price (as
defined in Section 9.3(e)) per share of Common Stock on (x) the date of the
notice sent pursuant to Section 9.3(a) or (y) the expiration of the period
specified in Section 9.4(a) and (ii) any and all Representative's Warrant at
such Market Price less the exercise price of such Representative's Warrant. Such
repurchase shall be in immediately available funds and shall close within two
(2) days after the later of (i) the expiration of the period specified in
Section 9.4(a) or (ii) the delivery of the written notice of election specified
in this Section 9.3(d).
(e) DEFINITION OF MARKET PRICE. As used herein, the phrase
"Market Price" at any date shall be deemed to be the last reported sale price,
or, in case no such reported sale takes place on such day, the average of the
last reported sale prices for the last three (3) trading days, in either case as
officially reported by the principal securities exchange on which the Common
Stock is listed or admitted to trading, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, the average closing
sale price as furnished by the NASD through The NASDAQ Stock Market, Inc.
("NASDAQ") or similar organization if NASDAQ is no longer- reporting such
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information, or if the Common Stock is not quoted on NASDAQ, the OTC Electronic
Bulletin Board, or as determined in good faith by resolution of the Board of
Directors of the Company, based on the best information available to it.
9.4 COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION. In
connection with any registration under Sections 9.2 or 9.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a
registration statement within sixty (60) days of receipt of any demand therefor,
and to have any registration statements declared effective at the earliest
possible time, and shall furnish each Holder desiring to sell Warrant Shares
such number of prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs (excluding fees and
expenses of Holder(s) counsel and any underwriting or selling commissions), fees
and expenses in connection with all registration statements filed pursuant to
Sections 9.2 and 9.3(a) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, blue sky fees and expenses. The
Holder(s) will pay all costs, fees and expenses (including those of the Company)
in connection with the registration statement filed pursuant to Section 9.3(c).
(c) The Company will take all necessary action which may be
required in qualifying or registering the Warrant Shares included in a
registration statement for offering and sale under the securities or blue sky
laws of such states as reasonably are requested by the Holder(s), provided that
the Company shall not be obligated to execute or file any general consent to
service of process or to qualify as a foreign corporation to do business under
the laws of any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Warrant
Shares to be sold pursuant to any registration statement and each person, if
any, who controls such Holders within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from such registration statement but only to
the same extent and with the same effect as the provisions pursuant to which the
Company has agreed to indemnify each of the Underwriters contained in Section 7
of the Underwriting Agreement.
(e) The Holder(s) of the Warrant Shares to be sold pursuant to
a registration statement, and their successors and assigns, shall severally, and
not jointly, indemnify the Company, its officers and directors and each person,
if any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against all loss, claim, damage or expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Act, the Exchange Act or otherwise, arising from information
furnished by or on behalf of such Holders, or their successors or assigns, for
specific inclusion in such registration statement to the same extent
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and with the same effect as the provisions contained in Section 7 of the
Underwriting Agreement pursuant to which the Underwriters have agreed to
indemnify the Company.
(f) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Representative's Warrant prior to the
initial filing of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any
securities other than the Warrant Shares to be included in any registration
statement filed pursuant to Section 9.3 hereof, or permit any other registration
statement to be or remain effective during the effectiveness of a registration
statement filed pursuant to Section 9.3 hereof, without the prior written
consent of National Securities Corporation or as otherwise required by the terms
of any existing registration rights granted prior to the date of this Agreement
by the Company to the holders of any of the Company's securities.
(h) The Company shall furnish to each Holder participating in
the offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a letter dated the date
of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities.
(i) The Company shall as soon as practicable after the
effective date of the registration statement, and in any event within 15 months
thereafter, make generally available to its security holders (within the meaning
of Rule 158 under the Act) an earnings statement (which need not be audited)
complying with Section 11(a) of the Act and covering a period of at least 12
consecutive months beginning after the effective date of the registration
statement.
(j) The Company shall enter into an underwriting agreement
with the managing underwriters selected for such underwriting by Holders holding
a Majority of the Warrant Shares requested to be included in such underwriting,
which may be the Representative. Such agreement shall be satisfactory in form
and substance to the Company, each Holder and such managing underwriters, and
shall contain such representations, warranties and covenants by the Company and
such other terms as are customarily contained in agreements of that type used by
the managing underwriter. The Holders shall be parties to any underwriting
agreement relating to an underwritten sale of their Warrant Shares and may, at
their option, require that any or all the representations, warranties and
covenants of the Company to or for the benefit of such underwriters shall also
be made to and for the benefit of such Holders. Such Holders shall not be
required to make any
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representations or warranties to or agreements with the Company or the
underwriters except as they may relate to such Holders and their intended
methods of distribution.
(k) For purposes of this Agreement, the term "Majority" in
reference to the Representative's Warrants or Warrant Shares, shall mean in
excess of fifty percent (50%) of the then outstanding Representative's Warrants
or Warrant Shares that (i) are not held by the Company, an affiliate, officer,
creditor, employee or agent thereof or any of their respective affiliates,
members of their family, persons acting as nominees or in conjunction therewith
or (ii) have not been resold to the public pursuant to a registration statement
filed with the Commission under the Act.
10. OBLIGATIONS OF HOLDERS. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to SECTION 9 hereof that
each of the selling Holders shall:
(a) Furnish to the Company such information regarding
themselves, the Warrant Shares held by them, the intended method of sale or
other disposition of such securities, the identity of and compensation to be
paid to any underwriters proposed to be employed in connection with such sale or
other disposition, and such other information as may reasonably be required to
effect the registration of their Warrant Shares.
(b) Notify the Company, at any time when a prospectus relating
to the Warrant Shares covered by a registration statement is required to be
delivered under the Act, of the happening of any event with respect to such
selling Holder as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing.
11. ADJUSTMENTS TO COMMON STOCK EXERCISE PRICE AND NUMBER OF
SECURITIES. The Common Stock Exercise Price in effect at any time and the number
and kind of securities purchased upon the exercise of the Representative's
Warrant shall be subject to adjustment from time to time only upon the happening
of the following events:
11.1 STOCK DIVIDEND, SUBDIVISION AND COMBINATION. In case the Company
shall (i) declare a dividend or make a distribution on its outstanding shares of
Common Stock in shares of Common Stock, (ii) subdivide or reclassify its
outstanding shares of Common Stock into a greater number of shares, or (iii)
combine or reclassify its outstanding shares of Common Stock into a smaller
number of shares, the Common Stock Exercise Price in effect at the time of the
record date for such dividend or distribution or of the effective date of such
subdivision, combination or reclassification shall be adjusted so that it shall
equal the price determined by multiplying the Common Stock Exercise Price by a
fraction, the denominator of which shall be the number of shares of Common Stock
outstanding after giving effect to such action, and the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
action. Such adjustment shall be made successively whenever any event listed
above shall occur.
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11.2 ADJUSTMENT IN NUMBER OF SECURITIES. Upon each adjustment of the
Common Stock Exercise Price pursuant to the provisions of this Section 11, the
number of Warrant Shares issuable upon the exercise at the adjusted Common Stock
Exercise Price of each Representative's Warrant shall be adjusted to the nearest
number of whole shares of Common Stock by multiplying a number equal to the
Common Stock Exercise Price in effect immediately prior to such adjustment by
the number of Warrant Shares issuable upon exercise of the Representative's
Warrant immediately prior to such adjustment and dividing the product so
obtained by the adjusted Common Stock Exercise Price.
11.3 DEFINITION OF COMMON STOCK. For the purpose of this Agreement, the
term "Common Stock" shall mean (i) the class of stock designated as Common Stock
in the Articles of Incorporation of the Company as amended as of the date
hereof, or (ii) any other class of stock resulting from successive changes or
reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value.
11.4 MERGER OR CONSOLIDATION. In case of any consolidation of the
Company with, or merger of the Company into, another corporation (other than a
consolidation or merger which does not result in any reclassification or change
of the outstanding Common Stock), the corporation formed by such consolidation
or merger shall execute and deliver to the Holder a supplemental warrant
agreement providing that the Holder of each Representative's Warrant then
outstanding or to be outstanding shall have the right thereafter (until the
expiration of such Representative's Warrant) to receive, upon exercise of such
Representative's Warrant, the kind and amount of shares of stock and other
securities and property receivable upon such consolidation or merger by a holder
of the number of shares of Common Stock for which such Representative's Warrant
might have been exercised immediately prior to such consolidation or merger.
Such supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in this Section 11. The above provision of
this subsection shall similarly apply to successive consolidations or mergers.
11.5 NO ADJUSTMENT OF EXERCISE PRICE IN CERTAIN CASES. No adjustment
of the Common Stock Exercise Price shall be made:
(a) Upon the issuance or sale of the Representative's Warrant
or the Warrant Shares;
(b) Upon the issuance or sale of Common Stock (or any other
security convertible, exercisable, or exchangeable into shares of Common Stock)
upon the direct or indirect conversion, exercise, or exchange of any options,
rights, warrants, or other securities or indebtedness of the Company outstanding
as of the date of this Agreement or granted pursuant to any stock option plan of
the Company in existence as of the date of this Agreement, pursuant to the terms
thereof; or
(c) If the amount of said adjustment shall be less than two
cents ($.02) per share, provided, however, that in such case any adjustment that
would otherwise be required then to be made shall be carried forward and shall
be made at the time of and together with the next subsequent
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adjustment which, together with any adjustment so carried forward, shall amount
to at least two cents ($.02) per Representative's Warrant.
12. EXCHANGE AND REPLACEMENT OF REPRESENTATIVE'S WARRANT CERTIFICATES.
Each Representative's Warrant Certificate is exchangeable, without expense, upon
the surrender thereof by the registered Holder at the principal executive office
of the Company for a new Representative's Warrant Certificate of like tenor and
date representing in the aggregate the right to purchase the same number of
Warrant Shares in such denominations as shall be designated by the Holder
thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Representative's Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Representative's Warrant, if mutilated, the Company will make and deliver a
new Warrant Certificate of like tenor, in lieu thereof.
13. ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Representative's Warrant, nor shall it be required to
issue scrip or pay cash in lieu of fractional interests, it being the intent of
the parties that all fractional interests shall be eliminated by rounding any
fraction up to the nearest whole number of shares of Common Stock or other
securities, properties or rights.
14. RESERVATION AND LISTING OF SECURITIES. The Company shall at all
times reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issuance upon the exercise of the Representative's
Warrant, such number of shares of Common Stock or other securities, properties
or rights as shall be issuable upon the exercise thereof. Every transfer agent
("Transfer Agent") for the Common Stock and other securities of the Company
issuable upon the exercise of the Representative's Warrant will be irrevocably
authorized and directed at all times to reserve such number of authorized shares
of Common Stock and other securities as shall be requisite for such purpose. The
Company will keep a copy of this Agreement on file with every Transfer Agent for
the Common Stock and other securities of the Company issuable upon the exercise
of the Representative's Warrant. The Company will supply every such Transfer
Agent with duly executed stock and other certificates, as appropriate, for such
purpose. The Company covenants and agrees that, upon exercise of the
Representative's Warrant and payment of the Common Stock Exercise Price
therefor, all shares of Common Stock and other securities issuable upon such
exercise shall be duly and validly issued, fully paid, non-assessable and not
subject to the preemptive rights of any stockholder. As long as the
Representative's Warrant shall be outstanding, the Company shall use its best
efforts to cause all shares of Common Stock issuable upon the exercise of the
Representative's Warrant to be listed (subject to official notice of issuance)
on all securities exchanges on which the Common Stock issued to the public in
connection herewith may then be listed and/or quoted on Nasdaq or the OTC
Electronic Bulletin Board.
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15. NOTICES TO REPRESENTATIVE'S WARRANT HOLDERS. Nothing contained in
this Agreement shall be construed as conferring upon the Holders the right to
vote or to consent or to receive notice as a stockholder in respect of any
meetings of stockholders for the election of directors or any other matter, or
as having any rights whatsoever as a stockholder of the Company. If, however, at
any time prior to the expiration of the Representative's Warrants and their
exercise, any of the following event shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a dividend
or distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on the
books of the Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed;
then in any one or more of said events, the Company shall give written notice of
such event at least fifteen (15) days prior to the date fixed as a record date
or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not affect the validity
of any action taken in connection with the declaration or payment of any such
dividend, or the issuance of any convertible or exchangeable securities, or
subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
16. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made and
sent when delivered, or mailed by registered or certified mail, return receipt
requested:
(a) if to the registered Holder of the Representative's
Warrant, to the address of such Holder as shown on the books of the Company; or
(b) if to the Company, to the address set forth in SECTION 4
hereof or to such other address as the Company may designate by notice to the
Holders.
17. SUPPLEMENTS; AMENDMENTS; ENTIRE AGREEMENT. This Agreement
(including the Underwriting Agreement to the extent portions thereof are
referred to herein) contains the entire understanding between the parties hereto
with respect to the subject matter hereof and may not be modified or amended
except by a writing duly signed by the party against whom enforcement
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of the modification or amendment is sought. The Company and the Representative
may from time to time supplement or amend this Agreement without the approval of
any holders of Representative's Warrant Certificates (other than the
Representative) in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any
provisions herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Representative may deem
necessary or desirable and which the Company and the Representative deem shall
not adversely affect the interests of the Holders of Representative's Warrant
Certificates.
18. SUCCESSORS. All of the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the Holders and
their respective successors and assigns hereunder.
19. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All statements in
any schedule, exhibit or certificate or other instrument delivered by or on
behalf of the parties hereto, or in connection with the transactions
contemplated by this Agreement, shall be deemed to be representations and
warranties hereunder. Notwithstanding any investigations made by or on behalf of
the parties to this Agreement, all representations, warranties and agreements
made by the parties to this Agreement or pursuant hereto shall survive.
20. GOVERNING LAW. This Agreement and each Representative's Warrant
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of New York and for all purposes shall be construed in
accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.
21. SEVERABILITY. If any provision of this Agreement shall be held to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
22. CAPTIONS. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
23. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Representative and any other registered Holder(s) of the Representative's
Warrant Certificates or Warrant Shares any legal or equitable right, remedy or
claim under this Agreement; and this Agreement shall be for the sole and
exclusive benefit of the Company and the Underwriters and any other Holder(s) of
the Representative's Warrant Certificates or Warrant Shares.
24. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
ATTEST: ALARON.COM HOLDING CORPORATION
By:___________________________ By:_______________________________
Name: Name:
Title: Title:
NATIONAL SECURITIES CORPORATION
By:_______________________________
Name: Steven A. Rothstein
Title: CEO
14
<PAGE>
EXHIBIT A
[FORM OF REPRESENTATIVE'S WARRANT CERTIFICATE]
THE REPRESENTATIVE'S WARRANT REPRESENTED BY THIS CERTIFICATE AND THE
OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 (THE "ACT"), (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT
(OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES),
OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY
TO COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE REPRESENTATIVE'S WARRANT REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE REPRESENTATIVE'S WARRANT
AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, ___________, 2004
Representative's Warrant No.
Issuable for
_____ Shares of Common Stock
WARRANT CERTIFICATE
This Warrant Certificate certifies that ___________ , or registered
assigns, is the registered holder of Warrants to purchase initially at any time
from __________, 2000 until 5:00 p.m., New York time on, __________, 2004
("Expiration Date"), up to 150,000 shares of Common Stock, par value $.01 par
share, of the Company (the "Common Stock"), at an exercise price of $_______ per
share (120% of the offering price per share) (the "Common Stock Exercise
Price"), upon surrender of this Representative's Warrant Certificate and payment
of the Common Stock Exercise Price at an office or agency of the Company, but
subject to the conditions set forth herein and in the Representative's Warrant
Agreement dated as of ________, 1999 among the Company and National Securities
Corporation (the "Warrant Agreement"). Payment of the Exercise Price shall be
made by certified or official bank check in New York Clearing House funds
payable to the order of the Company.
No Warrant may be exercised after 5:00 p.m., New York time, on the
Expiration Date, at which time all Representative's Warrant evidenced hereby,
unless exercised prior thereto, shall thereafter be void.
15
<PAGE>
The Representative's Warrant evidenced by this Warrant Certificate is
part of a duly authorized issue of Representative's Warrants issued pursuant to
the Warrant Agreement, which Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the
Representative's Warrant.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Representative's
Warrant; provided, however, that the failure of the Company to issue such new
Warrant Certificates shall not in any way change, alter or otherwise impair, the
rights of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Representative's Warrant shall be issued to the transferees in exchange for
this Warrant Certificate, subject to the limitations provided herein and in the
Warrant Agreement, without any charge except for any tax or other governmental
charge imposed in connection with such transfer.
Upon the exercise of less than all of the Representative's Warrant
evidenced by this Certificate, the Company shall forthwith issue to the holder
hereof a new Warrant Certificate representing such unexercised Representative's
Warrant.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
This Warrant Certificate does not entitle any holder thereof to any of
the rights of a shareholder of the Company.
16
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of _____________, 1999.
ALARON.COM HOLDING CORPORATION
By:________________________________
Name:
Title:
ATTEST:
By:_______________________________
Name:
Title:
17
<PAGE>
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 4.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ______ shares of Common
Stock, and herewith tenders in payment for such securities a certified or
official bank check payable in New York Clearing House Funds to the order of
Alaron.com Holding Corporation (the "Company") in the amount of $_________, all
in accordance with the terms of Section 4.1 of the Representative's Warrant
Agreement dated as of July __, 1999 among the Company and National Securities
Corporation. The undersigned requests that a certificate for such securities be
registered in the name of ____________________, whose address is
__________________ and that such certificate to be delivered
to____________________ whose address is _______________________, and if said
number of shares shall not be all the shares purchasable hereunder, that a new
Warrant Certificate for the balance of the shares purchasable under the within
Warrant Certificate be registered in the name of the undersigned warrant holder
or his assignee as below indicated and delivered to the address stated below.
Dated:_____________________________
Signature:____________________________ (Signature must conform in all respects
to name of holder as specified on the face of the Warrant
Certificate.)
Address: ______________________________
______________________________
____________________________________________
(Insert Social Security or Other Identifying
Number of Holder)
Signature Guaranteed:________________________________________________________
(Signature must be guaranteed by a bank savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
18
<PAGE>
[FORM OF ASSIGNMENT]
(TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH
HOLDER DESIRES TO TRANSFER THE WARRANT
CERTIFICATE.)
FOR VALUE RECEIVED ________________ hereby sells, assigns and transfers unto
[NAME OF TRANSFEREE) this Warrant Certificate, together with all right, title
and interest therein, and does hereby irrevocably constitute and appoint
________________, attorney, to transfer the within Warrant Certificate on the
book of the within-named Company, with full power of substitution.
Dated:_____________________
Signature:______________________________ (Signature must conform in all respects
to name of holder as specified on the face of the Warrant
Certificate.)
Address: ______________________________
______________________________
____________________________________________
(Insert Social Security or Other Identifying
Number of Holder)
Signature Guaranteed:________________________________________________________
(Signature must be guaranteed by a bank savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
19
EXHIBIT 4.3
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is made as of the ___ day of _____________, 19__,
by and between Lakeside Bank, Chicago, Illinois as escrow agent (the "Escrow
Agent") and Alaron.com Holding Corporation, a Delaware corporation (the
"Company").
1. Property Deposited in Escrow. All proceeds (the "Proceeds") of
subscriptions (together with a list setting forth the name, address and social
security number of each subscriber, and the amounts and dates of receipt of
their respective subscriptions) for shares of common stock (the "Shares") in the
Company received by the Company during the Initial Offering Period (as defined
in paragraph 2.6 below) shall be deposited in escrow with the Escrow Agent
within 48 hours of receipt. The Company shall deliver to all such prospective
subscribers interim receipts for the amount of their funds deposited into
escrows. Copies of such receipts shall be delivered to the Escrow Agent, said
interim receipts to be substantially in the form of Exhibit A hereto.
2. Authority of Escrow Agent. The Escrow Agent shall collect, hold,
deal with and dispose of the Proceeds and any other property at any time held by
it hereunder in the following manner:
2.1 If, but only if, proceeds aggregating not less than $1,000,000 have
been received during the Initial Offering Period, all proceeds and other
property deposited in this escrow (excluding all interest accumulated on the
Proceeds paid to subscribers pursuant to paragraph 2.2 below) shall as soon as
practicable be paid over and delivered to the Company upon its written request
and upon the Company's certification to the Escrow Agent that subscriptions
aggregating not less than ______________ Shares have been received and accepted
by the Company. Any interest which shall be accrued on the Proceeds during the
period of the escrow shall concurrently be paid to the Company.
2.2 If proceeds aggregating not less than $1,000,000 have not been
received during the Initial Offering Period, prompt remittance of the Proceeds
deposited in this escrow shall be made by the Escrow Agent to the subscribers,
at their respective addresses shown on the list of subscriber names and
addresses delivered to the Escrow Agent pursuant to paragraph 1 in the amounts
shown thereon and without deductions of any kind or character. Any interest
which shall be accrued on the Proceeds during the period of the escrow shall
concurrently be paid to the subscribers pursuant to calculations and written
instructions provided by the Company.
<PAGE>
2.3 Prior to delivery of the escrowed Proceeds to the Company as
described in paragraph 2.2 above, the Company shall have no title to or interest
in the Proceeds on deposit in this escrow or in any interest earned thereon, and
such Proceeds and interest shall under no circumstances be subject to the
liabilities or indebtedness of the Company.
2.4 The Escrow Agent shall cause all Proceeds deposited in this escrow
agreement to be maintained and invested as the Company shall from time to time
direct by written instrument delivered to the Escrow Agent, in certificates of
deposit, money market or savings accounts of the Escrow Agent which can be
readily liquidated on twenty-four hours notice so that 100% of the Proceeds so
deposited and interest thereon can, if necessary, be returned to subscribers in
accordance with paragraph 2.2 above. In the event that 100% of the Proceeds so
deposited are not realized upon such liquidation, the Company shall pay the
difference into this escrow for distribution to the subscribers. The Escrow
Agent shall incur no liability for any loss suffered so long as the Escrow Agent
follows such directions.
2.5 At any time prior to the termination of this escrow, for whatever
reason, the Company may notify the Escrow Agent that a Subscription Agreement of
a subscriber has not been accepted, or has only been partially accepted, and the
Company may direct the Escrow Agent to return as soon thereafter as may be
practicable any Proceeds held in this escrow for the benefit of such subscriber
directly to such subscriber, without interest. If any check transmitted to the
Escrow Agent in connection with a subscription shall remain uncollected for any
reason, the Escrow Agent shall return such check, together with any other
material or documents received by it in connection with such subscriptions, to
the Company.
2.6 The "Initial Offering Period" shall expire on ____________________
or, if extended in the discretion of the Company, on a date no later than
___________________.
2.7 The Escrow Agent shall not be obligated to inquire as to the form,
manner of execution or validity of any documents herewith or hereafter deposited
pursuant to the provisions hereof, nor shall the Escrow Agent be obligated to
inquire as to the identity, authority or rights of the persons executing the
same. In case of conflicting demands upon it, said Escrow Agent may withhold
performance under this escrow agreement until such time as said conflicting
demands shall have been withdrawn or the rights of the respective parties shall
have been settled by court adjudication, arbitration, joint order or otherwise.
2.8 The Escrow Agent shall not be required to record separately on its
books the name and address of each subscriber and the amount of each of their
respective subscriptions as received, but shall keep the lists delivered to it
pursuant to paragraph 1 above.
3. Fees and Expenses of Escrow Agent. The fees and expenses of the
Escrow Agent shall be as determined in accordance with the fee schedule annexed
hereto as Exhibit
- 2 -
<PAGE>
B. All fees and expenses referred to in this paragraph shall be paid by the
Company unless subscriptions are returned to all subscribers pursuant to
paragraph 2.2 above, in which event such fees and expenses shall be paid by the
Company. The Escrow Agent shall provide monthly statements to the Company. The
Escrow Agent shall be paid its customary fee for any documents and/or copies
other than the monthly account statements provided to the Company.
4. Liability of Escrow Agent. The Escrow Agent shall not be personally
liable for any act which it may do or omit to do hereunder in good faith and in
the reasonable exercise of its own best judgment. Any act done or omitted by the
Escrow Agent pursuant to the advice of its legal counsel shall be deemed
conclusively to have been performed or omitted in good faith by the Escrow Agent
and in no event shall it be liable or responsible for any loss to the Proceeds
resulting from the investment thereof in accordance with the terms of this
escrow agreement.
5. Indemnification of Escrow Agent. The Company agrees to indemnify and
hold harmless the Escrow Agent and its directors, officers, employees and agents
from and against all costs, damages, judgments, attorneys' fees (whether such
attorneys shall be regularly retained or specifically employed), expenses,
obligations and liabilities of every kind and nature which the Escrow Agent may
incur, sustain or be required to pay in connection with or arising out of this
Escrow, and to pay the Escrow Agent on demand the amount of all such costs,
damages, judgments, attorneys' fees, expenses, obligations and liabilities.
6. Representations and Warranties of the Company. The Company warrants
to and agrees with the Escrow Agent that, unless otherwise expressly set forth
in this escrow agreement: there is no security interest in the Proceeds or any
part thereof; no financing statement under the Uniform Commercial Code is on
file in any jurisdiction claiming a security interest in or describing (whether
specifically or generally) the proceeds or any part thereof; and the Escrow
Agent shall have no responsibility at any time to ascertain whether or not any
security interest exists in the proceeds or any part thereof or to file any
financing statement under the Uniform Commercial Code with respect to the
Proceeds or any part thereof.
7. Escrow Agent's Compliance with Court Orders, etc. If any property
subject hereto is at any time attached, garnished or levied upon under any court
order, or in case the payment, assignment, transfer, conveyance or delivery of
any such property shall be stayed or enjoined by any court order, or in case any
order, writ, judgment or decree shall be made or entered by any court effecting
such property, or any part hereof, then in any of such events, the Escrow Agent
is authorized to rely upon and comply with any such order, writ, judgment or
decree, it shall not be liable to any of the parties hereto or to any other
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<PAGE>
person, firm or corporation by reason of such compliance, even though such
order, writ, judgment or decree may be subsequently reversed, modified,
annulled, set aside or vacated.
8. Resignation of Escrow Agent. The Escrow Agent may resign by giving
ten days' written notice by certified mail, return receipt requested, sent to
the undersigned at their respective addresses herein set forth; and thereafter,
subject to the provisions of the preceding paragraph hereof, shall deliver all
remaining deposits in said escrow to a successor escrow agent acceptable to all
other parties hereto, which acceptance shall be evidenced by the joint written
and signed order of the undersigned. If no such order is received by the Escrow
Agent within thirty days after mailing such notice, it is unconditionally and
irrevocably authorized and empowered to send any and all items deposited
hereunder by registered mail to the respective depositors thereof.
9. Amendments. The Escrow Agent's duties and responsibilities shall be
limited to those expressly set forth in this escrow agreement, and the Escrow
Agent shall not be subject to, nor obliged to recognize, any other agreement
unless reference thereto is made herein; provided, however, with the Escrow
Agent's written consent, this escrow agreement may be amended at any time or
times by an instrument in writing signed by all of the undersigned.
10. Governing Law. This escrow agreement shall be construed, enforced
and administered in accordance wit the laws of the State of Illinois.
11. Effectiveness. This agreement shall not become effective (and the
Escrow Agent shall have no responsibility hereunder except to return the
property deposited in escrow to the subscribers) until the Escrow Agent shall
have received a certificate as to the names and specimen signatures of those
individuals with authority to bind the Company and shall have advised the
Company in writing that the same are in form and substance satisfactory to it.
12. Termination. This escrow agreement shall terminate upon completion
of the obligations provided in either paragraphs 2.1 or 2.2 hereof or as
provided in paragraph 8 hereof.
13. Notices. Any notice which the parties hereto are required or desire
to give hereunder to any of the undersigned shall be in writing and may be given
by mailing the same to the address of the undersigned by certified mail, return
receipt requested, postage prepaid:
If to the Escrow Agent: Lakeside Bank
55 West Wacker Drive
Chicago, IL 60601
Attention: Vincent Tolve
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<PAGE>
If to the Company: Alaron.com Holding Corporation
822 West Washington Street
Chicago, IL 60607
Attention: Steven Greenberg
Notices to or from the Escrow Agent hereunder shall be in writing and
shall not be deemed to be given until actually received by the Escrow Agent or
by the person to whom it was mailed, respectively. Whenever under the terms
hereof the time for giving notice or performing an act falls upon a Saturday,
Sunday or bank holiday, such time shall be extended to the Escrow Agent's next
business day.
IN WITNESS WHEREOF, the parties have executed this escrow agreement as
of the date first above written.
Alaron.com Holding Corporation
By:_______________________________
Authorized Officer
Officers of the Company:
_______________________________
_______________________________
_______________________________
_______________________________
ACCEPTED:
Lakeside Bank, Chicago, Illinois
By:__________________________________
Vice President and Trust Officer
- 5 -
<PAGE>
EXHIBIT A
INTERIM RECEIPT
Alaron.com Holding Corporation
(A Delaware Corporation)
__________________________________________
Name of Subscriber
__________________________________________
__________________________________________
__________________________________________
Address of Subscriber
__________________________________________
Telephone Number
__________________________________________
Social Security Number
This receipt evidences the subscription for ______________ Shares
during the Initial Offering period of Shares of Alaron.com Holding Corporation
by the subscriber named above for a total price of $______________. Said amount
shall be deposited with Lakeside Bank in Chicago, Illinois as Escrow Agent
pursuant to an escrow agreement between it and Alaron.com Holding Corporation.
Said subscription and payment for the Interest described above are governed by
said escrow agreement. This receipt does not constitute final acceptance of such
subscription by Alaron.com Holding Corporation.
Dated:__________________________
Alaron.com Holding Corporation
By:________________________________
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EXHIBIT 10.1
ASSIGNMENT, CONTRIBUTION AND ACKNOWLEDGMENT
This Assignment, Contribution and Acknowledgment is made this __ day of
________, 1999 by and between the undersigned shareholder (the "Shareholder") of
Alaron Trading Corporation, an Illinois corporation ("ATC"), and Alaron.com
Corporation, a Delaware corporation ("Alaron.com").
WHEREAS, the Shareholder owns __ shares of common stock, no par value,
of ATC (the "Stock");
WHEREAS, the Shareholder is also a shareholder in Alaron.com;
WHEREAS, the Shareholder has determined it to be in the best interests
of the Shareholder, ATC and Alaron.com to assign and contribute all of the Stock
to the paid in capital of Alaron.com;
WHEREAS, after the contribution of the Stock and the contributions of
the other shareholders of ATC to Alaron.com, Alaron.com will own all of the
issued and outstanding stock of ATC.
NOW, THEREFORE, in consideration of the foregoing recitals, and other
good and valuable consideration, the receipt and sufficiency which are hereby
acknowledged, the Shareholder and Alaron.com agree as follows:
1. Contribution and Assignment. The Shareholder hereby irrevocably
assigns, transfers and contributes to Alaron.com all right, title and interest
in and to the Stock and does hereby appoint Horwood Marcus & Berk Chartered as
attorneys to transfer the Stock on the books and records of ATC with full power
of substitution in the premises.
2. Acknowledgment. Alaron.com hereby acknowledges receipt of the Stock
and of the contribution to its paid in capital.
IN WITNESS WHEREOF, the parties have executed this Assignment,
Contribution and Acknowledgment this __ day of _______, 1999.
Alaron.com Corporation
By:_______________________________
Steven Greenberg, President
__________________________________
Shareholder
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made and entered into
this 1st day of March, 1999 by and between Alaron.com Corporation, a Delaware
corporation (the "Company"), and Steven A. Greenberg ("Employee").
W I T N E S S E T H:
WHEREAS, the Company desires to ensure that the unique experience,
qualifications and services of Employee will be available to the Company; and
WHEREAS, Employee desires to render services to the Company on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the Company and Employee agree as
follows:
1. Nature of Employment. The Company hereby agrees to employ Employee,
and Employee hereby agrees to be employed by the Company, as President of the
Company. Employee agrees to perform all duties incident to such office of the
Company and such other duties as are assigned to Employee from time to time by
the Company.
2. Term of Employment. The initial term of Employee's employment
hereunder shall commence on the date hereof and continue for a period of five
years unless sooner terminated pursuant to Section 7 hereof (the "Initial
Term"). Thereafter, this Agreement shall automatically and without further
action be renewed for successive one year periods (each, a "Renewal Term") on
the same terms and conditions unless sooner terminated pursuant to Section 7
hereof or by either party upon written notice given not less than 60 days prior
to the expiration of the Initial Term or any Renewal Term. As used herein,
"Term" shall mean the Initial Term and any Renewal Term.
3. Compensation. As compensation for the services rendered by Employee
to the Company, the Company shall pay or grant, as the case may be, to Employee
the following:
(a) Base Salary. A base salary of $200,000 per annum, prorated
for any partial calendar year. All such amounts shall be referred to as
"Base Salary" and shall be payable in accordance with the Company's
customary payroll practices, less federal and state income tax
withholding, other deductions required by law and other customary
employee deductions. The Base Salary will be increased on an annual
basis in an amount determined by the Board of Directors of the Company;
provided, however, that in no event shall the Base Salary for any year
of the Term be less than 105% of the Base Salary for the prior year of
the Term.
<PAGE>
(b) Nondiscretionary Bonus. A nondiscretionary cash bonus at
the end of each month of the Term in the amount of $6,794.85 (the
"Nondiscretionary Bonus"). The Nondiscretionary Bonus shall be payable
in accordance with the Company's customary payroll practices, less
federal and state income tax withholding, other deductions required by
law and other customary employee deductions.
(c) Incentive Bonus. An incentive cash bonus (the "Incentive
Bonus," and, with the Nondiscretionary Bonus, collectively, the
"Bonuses") at the end of each year of the Term in an amount equal to
4.8% of the annual Operating Income (as defined below) of the Company
in excess of $1,000,000. For purposes of this Agreement, the term
"Operating Income" shall mean the net income from operations of the
Company before interest and taxes, at the close of the end of the
Company's fiscal year as determined by the Company's regularly retained
certified public accountants in accordance with generally accepted
accounting principles consistently applied.
4. Benefits. During the term hereof, Employee may participate, subject
to eligibility and other terms, in any employee benefits plans and programs from
time to time established by the Company including, without limitation, any group
health insurance plans, life insurance plans, profit sharing, vacation, pension
and other benefit programs adopted by the Company.
5. Vacation. Employee shall be eligible for six weeks of paid vacation
during each year of the Term.
6. Expenses. The Company shall pay all reasonable expenses which are
actually incurred by Employee on behalf of the Company incident to the discharge
and performance of Employee's duties hereunder including, but not limited to,
business expenses for travel, as evidenced by vouchers and such other reasonable
supporting materials as the Company may require. Reimbursement for such expenses
shall be made by the Company in accordance with the Company's expense
reimbursement policies in effect from time to time.
7. Termination. Employee's employment hereunder shall, at the election
of the Company, immediately terminate upon the occurrence of one of the
following events:
(a) Upon the last day of the Term upon not less than 60 days'
prior written notice.
(b) Upon the death of Employee.
(c) Upon written notice from the Company to Employee in the
event Employee is convicted of any act of embezzlement, theft or fraud,
provided, however, that Employee shall not be terminated pursuant to
this Section 7(c) unless Employee has been given written notice of the
violation forming the basis for Employee's termination and after a
reasonable time thereafter, Employee has failed to remedy such
violation.
2
<PAGE>
(d) Upon written notice from the Company to Employee that
Employee is unable, by reason of physical or mental impairment for a
period of 90 days during any 12 month period, to carry out and perform
the duties and obligations ordinarily required of him as an employee of
the Company.
(e) Upon 30 days written notice from the Company to Employee
or the Employee to the Company.
8. Compensation Upon Termination. In the event that Employee's
employment hereunder is terminated by the Company pursuant to Section 7(c)
above, the Company shall continue to pay to Employee or Employee's legal
representative, Employee's Base Salary in effect on the date of termination for
a period of 12 months following Employee's date of termination. In the event
Employee's employment hereunder is terminated by the Company pursuant to Section
7(e) above, the Company shall continue to pay to Employee or Employee's legal
representative, the Employee's Base Salary (including annual increases) and
Bonuses each at a rate that is two times the amount set forth in Sections 3(a),
(b) and (c), for a period equal to the longer of the unexpired duration of the
Term or two years. In the event Employee terminates his employment pursuant to
Section 7(e) above, the Company shall pay to Employee or Employee's legal
representative, Employee's Base Salary and Bonuses which have accrued through
the date of termination. All payments hereunder shall be payable in accordance
with the Company's customary payroll practices less federal and state income tax
withholding, other deductions required by law and other customary employee
deductions. In the event Employee's employment hereunder is terminated by the
Company pursuant to Section 7(e) above, Employee shall have the option, upon
written notice to the Company within 90 days of the date of Employee's
termination, to sell all, and not less than all, of the common stock of the
Company owned by the Employee (the "Stock") to the Company and the Company shall
have the obligation, if so requested by the Employee, to purchase all, and not
less than all, of the Stock owned by the Employee (the "Put Right"). Any
exercise of the Put Right must be by written notice by the Employee to the
Company within 90 days of the Employee's date of termination. The price of the
Stock sold under this Section 8 shall equal 90% of the average closing price of
the Stock for the 30 day period prior to the date of Employee's termination. The
entire purchase price for the Stock purchased under this Section 8 shall be
paid, at the Employee's option, by certified or cashier's check, by wire
transfer, or by a combination thereof.
9. Inventions and Innovations. Employee agrees that all right, title
and interest in and to any innovation, design, marketing program, idea or
improvement in the business of the Company, and all copyrights, trademarks and
trade names which are developed or created in whole or in part by Employee at
any time and at any place during the Term of his employment hereunder and
related to or usable in connection with the business activities of the Company
shall be and remain forever the sole and exclusive property of the Company.
Employee further agrees to promptly reveal all information relating to the same
to the Company and to cooperate with the Company and execute such documents as
may be necessary in the event that the Company desires to seek copyright, patent
or trademark protection thereafter.
3
<PAGE>
10. Protection of Confidential Information. Employee recognizes that
the Company has acquired and will be developing certain trade secrets, know-how,
client lists, Prospective Client (as hereinafter defined) lists, supplier lists,
files, rolodex cards, forms, leads, systems and marketing plans and financial
information and reports which the Company regards as confidential and
proprietary (collectively "Confidential Information"). Employee agrees that,
upon termination of his employment for any reason, including, without
limitation, the end of the Term, he will immediately deliver to the Company all
papers, books, manuals, lists, correspondence and documents, including, without
limitation, records and lists stored on computer, relating to Confidential
Information as well as any other matters which may involve the business of the
Company, together with all copies thereof, irrespective of whether he created
the same or was involved with the same and that he will neither copy nor take
any such material with him upon leaving the Company's employ. Employee further
agrees that he will not at any time either while employed by the Company or
after the termination of his employment use or disclose or authorize anyone else
to use or disclose Confidential Information without the prior express written
consent of the Company.
11. Non-Competition Covenants. Employee agrees that while employed
hereunder he will not compete with the Company in any manner, and that after
termination of his employment hereunder, he will not, directly or indirectly,
individually or as a shareholder, director or officer of any corporation, a
partner of any partnership, or as an employee, agent, consultant or advisor of
any entity, for a period of 12 months in the event his employment is terminated
by the Company pursuant to Section 7(e) above, and for a period of 24 months in
the event his employment is terminated pursuant to Section 7(c) above, (a)
recruit or hire any employee of the Company, or otherwise attempt to solicit or
induce any employee to leave the employment of the Company; (b) solicit any
client or Prospective Client (as hereinafter defined) of the Company or
otherwise interfere with the business relationships between the Company, its
clients, suppliers and others with whom the Company conducts its business; (c)
individually or through any entity perform any services for any client or
Prospective Client of the Company which are competitive in any manner with
services which the Company may perform for such clients and Prospective Clients,
regardless of whether or not the Company has or is now providing such services;
or (d) accept employment by any client or Prospective Client of the Company. For
the purposes of this Section 11, the term "Prospective Client" shall mean any
person or entity with whom the Company has contacted for services to be rendered
by the Company within 180 days of the earlier of the expiration of the Term or
the termination of this Agreement.
12. Enforcement by Injunction. Employee acknowledges that the
protections of the Company set forth in Sections 9, 10 and 11 of this Agreement
are of vital concern to the Company, that monetary damages for any violation
thereof would not adequately compensate the Company and that the Company is
engaged in a highly competitive business. Accordingly, Employee agrees that the
restrictions set forth in Sections 9, 10 and 11 may be enforced by injunction
proceedings (without the necessity of posting bond) whether or not his
employment hereunder has terminated.
4
<PAGE>
13. Partial Enforcement. If any term or condition of this Agreement
shall be invalid or unenforceable to any extent or in any application,
including, but not limited to the non-competition covenants in Section 11, then
the remainder of this Agreement, and such term or condition, except to such
extent or in such application, shall not be affected thereby, and each and every
term and condition of this Agreement shall be valid and enforced to the fullest
extent and in the broadest application permitted by law.
14. Notices. All notices and other communications required hereunder
shall be in writing and deemed to have been given when (I) personally delivered,
(ii) one business day after delivery to a nationally recognized overnight
courier service, or (iii) three days after being mailed by certified mail,
postage prepaid, addressed as follows:
If to Employee: 822 West Washington Street
Chicago, Illinois 60607
Attention: Steven A. Greenberg
If to the Company: Alaron.com Corporation
822 West Washington Street
Chicago, Illinois 60607
Attention: Chairman or Executive Vice President
With a copy to: Horwood Marcus & Berk Chartered
333 West Wacker Drive, Suite 2800
Chicago, Illinois 60606
Attention: Jeffrey A. Hechtman, Esq.
or to such other address as either party hereto may request by notice given as
aforesaid to the other party hereto.
15. Merger or Reorganization. The Company may assign its rights under
this Agreement to any entity which may acquire all or substantially all of the
businesses which are currently conducted by the Company (or which have evolved
therefrom and are substantially similar thereto), or which may acquire
substantially all of the assets and businesses of the Company existing at the
time of such acquisition, or with or into which the Company may be consolidated
or merged, provided that any such assignment shall be subject to the express
terms and conditions of this Agreement.
16. Non-Assignability. This Agreement is personal as to Employee and
may not be assigned or transferred by Employee in any manner whatsoever.
17. Benefit. Subject to Sections 15 and 16 above, the rights and
covenants of this Agreement shall inure and extend to the parties hereto, their
respective heirs, administrators, executors, successors and assigns.
5
<PAGE>
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois. The prevailing parties in any
litigation in connection with this Agreement shall be entitled to recover from
the non-prevailing parties all costs and expenses, including without limitation,
reasonable attorneys' and paralegals' fees and costs incurred by such party in
connection with any such litigation. It is the intent of the parties that this
Agreement be deemed to have been prepared by all of the parties and that no
party shall be entitled to the benefit of any favorable interpretation or
construction of any term or provision hereof under any rule or law.
19. Titles and Headings. Titles and headings to paragraphs hereof are
for the purpose of reference only and do not affect the provisions hereof or the
rights of the parties hereto.
20. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all understandings and agreements
between the parties with respect to the subject matter hereof. This Agreement
shall not be altered, modified, amended or terminated except by written
instrument executed by both parties hereto.
21. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be considered an original and all of which,
when taken together, shall be considered a single agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be duly executed and delivered on the date first above written.
ALARON.COM CORPORATION
By:_____________________________________
Name:___________________________________
Its:____________________________________
________________________________________
Steven A. Greenberg
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made and entered into
this 1st day of March, 1999 by and between Alaron.com Corporation, a Delaware
corporation (the "Company"), and Michael A. Greenberg ("Employee").
W I T N E S S E T H:
WHEREAS, the Company desires to ensure that the unique experience,
qualifications and services of Employee will be available to the Company; and
WHEREAS, Employee desires to render services to the Company on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the Company and Employee agree as
follows:
1. Nature of Employment. The Company hereby agrees to employ Employee,
and Employee hereby agrees to be employed by the Company, as Chief Strategist of
the Company. Employee agrees to perform all duties incident to such office of
the Company and such other duties as are assigned to Employee from time to time
by the Company.
2. Term of Employment. The initial term of Employee's employment
hereunder shall commence on the date hereof and continue for a period of five
years unless sooner terminated pursuant to Section 7 hereof (the "Initial
Term"). Thereafter, this Agreement shall automatically and without further
action be renewed for successive one year periods (each, a "Renewal Term") on
the same terms and conditions unless sooner terminated pursuant to Section 7
hereof or by either party upon written notice given not less than 60 days prior
to the expiration of the Initial Term or any Renewal Term. As used herein,
"Term" shall mean the Initial Term and any Renewal Term.
3. Compensation. As compensation for the services rendered by Employee
to the Company, the Company shall pay or grant, as the case may be, to Employee
the following:
(a) Base Salary. A base salary of $200,000 per annum, prorated
for any partial calendar year. All such amounts shall be referred to as
"Base Salary" and shall be payable in accordance with the Company's
customary payroll practices, less federal and state income tax
withholding, other deductions required by law and other customary
employee deductions. The Base Salary will be increased on an annual
basis in an amount determined by the Board of Directors of the Company;
provided, however, that in no event shall the Base Salary for any year
of the Term be less than 105% of the Base Salary for the prior year of
the Term.
<PAGE>
(b) Nondiscretionary Bonus. A nondiscretionary cash bonus at
the end of each month of the Term in the amount of $6,794.85 (the
"Nondiscretionary Bonus"). The Nondiscretionary Bonus shall be payable
in accordance with the Company's customary payroll practices, less
federal and state income tax withholding, other deductions required by
law and other customary employee deductions.
(c) Incentive Bonus. An incentive cash bonus (the "Incentive
Bonus," and, with the Nondiscretionary Bonus, collectively, the
"Bonuses") at the end of each year of the Term in an amount equal to
4.8% of the annual Operating Income (as defined below) of the Company
in excess of $1,000,000. For purposes of this Agreement, the term
"Operating Income" shall mean the net income from operations of the
Company before interest and taxes, at the close of the end of the
Company's fiscal year as determined by the Company's regularly retained
certified public accountants in accordance with generally accepted
accounting principles consistently applied.
4. Benefits. During the term hereof, Employee may participate, subject
to eligibility and other terms, in any employee benefits plans and programs from
time to time established by the Company including, without limitation, any group
health insurance plans, life insurance plans, profit sharing, vacation, pension
and other benefit programs adopted by the Company.
5. Vacation. Employee shall be eligible for six weeks of paid vacation
during each year of the Term.
6. Expenses. The Company shall pay all reasonable expenses which are
actually incurred by Employee on behalf of the Company incident to the discharge
and performance of Employee's duties hereunder including, but not limited to,
business expenses for travel, as evidenced by vouchers and such other reasonable
supporting materials as the Company may require. Reimbursement for such expenses
shall be made by the Company in accordance with the Company's expense
reimbursement policies in effect from time to time.
7. Termination. Employee's employment hereunder shall, at the election
of the Company, immediately terminate upon the occurrence of one of the
following events:
(a) Upon the last day of the Term upon not less than 60 days'
prior written notice.
(b) Upon the death of Employee.
(c) Upon written notice from the Company to Employee in the
event Employee is convicted of any act of embezzlement, theft or fraud,
provided, however, that Employee shall not be terminated pursuant to
this Section 7(c) unless Employee has been given written notice of the
violation forming the basis for Employee's termination and after a
reasonable time thereafter, Employee has failed to remedy such
violation.
2
<PAGE>
(d) Upon written notice from the Company to Employee that
Employee is unable, by reason of physical or mental impairment for a
period of 90 days during any 12 month period, to carry out and perform
the duties and obligations ordinarily required of him as an employee of
the Company.
(e) Upon 30 days written notice from the Company to Employee
or the Employee to the Company.
8. Compensation Upon Termination. In the event that Employee's
employment hereunder is terminated by the Company pursuant to Section 7(c)
above, the Company shall continue to pay to Employee or Employee's legal
representative, Employee's Base Salary in effect on the date of termination for
a period of 12 months following Employee's date of termination. In the event
Employee's employment hereunder is terminated by the Company pursuant to Section
7(e) above, the Company shall continue to pay to Employee or Employee's legal
representative, the Employee's Base Salary (including annual increases) and
Bonuses each at a rate that is two times the amount set forth in Sections 3(a),
(b) and (c), for a period equal to the longer of the unexpired duration of the
Term or two years. In the event Employee terminates his employment pursuant to
Section 7(e) above, the Company shall pay to Employee or Employee's legal
representative, Employee's Base Salary and Bonuses which have accrued through
the date of termination. All payments hereunder shall be payable in accordance
with the Company's customary payroll practices less federal and state income tax
withholding, other deductions required by law and other customary employee
deductions. In the event Employee's employment hereunder is terminated by the
Company pursuant to Section 7(e) above, Employee shall have the option, upon
written notice to the Company within 90 days of the date of Employee's
termination, to sell all, and not less than all, of the common stock of the
Company owned by the Employee (the "Stock") to the Company and the Company shall
have the obligation, if so requested by the Employee, to purchase all, and not
less than all, of the Stock owned by the Employee (the "Put Right"). Any
exercise of the Put Right must be by written notice by the Employee to the
Company within 90 days of the Employee's date of termination. The price of the
Stock sold under this Section 8 shall equal 90% of the average closing price of
the Stock for the 30 day period prior to the date of Employee's termination. The
entire purchase price for the Stock purchased under this Section 8 shall be
paid, at the Employee's option, by certified or cashier's check, by wire
transfer, or by a combination thereof.
9. Inventions and Innovations. Employee agrees that all right, title
and interest in and to any innovation, design, marketing program, idea or
improvement in the business of the Company, and all copyrights, trademarks and
trade names which are developed or created in whole or in part by Employee at
any time and at any place during the Term of his employment hereunder and
related to or usable in connection with the business activities of the Company
shall be and remain forever the sole and exclusive property of the Company.
Employee further agrees to promptly reveal all information relating to the same
to the Company and to cooperate with the Company and execute such documents as
may be necessary in the event that the Company desires to seek copyright, patent
or trademark protection thereafter.
3
<PAGE>
10. Protection of Confidential Information. Employee recognizes that
the Company has acquired and will be developing certain trade secrets, know-how,
client lists, Prospective Client (as hereinafter defined) lists, supplier lists,
files, rolodex cards, forms, leads, systems and marketing plans and financial
information and reports which the Company regards as confidential and
proprietary (collectively "Confidential Information"). Employee agrees that,
upon termination of his employment for any reason, including, without
limitation, the end of the Term, he will immediately deliver to the Company all
papers, books, manuals, lists, correspondence and documents, including, without
limitation, records and lists stored on computer, relating to Confidential
Information as well as any other matters which may involve the business of the
Company, together with all copies thereof, irrespective of whether he created
the same or was involved with the same and that he will neither copy nor take
any such material with him upon leaving the Company's employ. Employee further
agrees that he will not at any time either while employed by the Company or
after the termination of his employment use or disclose or authorize anyone else
to use or disclose Confidential Information without the prior express written
consent of the Company.
11. Non-Competition Covenants. Employee agrees that while employed
hereunder he will not compete with the Company in any manner, and that after
termination of his employment hereunder, he will not, directly or indirectly,
individually or as a shareholder, director or officer of any corporation, a
partner of any partnership, or as an employee, agent, consultant or advisor of
any entity, for a period of 12 months in the event his employment is terminated
by the Company pursuant to Section 7(e) above, and for a period of 24 months in
the event his employment is terminated pursuant to Section 7(c) above, (a)
recruit or hire any employee of the Company, or otherwise attempt to solicit or
induce any employee to leave the employment of the Company; (b) solicit any
client or Prospective Client (as hereinafter defined) of the Company or
otherwise interfere with the business relationships between the Company, its
clients, suppliers and others with whom the Company conducts its business; (c)
individually or through any entity perform any services for any client or
Prospective Client of the Company which are competitive in any manner with
services which the Company may perform for such clients and Prospective Clients,
regardless of whether or not the Company has or is now providing such services;
or (d) accept employment by any client or Prospective Client of the Company. For
the purposes of this Section 11, the term "Prospective Client" shall mean any
person or entity with whom the Company has contacted for services to be rendered
by the Company within 180 days of the earlier of the expiration of the Term or
the termination of this Agreement.
12. Enforcement by Injunction. Employee acknowledges that the
protections of the Company set forth in Sections 9, 10 and 11 of this Agreement
are of vital concern to the Company, that monetary damages for any violation
thereof would not adequately compensate the Company and that the Company is
engaged in a highly competitive business. Accordingly, Employee agrees that the
restrictions set forth in Sections 9, 10 and 11 may be enforced by injunction
proceedings (without the necessity of posting bond) whether or not his
employment hereunder has terminated.
4
<PAGE>
13. Partial Enforcement. If any term or condition of this Agreement
shall be invalid or unenforceable to any extent or in any application,
including, but not limited to the non-competition covenants in Section 11, then
the remainder of this Agreement, and such term or condition, except to such
extent or in such application, shall not be affected thereby, and each and every
term and condition of this Agreement shall be valid and enforced to the fullest
extent and in the broadest application permitted by law.
14. Notices. All notices and other communications required hereunder
shall be in writing and deemed to have been given when (i) personally delivered,
(ii) one business day after delivery to a nationally recognized overnight
courier service, or (iii) three days after being mailed by certified mail,
postage prepaid, addressed as follows:
If to Employee: 822 West Washington Street
Chicago, Illinois 60607
Attention: Michael A. Greenberg
If to the Company: Alaron.com Corporation
822 West Washington Street
Chicago, Illinois 60607
Attention: President or Executive Vice President
With a copy to: Horwood Marcus & Berk Chartered
333 West Wacker Drive, Suite 2800
Chicago, Illinois 60606
Attention: Jeffrey A. Hechtman, Esq.
or to such other address as either party hereto may request by notice given as
aforesaid to the other party hereto.
15. Merger or Reorganization. The Company may assign its rights under
this Agreement to any entity which may acquire all or substantially all of the
businesses which are currently conducted by the Company (or which have evolved
therefrom and are substantially similar thereto), or which may acquire
substantially all of the assets and businesses of the Company existing at the
time of such acquisition, or with or into which the Company may be consolidated
or merged, provided that any such assignment shall be subject to the express
terms and conditions of this Agreement.
16. Non-Assignability. This Agreement is personal as to Employee and
may not be assigned or transferred by Employee in any manner whatsoever.
17. Benefit. Subject to Sections 15 and 16 above, the rights and
covenants of this Agreement shall inure and extend to the parties hereto, their
respective heirs, administrators, executors, successors and assigns.
5
<PAGE>
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois. The prevailing parties in any
litigation in connection with this Agreement shall be entitled to recover from
the non-prevailing parties all costs and expenses, including without limitation,
reasonable attorneys' and paralegals' fees and costs incurred by such party in
connection with any such litigation. It is the intent of the parties that this
Agreement be deemed to have been prepared by all of the parties and that no
party shall be entitled to the benefit of any favorable interpretation or
construction of any term or provision hereof under any rule or law.
19. Titles and Headings. Titles and headings to paragraphs hereof are
for the purpose of reference only and do not affect the provisions hereof or the
rights of the parties hereto.
20. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all understandings and agreements
between the parties with respect to the subject matter hereof. This Agreement
shall not be altered, modified, amended or terminated except by written
instrument executed by both parties hereto.
21. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be considered an original and all of which,
when taken together, shall be considered a single agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be duly executed and delivered on the date first above written.
ALARON.COM CORPORATION
By:___________________________________
Name:_________________________________
Its:__________________________________
______________________________________
Michael A. Greenberg
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made and entered into
this 1st day of March, 1999 by and between Alaron.com Corporation, a Delaware
corporation (the "Company"), and Carrie A. Greenberg ("Employee").
W I T N E S S E T H:
WHEREAS, the Company desires to ensure that the unique experience,
qualifications and services of Employee will be available to the Company; and
WHEREAS, Employee desires to render services to the Company on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the Company and Employee agree as
follows:
1. Nature of Employment. The Company hereby agrees to employ Employee,
and Employee hereby agrees to be employed by the Company, as Executive
Vice-President of the Company. Employee agrees to perform all duties incident to
such office of the Company and such other duties as are assigned to Employee
from time to time by the Company.
2. Term of Employment. The initial term of Employee's employment
hereunder shall commence on the date hereof and continue for a period of five
years unless sooner terminated pursuant to Section 7 hereof (the "Initial
Term"). Thereafter, this Agreement shall automatically and without further
action be renewed for successive one year periods (each, a "Renewal Term") on
the same terms and conditions unless sooner terminated pursuant to Section 7
hereof or by either party upon written notice given not less than 60 days prior
to the expiration of the Initial Term or any Renewal Term. As used herein,
"Term" shall mean the Initial Term and any Renewal Term.
3. Compensation. As compensation for the services rendered by Employee
to the Company, the Company shall pay or grant, as the case may be, to Employee
the following:
(a) Base Salary. A base salary of $80,000 per annum, prorated
for any partial calendar year. All such amounts shall be referred to as
"Base Salary" and shall be payable in accordance with the Company's
customary payroll practices, less federal and state income tax
withholding, other deductions required by law and other customary
employee deductions. The Base Salary will be increased on an annual
basis in an amount determined by the Board of Directors of the Company;
provided, however, that in no event shall the Base Salary for any year
of the Term be less than 105% of the Base Salary for the prior year of
the Term.
<PAGE>
(b) Nondiscretionary Bonus. A nondiscretionary cash bonus at
the end of each month of the Term in the amount of $1,659.76 (the
"Nondiscretionary Bonus"). The Nondiscretionary Bonus shall be payable
in accordance with the Company's customary payroll practices, less
federal and state income tax withholding, other deductions required by
law and other customary employee deductions.
(c) Incentive Bonus. An incentive cash bonus (the "Incentive
Bonus," and, with the Nondiscretionary Bonus, collectively, the
"Bonuses") at the end of each year of the Term in an amount equal to
1.95% of the annual Operating Income (as defined below) of the Company
in excess of $1,000,000. For purposes of this Agreement, the term
"Operating Income" shall mean the net income from operations of the
Company before interest and taxes, at the close of the end of the
Company's fiscal year as determined by the Company's regularly retained
certified public accountants in accordance with generally accepted
accounting principles consistently applied.
4. Benefits. During the term hereof, Employee may participate, subject
to eligibility and other terms, in any employee benefits plans and programs from
time to time established by the Company including, without limitation, any group
health insurance plans, life insurance plans, profit sharing, vacation, pension
and other benefit programs adopted by the Company.
5. Vacation. Employee shall be eligible for six weeks of paid vacation
during each year of the Term.
6. Expenses. The Company shall pay all reasonable expenses which are
actually incurred by Employee on behalf of the Company incident to the discharge
and performance of Employee's duties hereunder including, but not limited to,
business expenses for travel, as evidenced by vouchers and such other reasonable
supporting materials as the Company may require. Reimbursement for such expenses
shall be made by the Company in accordance with the Company's expense
reimbursement policies in effect from time to time.
7. Termination. Employee's employment hereunder shall, at the election
of the Company, immediately terminate upon the occurrence of one of the
following events:
(a) Upon the last day of the Term upon not less than 60 days'
prior written notice.
(b) Upon the death of Employee.
(c) Upon written notice from the Company to Employee in the
event Employee is convicted of any act of embezzlement, theft or fraud,
provided, however, that Employee shall not be terminated pursuant to
this Section 7(c) unless Employee has been given written notice of the
violation forming the basis for Employee's termination and after a
reasonable time thereafter, Employee has failed to remedy such
violation.
2
<PAGE>
(d) Upon written notice from the Company to Employee that
Employee is unable, by reason of physical or mental impairment for a
period of 90 days during any 12 month period, to carry out and perform
the duties and obligations ordinarily required of her as an employee of
the Company.
(e) Upon 30 days written notice from the Company to Employee
or the Employee to the Company.
8. Compensation Upon Termination. In the event that Employee's
employment hereunder is terminated by the Company pursuant to Section 7(c)
above, the Company shall continue to pay to Employee or Employee's legal
representative, Employee's Base Salary in effect on the date of termination for
a period of 12 months following Employee's date of termination. In the event
Employee's employment hereunder is terminated by the Company pursuant to Section
7(e) above, the Company shall continue to pay to Employee or Employee's legal
representative, the Employee's Base Salary (including annual increases) and
Bonuses each at a rate that is two times the amount set forth in Sections 3(a),
(b) and (c), for a period equal to the longer of the unexpired duration of the
Term or two years. In the event Employee terminates his employment pursuant to
Section 7(e) above, the Company shall pay to Employee or Employee's legal
representative, Employee's Base Salary and Bonuses which have accrued through
the date of termination. All payments hereunder shall be payable in accordance
with the Company's customary payroll practices less federal and state income tax
withholding, other deductions required by law and other customary employee
deductions. In the event Employee's employment hereunder is terminated by the
Company pursuant to Section 7(e) above, Employee shall have the option, upon
written notice to the Company within 90 days of the date of Employee's
termination, to sell all, and not less than all, of the common stock of the
Company owned by the Employee (the "Stock") to the Company and the Company shall
have the obligation, if so requested by the Employee, to purchase all, and not
less than all, of the Stock owned by the Employee (the "Put Right"). Any
exercise of the Put Right must be by written notice by the Employee to the
Company within 90 days of the Employee's date of termination. The price of the
Stock sold under this Section 8 shall equal 90% of the average closing price of
the Stock for the 30 day period prior to the date of Employee's termination. The
entire purchase price for the Stock purchased under this Section 8 shall be
paid, at the Employee's option, by certified or cashier's check, by wire
transfer, or by a combination thereof.
9. Inventions and Innovations. Employee agrees that all right, title
and interest in and to any innovation, design, marketing program, idea or
improvement in the business of the Company, and all copyrights, trademarks and
trade names which are developed or created in whole or in part by Employee at
any time and at any place during the Term of her employment hereunder and
related to or usable in connection with the business activities of the Company
shall be and remain forever the sole and exclusive property of the Company.
Employee further agrees to promptly reveal all information relating to the same
to the Company and to cooperate with the Company and execute such documents as
may be necessary in the event that the Company desires to seek copyright, patent
or trademark protection thereafter.
3
<PAGE>
10. Protection of Confidential Information. Employee recognizes that
the Company has acquired and will be developing certain trade secrets, know-how,
client lists, Prospective Client (as hereinafter defined) lists, supplier lists,
files, rolodex cards, forms, leads, systems and marketing plans and financial
information and reports which the Company regards as confidential and
proprietary (collectively "Confidential Information"). Employee agrees that,
upon termination of her employment for any reason, including, without
limitation, the end of the Term, she will immediately deliver to the Company all
papers, books, manuals, lists, correspondence and documents, including, without
limitation, records and lists stored on computer, relating to Confidential
Information as well as any other matters which may involve the business of the
Company, together with all copies thereof, irrespective of whether she created
the same or was involved with the same and that she will neither copy nor take
any such material with her upon leaving the Company's employ. Employee further
agrees that she will not at any time either while employed by the Company or
after the termination of her employment use or disclose or authorize anyone else
to use or disclose Confidential Information without the prior express written
consent of the Company.
11. Non-Competition Covenants. Employee agrees that while employed
hereunder she will not compete with the Company in any manner, and that after
termination of her employment hereunder, she will not, directly or indirectly,
individually or as a shareholder, director or officer of any corporation, a
partner of any partnership, or as an employee, agent, consultant or advisor of
any entity, for a period of 12 months in the event her employment is terminated
by the Company pursuant to Section 7(e) above, and for a period of 24 months in
the event her employment is terminated pursuant to Section 7(c) above, (a)
recruit or hire any employee of the Company, or otherwise attempt to solicit or
induce any employee to leave the employment of the Company; (b) solicit any
client or Prospective Client (as hereinafter defined) of the Company or
otherwise interfere with the business relationships between the Company, its
clients, suppliers and others with whom the Company conducts its business; (c)
individually or through any entity perform any services for any client or
Prospective Client of the Company which are competitive in any manner with
services which the Company may perform for such clients and Prospective Clients,
regardless of whether or not the Company has or is now providing such services;
or (d) accept employment by any client or Prospective Client of the Company. For
the purposes of this Section 11, the term "Prospective Client" shall mean any
person or entity with whom the Company has contacted for services to be rendered
by the Company within 180 days of the earlier of the expiration of the Term or
the termination of this Agreement.
12. Enforcement by Injunction. Employee acknowledges that the
protections of the Company set forth in Sections 9, 10 and 11 of this Agreement
are of vital concern to the Company, that monetary damages for any violation
thereof would not adequately compensate the Company and that the Company is
engaged in a highly competitive business. Accordingly, Employee agrees that the
restrictions set forth in Sections 9, 10 and 11 may be enforced by injunction
proceedings (without the necessity of posting bond) whether or not her
employment hereunder has terminated.
4
<PAGE>
13. Partial Enforcement. If any term or condition of this Agreement
shall be invalid or unenforceable to any extent or in any application,
including, but not limited to the non-competition covenants in Section 11, then
the remainder of this Agreement, and such term or condition, except to such
extent or in such application, shall not be affected thereby, and each and every
term and condition of this Agreement shall be valid and enforced to the fullest
extent and in the broadest application permitted by law.
14. Notices. All notices and other communications required hereunder
shall be in writing and deemed to have been given when (i) personally delivered,
(ii) one business day after delivery to a nationally recognized overnight
courier service, or (iii) three days after being mailed by certified mail,
postage prepaid, addressed as follows:
If to Employee: 822 West Washington Street
Chicago, Illinois 60607
Attention: Carrie A. Greenberg
If to the Company: Alaron.com Corporation
822 West Washington Street
Chicago, Illinois 60607
Attention: President
With a copy to: Horwood Marcus & Berk Chartered
333 West Wacker Drive, Suite 2800
Chicago, Illinois 60606
Attention: Jeffrey A. Hechtman, Esq.
or to such other address as either party hereto may request by notice given as
aforesaid to the other party hereto.
15. Merger or Reorganization. The Company may assign its rights under
this Agreement to any entity which may acquire all or substantially all of the
businesses which are currently conducted by the Company (or which have evolved
therefrom and are substantially similar thereto), or which may acquire
substantially all of the assets and businesses of the Company existing at the
time of such acquisition, or with or into which the Company may be consolidated
or merged, provided that any such assignment shall be subject to the express
terms and conditions of this Agreement.
16. Non-Assignability. This Agreement is personal as to Employee and
may not be assigned or transferred by Employee in any manner whatsoever.
17. Benefit. Subject to Sections 15 and 16 above, the rights and
covenants of this Agreement shall inure and extend to the parties hereto, their
respective heirs, administrators, executors, successors and assigns.
5
<PAGE>
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois. The prevailing parties in any
litigation in connection with this Agreement shall be entitled to recover from
the non-prevailing parties all costs and expenses, including without limitation,
reasonable attorneys' and paralegals' fees and costs incurred by such party in
connection with any such litigation. It is the intent of the parties that this
Agreement be deemed to have been prepared by all of the parties and that no
party shall be entitled to the benefit of any favorable interpretation or
construction of any term or provision hereof under any rule or law.
19. Titles and Headings. Titles and headings to paragraphs hereof are
for the purpose of reference only and do not affect the provisions hereof or the
rights of the parties hereto.
20. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all understandings and agreements
between the parties with respect to the subject matter hereof. This Agreement
shall not be altered, modified, amended or terminated except by written
instrument executed by both parties hereto.
21. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be considered an original and all of which,
when taken together, shall be considered a single agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be duly executed and delivered on the date first above written.
ALARON.COM CORPORATION
By:____________________________________
Name:__________________________________
Its:___________________________________
_______________________________________
Carrie A. Greenberg
6
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made and entered into
this 1st day of March, 1999 by and between Alaron.com Corporation, a Delaware
corporation (the "Company"), and Barry S. Isaacson ("Employee").
W I T N E S S E T H:
WHEREAS, the Company desires to ensure that the unique experience,
qualifications and services of Employee will be available to the Company; and
WHEREAS, Employee desires to render services to the Company on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the Company and Employee agree as
follows:
1. Nature of Employment. The Company hereby agrees to employ Employee,
and Employee hereby agrees to be employed by the Company, as Executive
Vice-President of the Company. Employee agrees to perform all duties incident to
such office of the Company and such other duties as are assigned to Employee
from time to time by the Company.
2. Term of Employment. The initial term of Employee's employment
hereunder shall commence on the date hereof and continue for a period of five
years unless sooner terminated pursuant to Section 7 hereof (the "Initial
Term"). Thereafter, this Agreement shall automatically and without further
action be renewed for successive one year periods (each, a "Renewal Term") on
the same terms and conditions unless sooner terminated pursuant to Section 7
hereof or by either party upon written notice given not less than 60 days prior
to the expiration of the Initial Term or any Renewal Term. As used herein,
"Term" shall mean the Initial Term and any Renewal Term.
3. Compensation. As compensation for the services rendered by Employee
to the Company, the Company shall pay or grant, as the case may be, to Employee
the following:
(a) Base Salary. A base salary of $91,000 per annum, prorated
for any partial calendar year. All such amounts shall be referred to as
"Base Salary" and shall be payable in accordance with the Company's
customary payroll practices, less federal and state income tax
withholding, other deductions required by law and other customary
employee deductions. The Base Salary will be increased on an annual
basis in an amount determined by the Board
<PAGE>
of Directors of the Company; provided, however, that in no event shall
the Base Salary for any year of the Term be less than 105% of the Base
Salary for the prior year of the Term.
(b) Incentive Bonus. An incentive cash bonus (the "Bonus") at
the end of each year of the Term in an amount equal to 2.25% of the
annual Operating Income (as defined below) of the Company in excess of
$1,000,000. For purposes of this Agreement, the term "Operating Income"
shall mean the net income from operations of the Company before
interest and taxes, at the close of the end of the Company's fiscal
year as determined by the Company's regularly retained certified public
accountants in accordance with generally accepted accounting principles
consistently applied.
4. Benefits. During the term hereof, Employee may participate, subject
to eligibility and other terms, in any employee benefits plans and programs from
time to time established by the Company including, without limitation, any group
health insurance plans, life insurance plans, profit sharing, vacation, pension
and other benefit programs adopted by the Company.
5. Vacation. Employee shall be eligible for six weeks of paid vacation
during each year of the Term.
6. Expenses. The Company shall pay all reasonable expenses which are
actually incurred by Employee on behalf of the Company incident to the discharge
and performance of Employee's duties hereunder including, but not limited to,
business expenses for travel, as evidenced by vouchers and such other reasonable
supporting materials as the Company may require. Reimbursement for such expenses
shall be made by the Company in accordance with the Company's expense
reimbursement policies in effect from time to time.
7. Termination. Employee's employment hereunder shall, at the election
of the Company, immediately terminate upon the occurrence of one of the
following events:
(a) Upon the last day of the Term upon not less than 60 days'
prior written notice.
(b) Upon the death of Employee.
(c) Upon written notice from the Company to Employee in the
event Employee is convicted of any act of embezzlement, theft or fraud,
provided, however, that Employee shall not be terminated pursuant to
this Section 7(c) unless Employee has been given written notice of the
violation forming the basis for Employee's termination and after a
reasonable time thereafter, Employee has failed to remedy such
violation.
(d) Upon written notice from the Company to Employee that
Employee is unable, by reason of physical or mental impairment for a
period of 90 days during any 12 month
2
<PAGE>
period, to carry out and perform the duties and obligations ordinarily
required of him as an employee of the Company.
(e) Upon 30 days written notice from the Company to Employee
or the Employee to the Company.
8. Compensation Upon Termination. In the event that Employee's
employment hereunder is terminated by the Company pursuant to Section 7(c)
above, the Company shall continue to pay to Employee or Employee's legal
representative, Employee's Base Salary in effect on the date of termination for
a period of 12 months following Employee's date of termination. In the event
Employee's employment hereunder is terminated by the Company pursuant to Section
7(e) above, the Company shall continue to pay to Employee or Employee's legal
representative, the Employee's Base Salary (including annual increases and
Bonus) each at a rate that is two times the amount set forth in Sections 3(a)
and (b) in effect on the date of termination for a period equal to the longer of
the unexpired duration of the Term or two years. In the event Employee
terminates his employment pursuant to Section 7(e) above, the Company shall pay
to Employee or Employee's legal representative, Employee's Base Salary and Bonus
which has accrued through the date of termination. All payments hereunder shall
be payable in accordance with the Company's customary payroll practices less
federal and state income tax withholding, other deductions required by law and
other customary employee deductions. In the event Employee's employment
hereunder is terminated by the Company pursuant to Section 7(e) above, Employee
shall have the option, upon written notice to the Company within 90 days of the
date of Employee's termination, to sell all, and not less than all, of the
common stock of the Company owned by the Employee (the "Stock") to the Company
and the Company shall have the obligation, if so requested by the Employee, to
purchase all, and not less than all, of the Stock owned by the Employee (the
"Put Right"). Any exercise of the Put Right must be by written notice by the
Employee to the Company within 90 days of the Employee's date of termination.
The price of the Stock sold under this Section 8 shall equal 90% of the average
closing price of the Stock for the 30 day period prior to the date of Employee's
termination. The entire purchase price for the Stock purchased under this
Section 8 shall be paid, at the Employee's option, by certified or cashier's
check, by wire transfer, or by a combination thereof.
9. Inventions and Innovations. Employee agrees that all right, title
and interest in and to any innovation, design, marketing program, idea or
improvement in the business of the Company, and all copyrights, trademarks and
trade names which are developed or created in whole or in part by Employee at
any time and at any place during the Term of his employment hereunder and
related to or usable in connection with the business activities of the Company
shall be and remain forever the sole and exclusive property of the Company.
Employee further agrees to promptly reveal all information relating to the same
to the Company and to cooperate with the Company and execute such documents as
may be necessary in the event that the Company desires to seek copyright, patent
or trademark protection thereafter.
3
<PAGE>
10. Protection of Confidential Information. Employee recognizes that
the Company has acquired and will be developing certain trade secrets, know-how,
client lists, Prospective Client (as hereinafter defined) lists, supplier lists,
files, rolodex cards, forms, leads, systems and marketing plans and financial
information and reports which the Company regards as confidential and
proprietary (collectively "Confidential Information"). Employee agrees that,
upon termination of his employment for any reason, including, without
limitation, the end of the Term, he will immediately deliver to the Company all
papers, books, manuals, lists, correspondence and documents, including, without
limitation, records and lists stored on computer, relating to Confidential
Information as well as any other matters which may involve the business of the
Company, together with all copies thereof, irrespective of whether he created
the same or was involved with the same and that he will neither copy nor take
any such material with him upon leaving the Company's employ. Employee further
agrees that he will not at any time either while employed by the Company or
after the termination of his employment use or disclose or authorize anyone else
to use or disclose Confidential Information without the prior express written
consent of the Company.
11. Non-Competition Covenants. Employee agrees that while employed
hereunder he will not compete with the Company in any manner, and that after
termination of his employment hereunder, he will not, directly or indirectly,
individually or as a shareholder, director or officer of any corporation, a
partner of any partnership, or as an employee, agent, consultant or advisor of
any entity, for a period of 12 months in the event his employment is terminated
by the Company pursuant to Section 7(e) above, and for a period of 24 months in
the event his employment is terminated pursuant to Section 7(c) above, (a)
recruit or hire any employee of the Company, or otherwise attempt to solicit or
induce any employee to leave the employment of the Company; (b) solicit any
client or Prospective Client (as hereinafter defined) of the Company or
otherwise interfere with the business relationships between the Company, its
clients, suppliers and others with whom the Company conducts its business; (c)
individually or through any entity perform any services for any client or
Prospective Client of the Company which are competitive in any manner with
services which the Company may perform for such clients and Prospective Clients,
regardless of whether or not the Company has or is now providing such services;
or (d) accept employment by any client or Prospective Client of the Company. For
the purposes of this Section 11, the term "Prospective Client" shall mean any
person or entity with whom the Company has contacted for services to be rendered
by the Company within 180 days of the earlier of the expiration of the Term or
the termination of this Agreement.
12. Enforcement by Injunction. Employee acknowledges that the
protections of the Company set forth in Sections 9, 10 and 11 of this Agreement
are of vital concern to the Company, that monetary damages for any violation
thereof would not adequately compensate the Company and that the Company is
engaged in a highly competitive business. Accordingly, Employee agrees that the
restrictions set forth in Sections 9, 10 and 11 may be enforced by injunction
proceedings (without the necessity of posting bond) whether or not his
employment hereunder has terminated.
4
<PAGE>
13. Partial Enforcement. If any term or condition of this Agreement
shall be invalid or unenforceable to any extent or in any application,
including, but not limited to the non-competition covenants in Section 11, then
the remainder of this Agreement, and such term or condition, except to such
extent or in such application, shall not be affected thereby, and each and every
term and condition of this Agreement shall be valid and enforced to the fullest
extent and in the broadest application permitted by law.
14. Notices. All notices and other communications required hereunder
shall be in writing and deemed to have been given when (i) personally delivered,
(ii) one business day after delivery to a nationally recognized overnight
courier service, or (iii) three days after being mailed by certified mail,
postage prepaid, addressed as follows:
If to Employee: 822 West Washington Street
Chicago, Illinois 60607
Attention: Barry S. Isaacson
If to the Company: Alaron.com Corporation
822 West Washington Street
Chicago, Illinois 60607
Attention: President
With a copy to: Horwood Marcus & Berk Chartered
333 West Wacker Drive, Suite 2800
Chicago, Illinois 60606
Attention: Jeffrey A. Hechtman, Esq.
or to such other address as either party hereto may request by notice given as
aforesaid to the other party hereto.
15. Merger or Reorganization. The Company may assign its rights under
this Agreement to any entity which may acquire all or substantially all of the
businesses which are currently conducted by the Company (or which have evolved
therefrom and are substantially similar thereto), or which may acquire
substantially all of the assets and businesses of the Company existing at the
time of such acquisition, or with or into which the Company may be consolidated
or merged, provided that any such assignment shall be subject to the express
terms and conditions of this Agreement.
16. Non-Assignability. This Agreement is personal as to Employee and
may not be assigned or transferred by Employee in any manner whatsoever.
17. Benefit. Subject to Sections 15 and 16 above, the rights and
covenants of this Agreement shall inure and extend to the parties hereto, their
respective heirs, administrators, executors, successors and assigns.
5
<PAGE>
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois. The prevailing parties in any
litigation in connection with this Agreement shall be entitled to recover from
the non-prevailing parties all costs and expenses, including without limitation,
reasonable attorneys' and paralegals' fees and costs incurred by such party in
connection with any such litigation. It is the intent of the parties that this
Agreement be deemed to have been prepared by all of the parties and that no
party shall be entitled to the benefit of any favorable interpretation or
construction of any term or provision hereof under any rule or law.
19. Titles and Headings. Titles and headings to paragraphs hereof are
for the purpose of reference only and do not affect the provisions hereof or the
rights of the parties hereto.
20. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all understandings and agreements
between the parties with respect to the subject matter hereof. This Agreement
shall not be altered, modified, amended or terminated except by written
instrument executed by both parties hereto.
21. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be considered an original and all of which,
when taken together, shall be considered a single agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be duly executed and delivered on the date first above written.
ALARON.COM CORPORATION
By:_________________________________
Name:_______________________________
Its:________________________________
____________________________________
Barry S. Isaacson
6
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made and entered into
this 1st day of March, 1999 by and between Alaron.com Corporation, a Delaware
corporation (the "Company"), and Joel W. Greenberg ("Employee").
W I T N E S S E T H:
WHEREAS, the Company desires to ensure that the unique experience,
qualifications and services of Employee will be available to the Company; and
WHEREAS, Employee desires to render services to the Company on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the Company and Employee agree as
follows:
1. Nature of Employment. The Company hereby agrees to employ Employee,
and Employee hereby agrees to be employed by the Company, as Chairman of the
Board of Directors of the Company. Employee agrees to perform all duties
incident to such office of the Company and such other duties as are assigned to
Employee from time to time by the Company.
2. Term of Employment. The initial term of Employee's employment
hereunder shall commence on the date hereof and continue for a period of five
years unless sooner terminated pursuant to Section 7 hereof (the "Initial
Term"). Thereafter, this Agreement shall automatically and without further
action be renewed for successive one year periods (each, a "Renewal Term") on
the same terms and conditions unless sooner terminated pursuant to Section 7
hereof or by either party upon written notice given not less than 60 days prior
to the expiration of the Initial Term or any Renewal Term. As used herein,
"Term" shall mean the Initial Term and any Renewal Term.
3. Compensation. As compensation for the services rendered by Employee
to the Company, the Company shall pay or grant, as the case may be, to Employee
the following:
(a) Base Salary. A base salary of $50,000 per annum, prorated
for any partial calendar year. All such amounts shall be referred to as
"Base Salary" and shall be payable in accordance with the Company's
customary payroll practices, less federal and state income tax
withholding, other deductions required by law and other customary
employee deductions. The Base Salary will be increased on an annual
basis in an amount determined by the Board
<PAGE>
of Directors of the Company; provided, however, that in no event shall
the Base Salary for any year of the Term be less than 105% of the Base
Salary for the prior year of the Term.
(b) Incentive Bonus. An incentive cash bonus (the "Bonus") at
the end of each year of the Term in an amount equal to 1.2% of the
annual Operating Income (as defined below) of the Company in excess of
$1,000,000. For purposes of this Agreement, the term "Operating Income"
shall mean the net income from operations of the Company before
interest and taxes, at the close of the end of the Company's fiscal
year as determined by the Company's regularly retained certified public
accountants in accordance with generally accepted accounting principles
consistently applied.
4. Benefits. During the term hereof, Employee may participate, subject
to eligibility and other terms, in any employee benefits plans and programs from
time to time established by the Company including, without limitation, any group
health insurance plans, life insurance plans, profit sharing, vacation, pension
and other benefit programs adopted by the Company.
5. Vacation. Employee shall be eligible for six weeks of paid vacation
during each year of the Term.
6. Expenses. The Company shall pay all reasonable expenses which are
actually incurred by Employee on behalf of the Company incident to the discharge
and performance of Employee's duties hereunder including, but not limited to,
business expenses for travel, as evidenced by vouchers and such other reasonable
supporting materials as the Company may require. Reimbursement for such expenses
shall be made by the Company in accordance with the Company's expense
reimbursement policies in effect from time to time.
7. Termination. Employee's employment hereunder shall, at the election
of the Company, immediately terminate upon the occurrence of one of the
following events:
(a) Upon the last day of the Term upon not less than 60 days'
prior written notice.
(b) Upon the death of Employee.
(c) Upon written notice from the Company to Employee in the
event Employee is convicted of any act of embezzlement, theft or fraud,
provided, however, that Employee shall not be terminated pursuant to
this Section 7(c) unless Employee has been given written notice of the
violation forming the basis for Employee's termination and after a
reasonable time thereafter, Employee has failed to remedy such
violation.
(d) Upon written notice from the Company to Employee that
Employee is unable, by reason of physical or mental impairment for a
period of 90 days during any 12 month
2
<PAGE>
period, to carry out and perform the duties and obligations ordinarily
required of him as an employee of the Company.
(e) Upon 30 days written notice from the Company to Employee
or the Employee to the Company.
8. Compensation Upon Termination. In the event that Employee's
employment hereunder is terminated by the Company pursuant to Section 7(c)
above, the Company shall continue to pay to Employee or Employee's legal
representative, Employee's Base Salary in effect on the date of termination for
a period of 12 months following Employee's date of termination. In the event
Employee's employment hereunder is terminated by the Company pursuant to Section
7(e) above, the Company shall continue to pay to Employee or Employee's legal
representative, the Employee's Base Salary (including annual increases and
Bonus) each at a rate that is two times the amount set forth in Sections 3(a)
and (b) for a period equal to the longer of the unexpired duration of the Term
or two years. In the event Employee terminates his employment pursuant to
Section 7(e) above, the Company shall pay to Employee or Employee's legal
representative, Employee's Base Salary and Bonus which has accrued through the
date of termination. All payments hereunder shall be payable in accordance with
the Company's customary payroll practices less federal and state income tax
withholding, other deductions required by law and other customary employee
deductions. In the event Employee's employment hereunder is terminated by the
Company pursuant to Section 7(e) above, Employee shall have the option, upon
written notice to the Company within 90 days of the date of Employee's
termination, to sell all, and not less than all, of the common stock of the
Company owned by the Employee (the "Stock") to the Company and the Company shall
have the obligation, if so requested by the Employee, to purchase all, and not
less than all, of the Stock owned by the Employee (the "Put Right"). Any
exercise of the Put Right must be by written notice by the Employee to the
Company within 90 days of the Employee's date of termination. The price of the
Stock sold under this Section 8 shall equal 90% of the average closing price of
the Stock for the 30 day period prior to the date of Employee's termination. The
entire purchase price for the Stock purchased under this Section 8 shall be
paid, at the Employee's option, by certified or cashier's check, by wire
transfer, or by a combination thereof.
9. Inventions and Innovations. Employee agrees that all right, title
and interest in and to any innovation, design, marketing program, idea or
improvement in the business of the Company, and all copyrights, trademarks and
trade names which are developed or created in whole or in part by Employee at
any time and at any place during the Term of his employment hereunder and
related to or usable in connection with the business activities of the Company
shall be and remain forever the sole and exclusive property of the Company.
Employee further agrees to promptly reveal all information relating to the same
to the Company and to cooperate with the Company and execute such documents as
may be necessary in the event that the Company desires to seek copyright, patent
or trademark protection thereafter.
10. Protection of Confidential Information. Employee recognizes that
the Company has acquired and will be developing certain trade secrets, know-how,
client lists, Prospective Client (as
3
<PAGE>
hereinafter defined) lists, supplier lists, files, rolodex cards, forms, leads,
systems and marketing plans and financial information and reports which the
Company regards as confidential and proprietary (collectively "Confidential
Information"). Employee agrees that, upon termination of his employment for any
reason, including, without limitation, the end of the Term, he will immediately
deliver to the Company all papers, books, manuals, lists, correspondence and
documents, including, without limitation, records and lists stored on computer,
relating to Confidential Information as well as any other matters which may
involve the business of the Company, together with all copies thereof,
irrespective of whether he created the same or was involved with the same and
that he will neither copy nor take any such material with him upon leaving the
Company's employ. Employee further agrees that he will not at any time either
while employed by the Company or after the termination of his employment use or
disclose or authorize anyone else to use or disclose Confidential Information
without the prior express written consent of the Company.
11. Non-Competition Covenants. Employee agrees that while employed
hereunder he will not compete with the Company in any manner, and that after
termination of his employment hereunder, he will not, directly or indirectly,
individually or as a shareholder, director or officer of any corporation, a
partner of any partnership, or as an employee, agent, consultant or advisor of
any entity, for a period of 12 months in the event his employment is terminated
by the Company pursuant to Section 7(e) above, and for a period of 24 months in
the event his employment is terminated pursuant to Section 7(c) above, (a)
recruit or hire any employee of the Company, or otherwise attempt to solicit or
induce any employee to leave the employment of the Company; (b) solicit any
client or Prospective Client (as hereinafter defined) of the Company or
otherwise interfere with the business relationships between the Company, its
clients, suppliers and others with whom the Company conducts its business; (c)
individually or through any entity perform any services for any client or
Prospective Client of the Company which are competitive in any manner with
services which the Company may perform for such clients and Prospective Clients,
regardless of whether or not the Company has or is now providing such services;
or (d) accept employment by any client or Prospective Client of the Company. For
the purposes of this Section 11, the term "Prospective Client" shall mean any
person or entity with whom the Company has contacted for services to be rendered
by the Company within 180 days of the earlier of the expiration of the Term or
the termination of this Agreement.
12. Enforcement by Injunction. Employee acknowledges that the
protections of the Company set forth in Sections 9, 10 and 11 of this Agreement
are of vital concern to the Company, that monetary damages for any violation
thereof would not adequately compensate the Company and that the Company is
engaged in a highly competitive business. Accordingly, Employee agrees that the
restrictions set forth in Sections 9, 10 and 11 may be enforced by injunction
proceedings (without the necessity of posting bond) whether or not his
employment hereunder has terminated.
13. Partial Enforcement. If any term or condition of this Agreement
shall be invalid or unenforceable to any extent or in any application,
including, but not limited to the non-competition covenants in Section 11, then
the remainder of this Agreement, and such term or condition, except
4
<PAGE>
to such extent or in such application, shall not be affected thereby, and each
and every term and condition of this Agreement shall be valid and enforced to
the fullest extent and in the broadest application permitted by law.
14. Notices. All notices and other communications required hereunder
shall be in writing and deemed to have been given when (i) personally delivered,
(ii) one business day after delivery to a nationally recognized overnight
courier service, or (iii) three days after being mailed by certified mail,
postage prepaid, addressed as follows:
If to Employee: 822 West Washington Street
Chicago, Illinois 60607
Attention: Joel W. Greenberg
If to the Company: Alaron.com Corporation
822 West Washington Street
Chicago, Illinois 60607
Attention: President or Executive Vice President
With a copy to: Horwood Marcus & Berk Chartered
333 West Wacker Drive, Suite 2800
Chicago, Illinois 60606
Attention: Jeffrey A. Hechtman, Esq.
or to such other address as either party hereto may request by notice given as
aforesaid to the other party hereto.
15. Merger or Reorganization. The Company may assign its rights under
this Agreement to any entity which may acquire all or substantially all of the
businesses which are currently conducted by the Company (or which have evolved
therefrom and are substantially similar thereto), or which may acquire
substantially all of the assets and businesses of the Company existing at the
time of such acquisition, or with or into which the Company may be consolidated
or merged, provided that any such assignment shall be subject to the express
terms and conditions of this Agreement.
16. Non-Assignability. This Agreement is personal as to Employee and
may not be assigned or transferred by Employee in any manner whatsoever.
17. Benefit. Subject to Sections 15 and 16 above, the rights and
covenants of this Agreement shall inure and extend to the parties hereto, their
respective heirs, administrators, executors, successors and assigns.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois. The prevailing parties in any
litigation in connection with this
5
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Agreement shall be entitled to recover from the non-prevailing parties all costs
and expenses, including without limitation, reasonable attorneys' and
paralegals' fees and costs incurred by such party in connection with any such
litigation. It is the intent of the parties that this Agreement be deemed to
have been prepared by all of the parties and that no party shall be entitled to
the benefit of any favorable interpretation or construction of any term or
provision hereof under any rule or law.
19. Titles and Headings. Titles and headings to paragraphs hereof are
for the purpose of reference only and do not affect the provisions hereof or the
rights of the parties hereto.
20. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all understandings and agreements
between the parties with respect to the subject matter hereof. This Agreement
shall not be altered, modified, amended or terminated except by written
instrument executed by both parties hereto.
21. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be considered an original and all of which,
when taken together, shall be considered a single agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be duly executed and delivered on the date first above written.
ALARON.COM CORPORATION
By:_____________________________________
Name:___________________________________
Its:____________________________________
________________________________________
Joel W. Greenberg
6
EXHIBIT 10.7
CLEARING AGREEMENT
(Fully Disclosed Futures Commission Merchant)
THIS AGREEMENT is made and entered into as of this 11th day of October,
1996 by and between LIT Division of First Options of Chicago, Inc., a Delaware
corporation ("LIT") and Alaron, an Illinois corporation ("Broker").
WHEREAS, Broker is registered as a futures commission merchant with the
Commodity Futures Trading Commission ("CFTC") under the Commodity Exchange Act,
as amended (the "Act");
WHEREAS, Broker desires to introduce certain accounts ("Accounts") on
behalf of its customers ("Customers") to LIT on an fully disclosed basis and to
obtain from LIT clearing, execution, and other services relating to transactions
in commodities, commodity futures contracts, options on commodities, options on
commodity future contracts, forward contracts and any similar instrument which
may be purchased or sold by or through LIT (collectively, "futures contracts")
for the Accounts;
WHEREAS, LIT is a clearing member of various contract markets and their
clearing houses and is registered as a futures commission merchant with the CFTC
under the ACT; and
WHEREAS, LIT desires to provide clearing, execution, and other services
for the Accounts on the terms and conditions set forth herein;
NOW, THEREFORE, for and in consideration of the premises and mutual
agreements set forth herein, the parties agree as follows:
1. Services Provided by LIT with Respect to Accounts. LIT, acting as
Broker's agent, shall perform the following services:
(a) LIT shall maintain the Accounts on a fully disclosed basis in
accordance with any applicable law, rule or regulation of or administered by the
CFTC, the National Futures Association ("NFA"), or any contract market, clearing
house or other self-regulatory organization ("applicable law"). LIT reserves the
right to refuse to carry any Account.
(b) LIT shall receive and execute orders for the Accounts in accordance
with instructions transmitted by Broker. LIT may execute orders through
employees of LIT or through independent contractors in contract markets of which
LIT is a member, and may utilize the reserves of other futures commission
merchants which are clearing members of contract markets of which LIT is not a
member. LIT may, but shall not be obligated to, execute orders received directly
from a Customer.
<PAGE>
(c) LIT shall prepare and transmit to Customers written reports of
margin calls, confirmation, purchase-and-sale, and monthly statements, and such
other documents as may be required by applicable law.
(d) LIT shall settle and clear futures contracts in the Accounts.
(e) LIT shall hold cash, securities, and other property received from
or on behalf of Customers in segregation in accordance with the Act and the CFTC
regulations. LIT shall not be obligated to pay interest on cash held in
segregation for Customers.
(f) LIT shall perform all cashiering functions for the Accounts
including, without limitation, receipt and delivery of warehouse receipt or
commodities, making and receiving payments for futures contract transactions,
and transmission of margin calls to Broker.
2. Services Not Performed by LIT.
(a) LIT will not perform any of the following services or
functions:
(i) Preparation of Broker's general accounting and payroll
records, financial statements, or regulatory reports.
(ii) Payment of Broker's general business expenses, except as
incurred on Broker's behalf under this Agreement.
(iii) Payment of commissions to Broker's associated persons.
(iv) Verification of information and instructions provided to
LIT by Broker or by Customers. Broker acknowledges that LIT shall be
entitled to rely upon any such information or instructions which LIT
believes to be transmitted from Broker or a Customer. Broker further
acknowledges that LIT shall be required to determine the suitability of
or otherwise screen any Customer order prior to execution and that LIT
shall not be required to make by determination of the adequacy of the
equity in any Account before executing an order.
(v) Supervision of Broker or of Broker's associated persons,
employees and agents.
(b) LIT will not be required to make any investigation into the facts
surrounding any transaction that it may have with Broker or that Broker may have
with its Customers or their persons, nor will LIT be responsible for compliance
by Broker with applicable law.
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<PAGE>
3. Obligations of Broker.
(a) Broker's conduct hereunder shall at all times be in compliance with
applicable law.
(b) Broker shall maintain or cause to be maintained in full force and
effect pursuant to the Act and applicable regulations of the CFTC and NFA the
registration of any natural person employed by or associated with it as an
"associated person" (as such term is interpreted by the CFTC), and Broker shall
not allow any natural person employed by or associated with it to serve as an
associated person unless such person is validly registered as an associated
person.
(c) Broker shall learn all essential facts relative to each Account and
to every Customer. Each new Account created for a Customer shall be approved in
writing by a principal of Broker.
(d) Broker shall maintain compliance and supervisory procedures which
are adequate to assure compliance by Broker and its associated persons,
employees, and agents with applicable law and procedures established from time
to time by LIT. Without limiting the generality of the foregoing, such
compliance and supervisory procedures shall cover the opening, approval, and
monitoring of Accounts, including review of order and entity procedures for and
trading activity in Accounts, including review of order entity procedures for
and trading activity in Accounts; supervision of trading advice and
recommendations provided to Customers; registration of associated persons with
the CFTC and applicable self-regulatory organizations; and supervision of
special Accounts such as discretionary accounts, commodity pool accounts, option
trading accounts, and accounts of employees or officers of Broker or of other
futures commission merchants, introducing brokers, securities broker-dealers,
self-regulatory organizations, or financial institutions.
(e) Broker shall furnish LIT with all pertinent information with
respect to each Account. Without limiting the generality of the foregoing,
Broker agrees to furnish LIT for each Account (i) the name, address, and
principal occupation or business of the beneficial owner for whom the Account is
maintained, the signature of such beneficial owner (or of the persons authorized
to act on behalf of such beneficial owner), the name and address of any other
persons who guarantee the Account, exercise any trading control or otherwise
direct trading in the Account, or have a direct or indirect interest in the
Account; (ii) a signed copy of all written agreements with respect to the
Account; (iii) a copy of all account cards or records relating to the opening
and maintenance of the Account; (iv) a signed copy of the customer agreement and
such other agreements as may be prescribed by LIT with respect to the Account;
(vi) evidence of the authority of the person or persons authorized to transact
business for the Account and of the genuineness of all certificates and other
documents pertaining to the Account, all in such form as may be prescribed by
LIT; (vii) a signed acknowledgment of receipt of each risk disclosure statement
or disclosure document required by applicable law; and (viii) such other
information as may be required by applicable law or by LIT. Broker further
agrees that it will not use any document or agreement in connection
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<PAGE>
with the opening or maintenance of an Account that has not been supplied or
approved by LIT.
(f) Broker shall be responsible for determining the authenticity,
accuracy and genuineness of all orders, instructions, certificates, papers and
signatures received with respect to an Account.
(g) Broker shall assure that no Customer will be permitted to establish
or maintain positions in an Account if such Customer is not in compliance with
all applicable margin requirements as established from time to time by LIT.
Broker shall promptly communicate to Customers any margin calls initiated by LIT
and use its best efforts to assure payment of margin as required by LIT. Broker
shall apprise its Customers of the risks of trading futures contracts and of
changes in LIT margin policies and requirements.
(h) Broker shall bide by procedures established by LIT with respect to
the transmission of orders for the Accounts. Without limiting the generality of
the foregoing, Broker agrees not to accept or transmit to LIT an order from or
for the Account of a Customer unless immediately upon receipt thereof a written
record of such order is prepared, including the Account identification and order
number, and Broker records on such order by time-stamping the date and time (to
the nearest minute) the order is received, when it was transmitted to LIT, and
when it was confirmed to the Customer by Broker.
(i) Broker shall not accept or hold in its name any money, securities,
or property (or extend credit in lieu thereof) to margin, guarantee, or secure
any trades, contracts or positions effected or carried in any Account. All such
money, securities, and property shall be received on behalf of LIT and in its
name (and all checks and drafts shall be payable to the order of LIT) and shall
be immediately transmitted to LIT or, at the direction of LIT, deposited in such
bank account or accounts as may be designated by LIT.
(j) Broker shall not guarantee any Customer against loss or a margin
call in an Account or in respect of any transaction effected with or for such
Customer.
(k) Broker shall be responsible for handling and resolving all Customer
inquiries and complaints relating to the Accounts and shall notify LIT and
receive LIT's cooperation with respect to inquiries and complaints relating to
services provided by LIT. Notwithstanding the foregoing, LIT shall have the
right, in its sole discretion, to handle and resolve any such inquiries or
complaints, including any inquiries or complaints received directly by LIT, and
including, without limitation, the right to settle any such complaints on behalf
of LIT and Broker.
(l) Broker shall not permit any of its associated persons or any other
person to exercise any discretionary authority with respect to any transaction
in an Account unless it has obtained (in a form approved by LIT) a signed copy
of the power-of-attorney,
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<PAGE>
authorization, or other document by which such power is given and a signed copy
of such further documents as may be required by LIT or by applicable law.
(m) Broker shall use its best efforts to assure that each Customer
complies with all applicable position limits established by the CFTC or a
contract market and shall not knowingly permit any transaction to be effected in
an Account in violation of such limits. Broker shall promptly report to LIT the
facts concerning any Account that has exceeded any applicable limit.
(n) Broker shall promptly report to LIT any special calls for
information made upon any of its Customers by the CFTC or any contract market or
self-regulatory organization and shall refrain from soliciting or accepting any
order (other than orders to liquidate existing positions) from any Customer who
is in violation of such a special call.
(o) Broker shall make no report or statement (whether orally or in
writing) to any Customer with respect to any transaction, position, or other
matter relating to a Customer's Account that is not in conformity with
statements, reports, and information furnished by LIT pursuant to this
Agreement.
(p) Broker shall check out with LIT each day's business in the
afternoon for accuracy and completeness. Concurrence between Broker and LIT will
be binding, except that LIT shall have the right to amend, add, or cancel any
trade (or any aspect or portion thereof) before the opening of the next
succeeding business day if floor and clearing house clearance reports properly
support such action. Any such amendment, addition, or cancellation will be
reported to Broker prior to the opening on such succeeding business day, and
Broker shall be required immediately to accept such amendment, addition or
cancellation.
(q) Broker shall not issue any advertisements, market letter or sales
literature directed to any Customer or containing the name of LIT without the
prior written consent of LIT.
4. Disclosure to Customers.
(a) LIT shall limit its services as provided in this Agreement and
Broker shall not hold itself out as an agent of LIT or any affiliated of LIT.
Broker shall be responsible for informing Customers of the nature of the
clearing relationship between LIT and Broker, and Broker agrees that it and its
associated persons, employees and agents will not make any representation to
Customer regarding LIT or LIT's responsibilities that is inconsistent with the
terms of this Agreement. LIT may transmit to each Customer for whom Broker opens
an Account a letter or statement describing the relationship between LIT and
Broker.
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<PAGE>
(b) Broker shall disclose to any Customer whose account is directed by
Broker the commission-sharing arrangement provided for herein and any
conflict-of-interest created thereby. Broker further agrees it will provide LIT
with each such Customer's written consent to such arrangement.
5. Access to Information; Financial Reports.
(a) Broker shall make its books and records available for reasonable
inspection at all times by duly authorized representatives of LIT or any
contract market or clearing house through which trades for Customers are
executed or cleared.
(b) Broker agrees to provide such financial information as LIT may
reasonably request.
(c) Broker shall, upon request, provide LIT with any information in
Broker's possession with respect to any Customer or any Account.
6. Confidentiality.
(a) LIT shall exercise reasonable care to prevent access to information
regarding Broker or Customers by unauthorized persons and will keep confidential
any information it has concerning the business of Broker. Notwithstanding the
foregoing, LIT shall be held harmless for complying with any request for
information or documents by the CFTC, Securities and Exchange Commission, any
contract market or other self-regulatory organization, or any court order or
other legal process which LIT believes to be valid and effective.
(b) Broker shall keep confidential any information it acquires
regarding LIT and its business pursuant to its clearing relationship with LIT.
(c) The provisions of this Section 6 shall survive the termination of
this Agreement.
7. Indemnification; Contribution.
(a) Broker shall fully indemnify, protect and hold harmless LIT, its
directors, officers, shareholders, employees, agents, affiliates, and each
person, if any, controlling LIT from and against all manner of claims, demands,
proceedings, suits, or actions (whether in law or in equity) and liabilities,
losses, expenses, and costs (including attorneys' fees) in the event (i) LIT
complies with any instruction or order received from Broker or any Customer in
respect to an Account, (ii) Broker or any Customer fails to satisfy any margin
requirement or to pay any amount due to LIT, (iii) Broker fails to perform its
obligations or breaches its representations, warranties and covenants hereunder,
or (iv) any Customer institutes a claim,
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<PAGE>
suit, action, or other proceeding (whether in law or in equity) against LIT for
any reason or the CFTC or any other governmental agency or self-regulatory
organization institutes a claim, suit, action, or other proceeding against LIT
relating to this Agreement or any Account or Customer; provided, however, that
LIT shall not be entitled to indemnify in any such matter if and to the extent
LIT is found to have engaged in gross negligence or willful misconduct in the
performance of its services under this Agreement. LIT may, in its sole
discretion, elect to assume the sole defense, including the settlement or
compromise, of any such claim, demand, proceeding, suit, or action instituted
against LIT or Broker.
(b) LIT shall be entitled to collect or secure any amount owed to LIT
hereunder by means which shall include but not be limited to charging Broker's
"house" account or setting off any amount owed to Broker by LIT. As security for
the obligations of Broker under this Section 7, Broker shall deposit and
maintain the sum of $_________ with LIT, which amount shall bear interest at the
rate then being paid on U.S. Treasury Bills having maturities of approximately
ninety-one (91) days. Such interest shall be credited on a monthly basis to
Broker's house account. At its option, Broker may instead deposit U.S.
government securities or an irrevocable stand-by letter of credit in the amount
of $________ and issued by a bank deemed satisfactory to LIT. LIT is authorized
to transfer, use, and apply (or draw upon in the case of securities or a letter
of credit) all or any portion of such security deposit whenever LIT deems it
necessary to pay or satisfy amounts owed to LIT or to third parties by reason of
this Section 7. Broker further agrees that, if any person or entity has
instituted or threatened a claim, suit, action, or other proceeding against LIT
which reasonably could expose LIT to any liability, loss, cost, or expense which
is the obligation of Broker hereunder, LIT is authorized to withhold (or draw
upon in the case of a letter of credit) an amount equal to the amount of any
such claim, suit, action, or other property owned by Broker on deposit with LIT
for any purpose until such claim, suit, action, or other proceeding has been
fully resolved to the satisfaction of LIT.
(c) If for any reason (other than the gross negligence or willful
misconduct of LIT as provided in Section 7(a)) the foregoing indemnification is
unavailable to LIT, then Broker shall promptly contribute the amount paid or
payable to LIT as a result of such claim, demand, proceeding, suit, or action
(whether in law or equity) or liability, expenses, and costs (including
attorneys' fees) in such proportion as is appropriate to reflect not only to
relative benefits received by Broker, on the one hand, and LIT on the other
hand, but also the relative fault of Broker pursuant to Section 8 of this
Agreement and actually received by LIT shall be the exclusive measure of the
benefits received by LIT for purposes of this Section 7(c).
8. Compensation. During the term of this Agreement, Broker shall pay
LIT clearing charges at such rates as set forth in Exhibit A hereto and as may
from time to time be mutually agreed upon in writing. In addition, LIT, in its
sole discretion, may require Broker or its Customers, as appropriate, to pay
other fees and expenses, including, but not limited to, transfer fees, ticket
charges and inactive account fees. LIT will collect
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<PAGE>
commissions established by Broker and paid on transactions executed and cleared
for Customers and will pay over the same to Broker monthly (or such other period
as LIT may agree) after deducting clearing charges and any other amounts owing
to LIT under this Agreement.
9. No Omnibus Account. Except as expressly permitted by LIT, during the
term of this Agreement Broker may not utilize an omnibus account maintained at
LIT to effect transactions in futures contracts for Customers. Broker agrees to
have all Customer orders executed only on a fully disclosed basis through LIT,
unless LIT shall have consented in writing to the use of an omnibus account.
10. Representations, Warranties and Covenants.
(a) Broker represents, warrants and covenants as follows:
(i) Broker is now, and during the term of this Agreement will
remain, duly registered as a futures commission merchant with the CFTC.
(ii) Broker is now, and during the term of this Agreement will
remain, a member in good standing of NFA.
(iii) Broker has all requisite authority, whether arising
under applicable federal or state laws and rules and regulations or the
rules and regulations of any contract market or other self-regulatory
organization to which Broker is subject, to enter into this Agreement
and to retain the services of LIT in accordance with the terms hereof.
(iv) Broker is now, and during the term of this Agreement will
remain, in compliance with the minimum financial and financial
reporting requirements of the CFTC and each contract market or other
self-regulatory organization of which it is a member.
(b) LIT represents, warrants and covenants as follows:
(i) LIT is now, and during the term of this Agreement will
remain, duly registered as a futures commission merchant with the CFTC.
(ii) LIT is now, and during the term of this Agreement will
remain, a member in good standing of NFA.
(iii) LIT has all requisite authority, whether arising under
applicable federal or state laws and rules and regulations or the rule
and regulations of any contract
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market or other self-regulatory organization to which LIT is subject,
to enter into this Agreement.
(iv) LIT is now, and during the term of this Agreement will
remain, in compliance with the minimum financial and financial
reporting requirements of the CFTC and each contract market or other
self-regulatory organization of which it is a member.
11. Termination. This Agreement may be terminated by either party
without cause upon ten (10) days written notice delivered as provided in Section
12 hereof. This Agreement may be terminated immediately by either party if any
representation or warranty ceases to be true or if any duties, responsibilities,
obligations, or covenants are not duly performed during the term of this
Agreement. Broker shall promptly make arrangements to transfer the Accounts to
another futures commission merchant upon termination of this Agreement. The
obligations of Broker under Section 7 hereof shall survive any termination of
this Agreement.
12. Notices. Except as otherwise provided in this Agreement, all
notices required to be given under this Agreement shall be in writing, and shall
be effective upon receipt as provided herein. Any such written notice shall be
deemed received upon the earlier of: (a) actual receipt by the other party; or
(b) the close of business on: (i) the date of transmission if sent by facsimile
or same-day courier, (ii) on the business day after the date of transmission, if
sent by overnight mail; or (iii) the fifth business day after transmission, if
sent by registered or certified mail, postage prepaid, and return receipt
requested. For the purposes of delivery of any notice hereunder, the address and
facsimile number of LIT and broker, respectively, shall be as set forth on the
signature page hereof. Either party may change its address or facsimile number
for notices by giving written notice of the new address or number to the other
party.
13. Limitation on Liability. LIT will not be responsible for delays in
the transmission or execution of orders due to breakdown or failure of
transmission or communication facilities or to any other cause or causes beyond
LIT's control. Independent floor brokers responsible for the execution of
Customer orders are not agents of LIT and LIT shall not be responsible for the
acts or omissions of such floor brokers.
14. Miscellaneous.
(a) THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
ILLINOIS WITHOUT REGARD TO THE CHOICE-OF-LAW PROVISIONS THEREOF. ALL DISPUTES,
CLAIMS, ACTIONS, OR PROCEEDINGS ARISING DIRECTLY, OR INDIRECTLY OR OTHERWISE IN
CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS AGREEMENT SHALL BE LITIGATED AT
THE DISCRETION AND ELECTION OF LIT ONLY
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IN A COURT LOCATED IN CHICAGO, ILLINOIS. BROKER HEREBY CONSENTS AND SUBMITS TO
THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN CHICAGO, ILLINOIS.
BROKER APPOINTS AND DESIGNATES LIT (OR ANY OTHER PERSON WHOM LIT MAY FROM TIME
TO TIME HEREINAFTER DESIGNATE) AS BROKER'S TRUE AND LAWFUL ATTORNEY-IN-FACT AND
DULY AUTHORIZED AGENT FOR SERVICE OF LEGAL PROCESS, AND AGREES THAT SERVICE OF
SUCH PROCESS UPON LIT OR SUCH OTHER PARTY SHALL CONSTITUTE PERSONAL SERVICE OF
SUCH PROCESS UPON BROKER; PROVIDED, THAT LIT OR SUCH OTHER PARTY SHALL, WITHIN
FIVE DAYS AFTER RECEIPT OF ANY SUCH PROCESS, FORWARD THE SAME BY CERTIFIED OR
REGISTERED MAIL, TOGETHER WITH ALL PAPERS AFFIXED THERETO, TO BROKER'S ADDRESS
SET FORTH ON THE SIGNATURE PAGE HEREOF.
(b) No action, regardless of form, arising out of transactions under
this Agreement may be commenced against LIT, its directors, officers,
shareholders, employees, representatives, agents, successors or assigns in any
forum by the undersigned, its successors, or assigns more than one year after
the claim giving rise to such action has arisen.
(c) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns. No
assignment shall be valid unless the other party consents to such assignment in
writing. Notwithstanding the foregoing, any assignment by LIT to any entity
controlled directly or indirectly by it or in connection with the sale of all or
substantially all its business will be deemed not to require the consent of
Broker.
(d) This Agreement is the entire Agreement between the parties relating
to the subject hereof and all prior negotiations and understandings between the
parties, whether written or oral, are hereby merged into this Agreement. Except
as otherwise expressly provided in this Agreement, no provision of this
Agreement may be waived or amended unless the waiver or amendment is in writing
and signed by a duly authorized officer of LIT and a duly authorized principal
of Broker. No waiver or amendment of this Agreement shall be implied from any
course of dealing between the parties or from any failure by a party to assert
its rights under this Agreement on any occasion or series of occasions.
(e) Neither this Agreement nor the performance of services by LIT
hereunder shall be construed to create a joint venture or partnership between
LIT and Broker.
(f) Whenever possible, each provision of this Agreement shall be
interpreted in such a manner as to be valid and effective under applicable law.
In the event that any one or more of the provisions of the Agreement shall be
held invalid, illegal, or unenforceable in any respect, such provisions shall be
severed from this Agreement, and the validity,
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<PAGE>
legality and enforcement of the remaining provisions contained herein shall be
affected or impaired thereby.
(g) The section headings in this Agreement are inserted for convenience
of reference only and are not intended to limit the applicability or affect the
meaning of any of its provisions.
IN WITNESS WHEREOF, the parties hereby have each caused this Agreement
to be executed by their duly authorized representative as of the day and year
first set forth above.
BROKER LIT DIVISION OF
FIRST OPTIONS OF CHICAGO, INC.
By: /s/ Steven Greenberg By: /s/ Salvatore Caputo
- -------------------------- --------------------------------
Title: President Title: Senior V.P. 10/15/96
Address for Notices: Address for Notices:
Alaron Trading Corp. LIT Division of
822 W. Washington First Options of Chicago, Inc.
Chicago, IL 60607 141 West Jackson Boulevard
Suite 1302A
Chicago, Illinois 60604
Facsimile: 312-850-2820 Facsimile: 312-
Attention: Steven Greenberg Attention: Legal & Compliance Department
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<PAGE>
PERSONAL GUARANTEE
In order to induce LIT Division of First Options of Chicago, Inc.
("LIT") to enter into the Clearing Agreement with Alaron Trading ("Broker"), to
which this guarantee is attached, and for other good an valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the undersigned
hereby, jointly and severally in the case of multiple guarantors, personally and
unconditionally guarantees the prompt, full and complete performance of any and
all covenants and agreements of Broker to LIT and the payment of any and all
indebtedness, damages, costs, and expenses (including attorneys' fees and costs
of collection) owed to or which may become due to LIT by Broker.
This guarantee shall remain in full force and effect until the
termination of the Clearing Agreement; provided, however, that the undersigned
shall not be released from his obligations hereunder so long as any claim of LIT
against Broker which arises out of, or relates to, directly or indirectly, the
Clearing Agreement is not settled to the satisfaction of LIT or discharged in
full.
The undersigned hereby expressly waives (a) notice of acceptance of
this guarantee by LIT, (b) notice of any default of non-performance of Broker
under the Clearing Agreement, (c) notice of any modification to the Clearing
Agreement or any extension of time granted to Broker, and (d) all defenses,
offsets, and counterclaims which the undersigned may at any time have to any
claim of LIT against Broker. The undersigned expressly acknowledges that
amendment or modification of the Clearing Agreement or the renewal or extension
of any indebtedness of Broker shall not in any manner release, affect or impair
his liability under this guarantee. The undersigned further agrees that no
invalidity of the Clearing Agreement or any obligation thereunder shall not
affect or impair his liability under this guarantee.
LIT may, in its discretion, proceed against the undersigned, jointly
and severally in the case of multiple guarantor, to collect any obligation
covered by this Guarantee without first proceeding against Broker. Upon five
days' written notice by LIT, the undersigned shall pay any and all indebtedness,
damages, costs, and expenses due LIT from Broker and shall perform any and all
duties and obligations of Broker to LIT. This guarantee shall be construed
pursuant to the laws of the State of Illinois, shall inure to the benefit of
LIT, its successors and assigns, and shall be binding on the undersigned, his
heirs and assigns.
All notices required to be delivered under this guarantee shall be in
writing and shall be effective upon the earlier of: (a) actual receipt by the
other party; or (b) the close of business on: (i) the date of transmission if
sent by facsimile or same-day courier, (ii) the business day after the date of
transmission, if sent by overnight mail, or (iii) the fifth business day after
transmission, if sent by registered or certified mail postage prepaid and return
receipt requested For the purposes of delivery of any notice hereunder, the
address and
- 12 -
<PAGE>
facsimile number of the undersigned shall be as set forth on the signature page
hereof. Either party may change its address or facsimile number for notice by
giving written notice of the new address or number to the other party.
This guarantee shall be governed by the laws of the State of Illinois
without regard to the choice-of-law provision thereof. All disputes, claims,
actions, or proceedings arising directly, indirectly or otherwise in connection
with, out of, related to or from this guarantee shall be litigated at the
discretion and election of LIT only in a court located in Chicago, Illinois. The
undersigned hereby consents and submits to the jurisdiction of any state or
federal court located within the City of Chicago, State of Illinois, and waives
any objection to venue in such court. The undersigned appoints and designates
LIT (or any other party whom LIT may from time to time hereinafter designate) as
the undersigned true and lawful attorney-in-fact and duly authorized agent for
service of legal process, and agrees that service of such process upon LIT or
such other party shall constitute personal service of such process upon the
undersigned; provided, that LIT or such other party shall, within five days
after receipt of any such process, forward the same by certified or registered
mail, together with all papers affixed thereto, to the address provided below.
All pronouns shall be deemed to refer to the masculine or feminine, as
the gender of the undersigned requires, and the singular shall import the plural
in the context of this guarantee.
/s/ Steven Greenberg /s/ Carrie Greenberg
- ------------------------------ --------------------
Individually, as Guarantor Individually, as Guarantor
822 West Washington
- ------------------------------ ------------------------------
312-850-2820
- ------------------------------ ------------------------------
Facsimile Facsimile
Date: 10/11/96 Date:
------------------------- ------------------------
/s/ Michael Greenberg
- ------------------------------ ---------------------
Individually, as Guarantor Individually, as Guarantor
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
Facsimile Facsimile
Date: Date:
------------------------- ------------------------
10/15/96
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EXHIBIT 10.8
LEASE
Between
ALARON DEVELOPMENT L.L.C.
an Illinois Limited Liability Company
and
ALARON TRADING CORPORATION,
an Illinois Corporation
<PAGE>
TABLE OF CONTENTS
ARTICLE I. Premises....................................................1
ARTICLE II. Term........................................................1
ARTICLE III. Rent........................................................2
ARTICLE IV. Taxes and Assessments.......................................3
ARTICLE V. Use.........................................................5
ARTICLE VI. Maintenance of Premises.....................................5
ARTICLE VII. Signs.......................................................6
ARTICLE VIII. Insurance...................................................6
ARTICLE IX. Damage or Destruction.......................................9
ARTICLE X. Liens......................................................11
ARTICLE XI. Alterations and Improvements...............................11
ARTICLE XII. Condemnation...............................................12
ARTICLE XIII. Rent Absolute..............................................13
ARTICLE XIV. Assignment and Subletting .................................14
ARTICLE XV. Indemnity for Litigation...................................14
ARTICLE XVI. Estoppel Certificate.......................................15
ARTICLE XVII. Condition and Inspection of Premises.......................15
ARTICLE XVIII. Fixtures...................................................15
ARTICLE XIX. Default....................................................16
ARTICLE XX. Landlord's Performance of Tenant's Covenants...............19
ARTICLE XXI. Exercise of Remedies.......................................19
ARTICLE XXII. Subordination to Mortgages.................................20
ARTICLE XXIII. Indemnity and Waiver.......................................20
ARTICLE XXIV. Surrender..................................................21
ARTICLE XXV. Covenant of Quiet Enjoyment................................23
ARTICLE XXVI. Short Form Lease...........................................23
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ARTICLE XXVII. Notices....................................................23
ARTICLE XXVIII. Covenants Binding Upon Successors and Assigns..............23
ARTICLE XXIX. Time of Essence............................................24
ARTICLE XXX. Americans With Disabilities Act............................24
ARTICLE XXXI. Miscellaneous..............................................25
ii
<PAGE>
LEASE
THIS LEASE is made this 1st day of August, 1994 between Alaron Development
L.L.C., an Illinois Limited Liability Company (hereinafter referred to as
"Landlord"), and Alaron Trading Corporation, an Illinois corporation
(hereinafter referred to as
"Tenant").
W I T N E S S E T H:
A. Landlord owns the property commonly known as 822 West Washington Street,
Chicago, Illinois.
B. Tenant desires to lease the Premises (as hereinafter defined) on the
terms and conditions hereinafter set forth.
C. Landlord is willing to enter into this Lease on the terms and conditions
hereinafter set forth.
Now, therefore, Landlord and Tenant agree as follows:
ARTICLE I.
Premises
Landlord, for and in consideration of the rents herein reserved and of the
covenants and agreements herein contained on the part of the Tenant to be kept,
observed and performed, does by these presents, lease to Tenant and Tenant does
hereby lease from Landlord, the real estate described on Exhibit A attached
hereto and made a part hereof, together with all buildings and improvements now
located thereon, and subject to covenants, agreements, easements, encumbrances,
restrictions and current general and special real estate taxes and assessments
affecting said real estate and the improvements thereon. Said real estate and
improvements are hereinafter referred to as the "demised premises".
ARTICLE II.
Term
The term of this Lease shall commence on the date hereof ("Commencement
Date") and shall terminate on December 31, 2004 ("Expiration Date")
(collectively, the "lease term"), unless sooner terminated as herein set forth.
<PAGE>
ARTICLE III.
Rent
Section 3.1. Base Rent. During the lease term Tenant shall pay to Landlord
as base rent (the "Base Rent") for the demised premises, without offset or
deduction of any kind, the following amounts. During the first year of the lease
term Tenant shall pay to Landlord as Base Rent for the demised premises the sum
of One Hundred Thousand and no/100 Dollars ($100,000.00), without offset or
deduction of any kind, payable in equal monthly installments of $8,333.33 each.
Commencing August 1, 1999, the Base Rent shall increase to Two Hundred Fifty
Thousand and no/100 Dollars ($250,000.00), without offset or deduction of any
kind, payable in equal monthly installments of $20,833.33 each. Commencing
January 1, 1996 and on each January 1 of 1997, 1998 and 1999, the base rent
shall increase by three percent (3%) over the prior year, and commencing January
1, 2000 and on each January 1, thereafter, during the balance of the term the
base rent shall increase by four percent (4%) over the prior year, and the
monthly installments shall be increased accordingly. All such payments shall be
made in advance on the first day of the month to Alaron Development L.L.C. at
822 West Washington Street, Chicago, Illinois 60607, or at such other place as
Landlord in writing directs.
Section 3.2. Net Lease. All rent payable under this Lease shall be
absolutely net to the Landlord so that this Lease shall yield, net, to the
Landlord, the specified Base Rent in each specified period during the lease
term, and each and every item of taxes and other expenses of every kind and
nature whatsoever, the payment of which the Landlord is, shall, or may become
liable for by reason of its estate or interest in the demised premises or of any
rights or interest of the Landlord in or under this lease or by reason or in any
manner connected with or arising from the ownership, leasing, operation,
management, maintenance, repair, rebuilding, remodeling, renovation, uses or
occupancy (including without limitation renewal of driveway permits) of the
demised premises shall be borne by the Tenant.
Section 3.3. Past Due Rent. If Tenant shall fail to pay when the same is
due and payable, any Base Rent, any additional rent, or any amount or charges
accruing or payable under this lease, such unpaid amounts shall bear interest
from the due date thereof to the date of payment at the lease interest rate (as
hereinafter defined).
ARTICLE IV.
Taxes and Assessments
Section 4.1. Payment of Taxes. Tenant further agrees to pay not later than
the due date thereof, as additional rent for the demised premises, all taxes and
assessments, general and special, water and sewer rents, rates and charges,
excises, levies, license and permit fees, fines, penalties and other
governmental charges and any interest or costs with respect thereto, utilities
and all other impositions, ordinary and extraordinary, of every kind and nature
whatsoever, which at anytime during the lease term may be
2
<PAGE>
levied, assessed, imposed, confirmed or grow or become due and payable out of,
or in respect of, or charged with respect to, or become a lien on the demised
premises or any part thereof or upon any building or improvements at any time
situated thereon. If, by law, any assessment may at the option of the taxpayer
be paid in installments, Tenant may exercise the option to pay the same in such
installments, provided that the amount of all installments of any such
assessment which are to become due and payable after expiration of the lease
term, shall be deposited with Landlord for such payment on the date which shall
be three (3) months immediately prior to the date of such expiration. Tenant
shall, in addition to the foregoing, pay any new tax of a nature not presently
in effect but which may hereafter be levied, assessed or imposed upon the
Landlord or upon the demised premises, if such tax shall be based upon or arise
out of the ownership, use or operation of the demised premises; provided,
however, that for the purpose of computing Tenant's liability for such new type
of tax, the demised premises shall be deemed the only property of the Landlord.
Section 4.2. Taxes Imposed on Landlord. Nothing contained herein shall be
construed to require Tenant to pay any franchise, inheritance, estate,
succession or transfer tax of Landlord or any income or excess profits tax
assessed upon or in respect of any income of Landlord or chargeable to or
required to be paid by Landlord unless such tax shall be specifically levied
against the rental income of Landlord derived hereunder, or shall be
specifically levied as a substitute for the real estate taxes, in whole or in
part, upon the demised premises or the improvements situated thereon, in either
of which events said rent shall be considered as the sole income of Landlord.
Section 4.3. Evidence of Payment. Tenant further agrees to deliver to
Landlord, duplicate receipts or photostatic copies thereof showing the payment
of all said taxes, assessments, and other impositions, within thirty (30) days
after the respective payments evidenced thereby, but no later than twenty (20)
days after the due date thereof.
Section 4.4. Payments By Landlord. Landlord shall, at its option, have the
right at all times during the term hereof to pay any such taxes, assessments or
other charges or impositions not paid by Tenant, when due, and the amounts so
paid, including penalties and reasonable expenses, shall be so much additional
rent due at the next rent date after any such payments, with interest at the
lease interest rate from the date of payment thereof.
Section 4.5. Protest. Tenant shall not be required to pay any tax,
assessment, tax lien or other imposition or charge upon or against the demised
premises or any part thereof or the improvements at any time situated thereon so
long as Tenant shall, in good faith and with due diligence, contest the same or
the validity thereof by appropriate legal proceedings which shall have the
effect of preventing the collection of the tax, assessment, tax lien or other
imposition or charge so contested; provided that on
3
<PAGE>
or before the due date of any such tax, assessment, tax lien or other imposition
or charge, Tenant shall give Landlord such reasonable security as may be
demanded by Landlord to insure payment of the amount of the tax, assessment, tax
lien or other imposition or charge, and all interest and penalties thereon.
Section 4.6. Recovery of Taxes. In the event that Tenant at any time
institutes suit to recover any tax, assessment, tax lien or other imposition or
charge paid by Tenant under protest in Landlord's name, Tenant shall have the
right, at its sole expense, to institute and prosecute such suit or suits in
Landlord's name, in which event Tenant covenants and agrees to indemnify
Landlord and save it harmless from and against all costs, charges or liabilities
in connection with any such suit. All funds received as a result of any such
suit shall belong to Tenant.
ARTICLE V.
Use
The demised premises shall be used solely for general office purposes.
Tenant shall not use or occupy the demised premises or permit the demised
premises to be used or occupied contrary to any statute, rule, order, ordinance,
requirement, regulation or restrictive covenant applicable thereto or in any
manner which would violate any certificate of occupancy affecting the same or
which would render the insurance thereon void or which would cause structural
injury to the improvements or cause the value or usefulness of the demised
premises or any part thereof to diminish or which would constitute a public or
private nuisance or waste, and Tenant agrees that it will, promptly upon
discovery of any such use, take all necessary steps to compel the discontinuance
of such use.
ARTICLE VI.
Maintenance of Premises
Section 6.1. Maintenance and Repairs by Tenant. Tenant shall maintain the
demised premises and any buildings, structures, facilities, improvements and
appurtenances now or hereafter erected thereon in good order and repair, both
inside and outside, structurally and nonstructurally, and keep the same and all
parts thereof, including, without limiting the generality of the foregoing,
foundations, walls, floors, roof, sidewalks, curbs, water and sewer connections,
windows and other glass, plumbing, water, gas and electric fixtures, pipes,
wires and conduits, heating, cooling and electrical and plumbing systems,
elevators, boilers, machinery, fixtures, equipment, furnishings, facilities,
appliances, roadways, walkways, parking areas and landscaping in, on or
connected with the demised premises, in good, clean,
4
<PAGE>
healthful, and safe order and condition, all in accordance with applicable
municipal and other governmental statutes, rules, orders and regulations and
ordinances and the direction of proper public officers, suffering no waste or
injury, and shall, at Tenant's sole expense, promptly make or cause to be made
all needed repairs, replacements, renewals and additions, structural or
otherwise, whether ordinary or extraordinary, foreseen or unforeseen, in and to
any of the foregoing, all as may be necessary to maintain the value of the
building and other improvements which comprise a portion of the demised premises
throughout the lease term. All such repairs, replacements, renewals and
additions shall be of good quality and sufficient for the proper maintenance and
operation of the demised premises and any buildings, structures, facilities,
furnishings, equipment, fixtures, improvements and appurtenances now or
hereafter erected thereon and shall be constructed and installed in compliance
with all requirements of all governmental authorities having jurisdiction
thereof and of the appropriate Board of Fire Underwriters or any successor
thereof. Tenant shall not permit anything to be done upon the demised premises
which would invalidate or prevent the procurement of any insurance policies
which may at any time be required pursuant to the provisions of this lease.
Section 6.2. Maintenance by Landlord on Tenant's Default. If Tenant refuses
or neglects to make any repairs as required hereunder to the reasonable
satisfaction of Landlord, Landlord, within seven (7) days after written demand,
may make such repairs without liability to Tenant for any loss or damage that
may accrue to Tenant's merchandise, fixtures, or other property or to Tenant's
business by reason thereof, and upon completion thereof, Tenant shall pay
Landlord's costs for making such repairs plus twenty percent (20) of such costs
for overhead upon presentation of a bill therefor, as additional rent.
ARTICLE VII.
Signs
Tenant will not place or suffer to be placed or maintained on any exterior
wall or the roof of the building comprising a portion of the demised premises
any sign or advertising matter or other thing of any kind, without first
obtaining Landlord's written consent, which consent shall not be unreasonably
withheld so long as such item complies with all applicable municipal and
governmental statutes, rules, orders and regulations and ordinances and does not
affect the structure of such building. Tenant further agrees to maintain any
such sign or advertising matter as may be approved in good condition and repair
at all times.
5
<PAGE>
ARTICLE VIII.
Insurance
Section 8.1. Liability Insurance. Tenant covenants to defend, save
harmless, and indemnify Landlord, its agents, beneficiaries and officers and
employees or any of them from any liability for injury, loss, accident or damage
to any person or property, and from any claims, actions, proceedings and
expenses and costs in connection therewith (including without limitation
reasonable counsel fees) arising from the omission, fault, willful act or
negligence of Tenant, its officers, agents, servants or employees in connection
with Tenant's use of the demised premises. Tenant shall at all times during the
lease term, at Tenant's expense, maintain public liability insurance covering
the demised premises insuring Landlord as well as Tenant with limits of not less
than $1,000,000 for each injury or death to a person and $1,000,000 for each
incident involving personal injury or death to persons and, in each case of
property damage, not less than $500,000 for any one occurrence. If by reason of
changed economic conditions the coverages and amounts of public liability
insurance referred to above become inadequate, Tenant agrees to increase the
coverages and amounts of such insurance promptly upon Landlord's request.
Section 8.2. Hazard Insurance. Tenant shall at all times during the lease
term, at Tenant's expense, keep the demised premises insured against loss by
fire and those risks now or hereafter normally covered by the term "all risk
extended coverage", in the amount of the full replacement cost (without
depreciation) of the buildings and other improvements (above foundations)
located on the demised premises. For the purposes of determining the amount of
insurance hereunder, Landlord may request a written appraisal furnished by an
insurance company insuring the improvements, or an independent appraisal
company, not more frequently than once every three years, and such appraisal
shall be binding upon Landlord and Tenant. Tenant shall bear the expense, if
any, of such appraisals. At the commencement of the lease term, the full
replacement cost (without depreciation) of the building and other improvements
shall be $250,000.
Section 8.3. Business Interruption Insurance. Upon the written request of
Landlord, Tenant shall at all times during the lease term, at Tenant's expense,
maintain all risk business interruption rental use and occupancy insurance in an
amount equal to Base Rent and real estate taxes and all additional charges
hereunder for a period of twelve (12) months, to insure payment of all charges
due to Landlord hereunder in the event of the interruption of Tenant's business
for any reason whatsoever.
Section 8.4. Workmen's Compensation Insurance. In the event that Tenant or
any one holding or claiming by, through or under Tenant employs any person or
persons upon the demised premises, then Tenant or such person holding or
claiming by, through or under
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<PAGE>
Tenant shall provide at its expense for Workmen's Compensation Insurance in the
usual form indemnifying Tenant and Landlord against loss or damage resulting
from any accident or casualty within the purview of the Illinois Workmen's
Compensation Law and in the amount as required from time to time by statute.
Section 8.5. Boiler, Scaffolding and Plate Glass Insurance. Upon the
written request of Landlord, Tenant shall procure, at Tenant's expense,
scaffolding insurance when needed by reason of work performed on the demised
premises. Tenant shall also maintain, in full force and effect during the lease
term at Tenant's expense, boiler insurance in an amount equal to the total cost
of the boiler as installed and improved and insurance against breakage of all
plate glass used in the demised premises.
Section 8.6. Other Insurance. In the event that any type of legislation may
hereafter be enacted imposing special liability upon Landlord by virtue of the
use of the demised premises for any purpose, Tenant shall provide Landlord
(prior to using the demised premises for such purpose), with insurance in
customary form and with insurers and limits satisfactory to Landlord against any
and all such liability. Tenant shall procure, at Tenant's expense, any
additional type of insurance coverage necessitated by activities carried on by
Tenant on the demised premises or reasonably requested by Landlord to protect
Landlord's interest in the demised premises. Such policies of insurance shall be
in customary form, with insurers and limits satisfactory to Landlord, against
any and all such liability, and naming Landlord and such other parties as
Landlord may designate as additional insured parties thereunder.
Section 8.7. Evidence of Insurance. The policies of insurance obtained in
compliance with this Article VIII shall specify that the loss, if any, shall be
payable to Landlord or such other persons, corporation or parties as Landlord
shall designate, except that policies of insurance obtained in compliance with
Section 8.1 hereof shall specify that the loss, if any, shall be payable to
Landlord and Tenant as their respective interests may appear. In the event the
demised premises are owned by a trust, Tenant shall maintain all insurance
required pursuant to this lease in the name of the beneficiaries of said trust
as well as the trustee. All policies of insurance obtained in compliance with
this Article VIII shall contain a clause that the insurer will not cancel or
change the insurance without first giving Landlord and Tenant thirty (30) days
prior written notice. The policies of insurance obtained by Tenant hereunder
shall be with responsible insurance companies qualified to do business in
Minnesota and satisfactory to Landlord and Landlord shall be named as an
additional insured. A copy of each such policy or a certificate of insurance
with respect thereto shall be delivered to Landlord whenever requested by
Landlord. Landlord shall notify Tenant within sixty (60) days of receipt of such
insurance if such insurance shall fail to conform to the requirements of this
lease. Thereafter, until Landlord otherwise notifies Tenant, the insurance shall
be deemed to meet the requirements of this lease. Landlord shall hold all
policies of insurance as provided hereunder for the
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<PAGE>
benefit of Landlord and Tenant, all as their respective interests may appear. At
the request of Landlord, a mortgage clause may be included in said policies
covering Landlord's mortgagee, if any.
Section 8.8. Failure to Provide Insurance. In the event Tenant shall fail,
when required, to furnish evidence of any of the insurance provided for in this
Article VIII, or in the event such insurance shall be cancelled, terminated or
changed, Landlord shall have the right at its election (but without being
obligated so to do) to procure or renew the same; and the amount or amounts paid
therefor shall become so much additional rent under the terms hereof, due and
payable with the next succeeding installment of rent due hereunder, with
interest at the lease interest rate from the date of payment thereof.
Section 8.9. Application of Insurance Proceeds. Landlord shall be entitled
to collect all monies due under the insurance policies provided for hereunder
which are payable in the event and by reason of loss or damage to the demised
premises. Such proceeds may be disbursed by the Landlord for repair or
reconstruction of the demised premises (if Landlord so elects) or otherwise
applied in accordance with the pertinent provisions of this lease. All policies
of insurance shall, to the extent obtainable, provide that any loss shall be
payable to Landlord notwithstanding any act or negligence of Tenant which might
otherwise result in a forfeiture of said insurance.
ARTICLE IX.
Damage or Destruction
Section 9.1. Obligation to Repair. Tenant agrees that in case of damage to
or destruction of any building or improvements on the demised premises or of the
fixtures and equipment therein, by fire or other casualty, it will promptly, at
its sole cost and expense, repair, restore or rebuild the same and upon the
completion of such repairs, restoration or rebuilding, the value and rental
value of the buildings and improvements upon the demised premises shall be equal
to the value and rental value of the buildings and improvements thereon
immediately prior to the happening of such fire or other casualty. Rent shall
not abate during the period of such repair, restoration or rebuilding and during
any period that the improvements are not tenantable because of such damage or
destruction.
Section 9.2. Major Repairs. Before commencing such repairing, restoration
or rebuilding, involving an estimated cost of more than $25,000, (a) Tenant
shall have plans and specifications therefor, prepared by a licensed architect,
submitted to and approved by Landlord; and (b) Tenant shall have furnished to
Landlord an estimate of the cost of the proposed work, certified by the
architect who prepared such plans and specifications.
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Section 9.3. Insurance Funds. In the event of loss under any policy or
policies of insurance described in Article VIII hereof and if Tenant is not in
default under this lease, the net amount of insurance proceeds so collected by
Landlord after payment of expenses incurred in such collection shall be
disbursed to Tenant in the same manner and following the customs ordinarily
employed by a mortgage bank making construction loans and be applied toward the
expense of repairing or rebuilding the buildings or improvements which have been
damaged or destroyed; provided, however, that it shall first appear to the
satisfaction of Landlord that the amount of insurance money available, plus any
additional funds deposited by Tenant, shall at all times be sufficient to pay
for the completion of said repairs or rebuilding. Upon the completion of said
repairs or rebuilding, free from all liens of mechanics and others, any surplus
funds shall be paid to Tenant. All payouts by the Landlord as hereinabove
required, shall be made after making provision for reasonable holdbacks and upon
receipt of a certificate of the architect or engineer in charge of the repairs
and rebuilding stating:
(a) that the sum requested is due to the contractors,
materialmen, laborers, engineers, architects, or other persons (whose
names and addresses shall be stated) who have furnished services or
materials for the repairs and restoration, or is required to reimburse
Tenant for expenditures made by Tenant in connection with the repairs
and restoration;
(b) that the sum requested when added to all sums previously
paid out under this Article for the repairs and restoration does not
exceed the value of the repairs and restoration done to the date of
such certificate;
(c) the progress of the repairs and restoration;
(d) that the repairs and restoration have been done pursuant
to all plans and specifications required by Section 9.2 hereof; and
(e) that in the opinion of the architect or engineer, the
remaining amount of the sum on deposit will be sufficient upon the
completion of the repairs and restoration to pay for the same in full.
Tenant shall furnish the Landlord at the time of any such payment with such
statements and waivers of lien as may be required under the mechanic's lien law
of Illinois and an official search, or other evidence satisfactory to the
Landlord, that there has not been filed with respect to the demised premises any
mechanic's or other lien which has not been discharged of record, in respect of
any work, labor, services or materials performed, furnished or supplied, in
connection with the repair and restoration, and that all of said materials have
been purchased free and clear of any security agreement or title retention
agreement. The Landlord shall not be required to pay out any sum when the
demised premises shall be encumbered with any such lien or
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agreement, or when the Tenant is in default under any covenant or obligation set
forth herein.
ARTICLE X.
Liens
Section 10.1. Prohibition of Liens. Tenant shall not do any act which shall
in any way encumber the title of Landlord in and to the demised premises, nor
shall any interest or estate of Landlord in the demised premises be in any way
subject to any claim by way of lien or encumbrance, whether by operation of law
or by virtue of any express or implied contract by Tenant and any claim to or
lien upon the demised premises arising from any act or omission of Tenant shall
accrue only against the leasehold estate of Tenant and shall in all respects be
subject and subordinate to the paramount title and rights of Landlord in and to
the demised premises. Tenant will not permit the demised premises to become
subject to any mechanics', laborers', or materialmen's lien on account of labor
or material furnished to Tenant or claimed to have been furnished to Tenant in
connection with work of any character performed or claimed to have been
performed on the demised premises by or at the direction or sufferance of
Tenant; provided, however, that Tenant shall have the right to contest in good
faith and with reasonable diligence, the validity of any such lien or claimed
lien if Tenant first gives to Landlord such security as may be demanded by
Landlord to insure payment thereof and to prevent any sale, foreclosure or
forfeiture of the demised premises by reason of non-payment thereof and if on
final determination of the lien or claim for lien, Tenant will immediately pay
any judgment rendered, with all proper costs and charges, and will, at its own
expense, have the lien released and any judgment satisfied.
Section 10.2. Landlord's Right to Act. If Tenant shall fail to contest the
validity of any lien or claimed lien or fail to give security to Landlord to
insure payment thereof, or shall fail to prosecute such contest with diligence,
or shall fail to have the same released and satisfy any judgment rendered
thereon, then Landlord may, at its election (but shall not be required to)
remove or discharge such lien or claim for lien (with the right, in its
discretion, to settle or compromise the same), and any amounts advanced by
Landlord, including reasonable attorneys' fees, for such purposes shall be so
much additional rental due from Tenant to Landlord at the next rent date after
any such payment, with interest at the lease interest rate.
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ARTICLE XI.
Alterations and Improvements
Tenant shall not at any time during the lease term make any alteration,
addition or improvement to the Premises or any improvements located thereon,
including without limitation creating any openings in the roof or exterior
walls, without in each instance the prior written consent of Landlord. Landlord
shall not unreasonably withhold its consent to minor, non-structural alterations
and improvements made by Tenant, provided the costs of any such alterations or
improvements shall not exceed $25,000.00. No alteration, addition or improvement
to the Premises shall be commenced by Tenant until Tenant has furnished Landlord
with a satisfactory certificate or certificates from an insurance company
acceptable to Landlord, evidencing workmen's compensation coverage in amounts
satisfactory to Landlord and protecting Landlord against public liability and
property damage to any person or property, on or off the Premises, arising out
of and during the making of such alterations, additions or improvements. All
alterations, additions and improvements (except Tenant's equipment, as
hereinafter defined), made at the expense of Tenant, shall become the property
of Landlord and shall remain upon and be surrendered with the Premises as a part
thereof at the termination of this lease, or at Landlord's option, Landlord may
require Tenant to remove such alterations, additions and improvements and
restore the Premises to its original condition. Landlord may require Tenant to
remove such alterations, additions and improvements and restore the Premises to
its original condition. Tenant, at its sole cost and expense, will make all
additions, improvements and alterations on the Premises and to the improvements,
appurtenances and equipment thereon which may be necessary by the act or neglect
of any other person or corporation (public or private), including supporting the
streets and alleys adjoining the Premises. No additions, improvements or
alterations exceeding the cost of $25,000.00 shall be commenced until Tenant has
first satisfied the requirements set forth in Section 9.2 hereof.
ARTICLE XII.
Condemnation
Section 12.1. Total Condemnation In the event the whole of the demised
premises shall be taken as a result of the exercise of the power of eminent
domain or condemned for a public or quasi-public use or purpose by any competent
authority or sold to the condemning authority under threat of condemnation, or
in the event a portion of the demised premises shall be taken or sold as a
result of such event, and as a result thereof the balance of the demised
premises cannot be used for the same purpose as before such taking, sale or
condemnation, then and in either of such events, the term of this lease shall
terminate as of the date of vesting of title pursuant
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to such proceeding or sale. The total award, compensation or damages received
from such proceeding or sale (hereinafter called the "award") shall be paid to
and be the property of Landlord, whether the award shall be made as compensation
for diminution of the value of the leasehold or the fee of the demised premises
or otherwise, and the Tenant hereby assigns to Landlord, all of Tenant's right,
title and interest in and to the award. Tenant shall execute, immediately upon
demand of Landlord, such documents as may be necessary to facilitate collection
by Landlord of any such award, compensation or damages.
Section 12.2. Partial Condemnation. In the event only a part of the demised
premises shall be taken as a result of the exercise of the power of eminent
domain or condemned for a public or quasi-public use or purpose by any competent
authority or sold to the condemning authority under threat of condemnation, and
as a result thereof the balance of the demised premises can be used for the same
purpose as before such taking, sale or condemnation, this lease shall not
terminate and Tenant, at its sole cost and expense, shall promptly repair and
restore the premises and all improvements thereon. Any award, compensation or
damages paid as a consequence of such taking, sale, or condemnation, shall be
paid to Landlord and shall be disbursed in accord with the provisions of Section
8.9 hereof. Any sums not so disbursed shall be retained by Landlord. In such
event, rent shall abate equitably if such taking shall affect the building or a
substantial portion of the demised premises. In the event Tenant shall not
promptly commence the repair or restoration required hereby, and diligently
pursue the completion of same, Tenant shall be deemed in default under this
lease and, in addition to any remedy of Landlord provided for under this lease,
at law or in equity, Landlord may retain the award, compensation or damages or
the balance thereof remaining in the hands of Landlord.
Section 12.3. Tenants Claims. In any condemnation proceeding, Tenant shall
be permitted to make claim with the condemning authority for a separate award
for the value of Tenant's fixtures, installations, improvements and decorations
which lie and are located in the area taken by the condemning authority.
ARTICLE XIII.
Rent Absolute
Any damage or destruction to all or any portion of the buildings,
structures and fixtures upon the demised premises, by fire, the elements, or any
other cause whatsoever, whether with or without fault on the part of Tenant,
shall not, terminate this lease or entitle Tenant to surrender the demised
premises or entitle Tenant to any abatement of or reduction in the rent payable,
or otherwise affect the respective obligations of the parties hereto. If the use
of the demised premises for any purpose should, at any time during the term of
this lease, be
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prohibited by law or ordinance or other governmental regulation, or prevented by
injunction, this lease shall not be thereby terminated, nor shall Tenant be
entitled by reason thereof to surrender the demised premises, or to any
abatement or reduction in rent, nor shall the respective obligations of the
parties hereby be otherwise affected unless such eviction is due to the act of
Landlord or any person or persons claiming any interest in the demised premises
by or under Landlord.
ARTICLE XIV.
Assignment and Subletting
Section 14.1. Requirements. Tenant shall not assign this lease or any
interest hereunder without the prior written consent of Landlord. Tenant shall
not sublet or permit the use or occupancy of the demised premises or any part
thereof by anyone other than Tenant without the prior written consent of
Landlord. No assignment or subletting shall relieve Tenant of its obligations
hereunder, and Tenant shall continue to be liable as a principal and not as a
guarantor or surety, to the same extent as though no assignment or sublease had
been made, unless specifically provided to the contrary in Landlord's consent.
Consent by Landlord pursuant to this Article shall not be deemed, construed or
held to be consented to any additional assignment or subletting, but each
successive act shall require similar consent of the Landlord. Landlord shall be
reimbursed by Tenant for any costs or expense incurred pursuant to any request
by Tenant for approval to any such assignment or subletting.
Section 14.2. Transfer of Tenant's Interest. Tenant shall not allow or
permit any transfer of this lease, or any interest hereunder, by operation of
law or otherwise, or convey, mortgage, pledge or encumber this lease or any
interest hereunder.
Section 14.3. Transfer of Landlord's Interest. Notwithstanding anything in
this lease to the contrary, Tenant acknowledges that Landlord has the right to
transfer Landlord's interest in the Premises and in this lease (including,
without limitation, the transfer of such interest to a trust), in whole or in
part, at any time during the lease term.
ARTICLE XV.
Indemnity for Litigation
Tenant covenants and agrees that in case Landlord shall without fault on
its part be made a party to any litigation commenced by or against Tenant, then
Tenant shall pay all costs and expenses, including reasonable attorneys' fees,
incurred by or imposed on the Landlord by or in connection with such litigation;
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and also shall pay all costs and expenses, including attorneys' fees, which may
be incurred by Landlord in enforcing any of the covenants and agreements of this
lease, and all such costs, expenses and attorneys' fees shall, if paid by
Landlord herein, be so much additional rent due on the next rent date after such
payment or payments, together with interest at the lease interest rate from the
date of payment.
ARTICLE XVI.
Estoppel Certificate
Tenant agrees at any time and from time to time, upon not less than ten
(10) days prior written request by Landlord, to execute, acknowledge and deliver
to Landlord, or Landlord's mortgagee, a statement in writing certifying that
this lease is unmodified and in full force and effect (or if there have been
modifications, that the same is in full force and effect as modified, and
stating the modifications), the date to which the rental and other charges have
been paid in advance, if any, and further providing such other reasonable
information requested by Landlord's mortgagee, assignee of such mortgage, or any
prospective purchaser of the fee, it being intended that any such statement
delivered pursuant to this Article XVI may be relied upon by any such
prospective purchaser, mortgagee or assignee.
ARTICLE XVII.
Condition and Inspection of Premises
Section 17.1. No Representations. Tenant acknowledges that it has inspected
the demised premises and finds them to be in good order and repair and in a safe
and satisfactory condition and acknowledges that Landlord has made no
representations to Tenant as to the condition, safety, fitness for use, or state
of repair thereof.
Section 17.2. Inspections. Tenant agrees to permit Landlord and any
authorized representative of Landlord, to enter the demised premises at all
reasonable times during business hours for the purpose of inspecting the same.
Any such inspections shall be solely for Landlord's purposes and may not be
relied upon by Tenant or any other person, nor shall such inspection constitute
a waiver by Landlord of any of Tenant's obligations under this lease.
Section 17.3. Access. Tenant agrees to permit Landlord and any authorized
representative of Landlord to enter the demised premises at all reasonable times
during business hours to exhibit the same for the purpose of sale, mortgage or
lease, and during the
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final year of the term hereof Landlord may display on the demised premises the
usual "For Sale" or "For Rent" signs.
ARTICLE XVIII.
Fixtures
Section 18.1. Ownership of Fixtures. All buildings and improvements and all
plumbing, heating, lighting, electrical and air-conditioning fixtures and
equipment, and other articles of personal property used in the operation of the
demised premises (as distinguished from operations incident to the business of
Tenant), whether or not attached or affixed to the demised premises (hereinafter
referred to as "building fixtures"), shall be and remain a part of the demised
premises and shall constitute the property of Landlord following the termination
of this lease.
Section 18.2. Tenant's Equipment. All of Tenant's trade fixtures and all
personal property, fixtures, apparatus, machinery and equipment now or hereafter
located upon the demised premises, other than building fixtures as defined in
Section 18.1 hereof, shall be and remain the personal property of Tenant, and
the same are herein referred to as "Tenant's equipment."
Section 18.3. Removal of Equipment. Tenant's equipment may be removed from
time to time by Tenant, provided, however, that if such removal shall injure or
damage the demised premises, Tenant shall repair the damage and place the
demised premises in substantially the same condition as it would have been if
such equipment had not been installed, ordinary wear and tear excepted.
ARTICLE XIX.
Default
Section 19.1. Events of Default. Tenant agrees that any one or more of the
following events shall be considered events of default as said term is used
herein:
(a) If an order, judgment or decree shall be entered by any
court adjudicating the Tenant a bankrupt or insolvent or approving a
petition seeking reorganization of the Tenant or appointing a receiver,
trustee or liquidator of the Tenant or of all or a substantial part of
its assets, and such order, judgment or decree shall continue unstayed
and in effect for any period of sixty (60) days; or,
(b) Tenant shall file an answer admitting the material
allegations of a petition filed against the Tenant in any bankruptcy,
reorganization or insolvency proceeding or under any laws relating to
the relief of debtors, readjustment of
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indebtedness, reorganization, arrangements, composition or
extension; or,
(c) Tenant shall make any assignment for the benefit of
creditors or shall apply for or consent to the appointment of a
receiver, trustee or liquidator of Tenant, or any of the assets of
Tenant; or,
(d) Tenant shall file a voluntary petition in bankruptcy, or
admit in writing its inability to pay its debts as they come due, or
file a petition or an answer seeking reorganization or arrangement with
creditors or take advantage of any insolvency law; or,
(e) A decree or order appointing a receiver of the property of
Tenant shall be made and such decree or order shall not have been
vacated within sixty (60) days from the date of entry or granting
thereof; or,
(f) Tenant shall vacate the demised premises or abandon the
same during the term hereof; or,
(g) Tenant shall default in any payment of rent or other
payment required to be made by Tenant hereunder when due as herein
provided; or,
(h) Tenant shall repeatedly be late in the payment of rent or
other charges required to be paid hereunder or shall repeatedly default
in the keeping, observing, or performing of any other covenants or
agreements herein contained to be kept, observed or performed by
Tenant; or,
(i) Tenant shall be in default in the performance or
compliance with any of the agreements, terms, covenants or conditions
in this lease other than those referred to in the foregoing paragraphs
(a) through (h) of this Section for a period of twenty (20) days after
written notice from Landlord to Tenant specifying the items in default.
Section 19.2. Remedies. Upon the occurrence of any one or more of such
events of default, Landlord may at its election terminate this lease or
terminate Tenant's right to possession only, without terminating this lease.
Upon termination of this lease, whether by lapse of time or otherwise, or upon
any termination of Tenant's right to possession without termination of this
lease, Tenant shall surrender possession and vacate the demised premises
immediately, and deliver possession thereof to the Landlord. Tenant hereby
grants to Landlord full and free license to enter into and upon the demised
premises in such event, with or without process of law, and to repossess
Landlord of the demised premises as of Landlord's former estate and to expel or
remove Tenant and any others who may be occupying or within the demised premises
and to remove any and all property therefrom, using such force as may be
necessary, without being deemed in any manner guilty of trespass, eviction or
forcible entry or detainer
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or conversion of property and without relinquishing the Landlord's rights to
rent or any other right given to Landlord hereunder or by operation of law.
Tenant expressly waives the service of any demand for the payment of rent or for
possession and the service of any notice of Landlord's election to terminate
this lease or to re-enter the demised premises, including any and every form of
demand and notice prescribed by any statute or other law, and agrees that the
simple breach of any covenant or provision of this lease by Tenant shall, of
itself, without the service of any notice or demand whatsoever, constitute a
forcible detainer by Tenant of the demised premises within the meaning of the
statutes of Illinois.
Section 19.3. Abandonment or Termination of Possession. If Tenant abandons
the demised premises or if Landlord elects to terminate Tenant's right to
possession only, without terminating the lease pursuant to a right granted to
Landlord hereunder, Landlord may, at Landlord's option, enter into the demised
premises, remove Tenant's signs and other evidences of tenancy and take and hold
possession thereof as in this Section provided, without such entry and
possession terminating the lease or releasing Tenant, in whole or in part, from
Tenant's obligation to pay the rent hereunder for the full term. In any such
case, Tenant shall pay forthwith to Landlord, if Landlord so elects, in lieu of
making the regular payments of rent required hereunder, a sum equal to
Landlord's Damages (hereinafter defined) in payment of the damages Landlord
incurred by reason of Tenant's default. As used herein, "Landlord's Damages"
shall mean the sum of (i) the present value of the Base Rent and additional rent
specified in this lease for the residue of the stated term following termination
of the lease or of Tenant's rights to possession less the present value of fair
market rental value of the demised premises for such residue and (ii) any other
sums then due to Landlord hereunder. In calculating the amount of Landlord's
damages (x) present value shall be computed on the basis of a discount of ten
percent (10%) per year and (y) the additional rent due Landlord for the rest of
the lease term shall be deemed to equal the additional rent payable for the last
calendar year of the lease term prior to termination of this lease or of
Tenant's right to possession (or the additional rent which would have been paid
for the calendar year in which such termination occurred, if no additional rent
had previously been paid).
Section 19.4. Reletting. Upon and after entry into possession without
termination of the lease, Landlord may, but need not, relet the demised premises
or any part thereof for the account of Tenant to any person, firm or corporation
other than Tenant for such rent, for such time and upon such terms as Landlord
in Landlord's sole discretion shall determine. Landlord shall not be required to
accept any tenant offered by Tenant or to observe any instructions given by
Tenant about such reletting. In any such case, Landlord may make repairs,
alterations and additions in or to the demised premises and redecorate the same
to the extent deemed by Landlord necessary or desirable. Tenant shall, upon
demand, pay
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the cost thereof, together with Landlord's expenses of the
reletting.
Section 19.5. Deficiencies. If Landlord has not elected to collect
Landlord's Damages and if the consideration collected by Landlord upon any such
reletting for Tenant's account is not sufficient to pay monthly the full amount
of the Base Rent and additional rental reserved in this lease, together with,
the costs of repairs, alterations, additions, redecorating, leasing commissions,
and Landlord's other costs and expenses of regaining possession and reletting
the demised premises, Tenant shall pay to Landlord the amount of each monthly
deficiency upon demand.
Section 19.6. Removal of Property. Any and all property which may be
removed from the demised premises by Landlord pursuant to the authority of this
lease or of law, to which Tenant is or may be entitled, may be handled, removed
or stored in a commercial warehouse or otherwise by Landlord at Tenant's risk,
cost and expense and Landlord shall in no event be responsible for the value,
preservation or safekeeping thereof. Tenant shall pay to Landlord, upon demand,
any and all expenses incurred in such removal and all storage charges against
such property so long as the same shall be in Landlord's possession or under the
Landlord's control. Any such property of Tenant not removed from the demised
premises or retaken from storage by Tenant within thirty (30) days after the end
of the term, however terminated, shall be conclusively presumed to have been
abandoned by Tenant.
ARTICLE XX.
Landlord's Performance of Tenant's Covenants
Should Tenant at any time fail to do any act or make any payment required
to be done or made by it under the provisions of this lease, Landlord, at its
option, may (but shall not be required to) do the same or cause the same to be
done, and the amounts paid by Landlord in connection therewith shall be so much
additional rent due on the next rent date after such payment, together with
interest at the lease interest rate from the date of payment by Landlord.
ARTICLE XXI.
Exercise of Remedies
Section 21.1. Cumulative Remedies. No remedy contained herein or otherwise
conferred upon or reserved to Landlord, shall be considered exclusive of any
other remedy, but the same shall be cumulative and shall be in addition to every
other remedy given herein or now hereafter existing at law or in equity or by
statute, and every power and remedy given by this lease to Landlord may be
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exercised from time to time and as often as occasion may arise or as may be
deemed expedient. No delay or omission of Landlord to exercise any right or
power arising from any default, shall impair any such right or power or shall be
construed to be a waiver of any such default or an acquiescence therein.
Section 21.2. Waivers. No waiver of any breach of any of the covenants of
this lease shall be construed, taken or held to be a waiver of any other breach
or waiver, acquiescence in or consent to any further or succeeding breach of the
same covenant. The acceptance by Landlord of any payment of rent or other
charges hereunder after the termination by Landlord of this lease or of Tenant's
right to possession hereunder shall not, in the absence of agreement in writing
to the contrary by Landlord, be deemed to restore this lease or Tenant's right
to possession hereunder, as the case may be, but shall be construed as a payment
on account and not in satisfaction of damages due from Tenant to Landlord.
Section 21.3. Anticipatory Breach. In the event of any breach or threatened
breach by Tenant of any of the agreements, terms, covenants or conditions
contained in this lease, Landlord shall be entitled to enjoin such breach or
threatened breach and shall have the right to invoke any right and remedy
allowed at law or in equity or by statute or otherwise as though re-entry,
summary proceedings, and other remedies were not provided for in this lease.
ARTICLE XXII.
Subordination to Mortgages
At the option of any mortgagee of Landlord, this lease shall be subject and
subordinate to any first mortgage or deed of trust now or hereafter placed upon
the demised premises; provided, however, that the mortgagee or beneficiary under
such deed of trust agrees in writing with Tenant or adequate provision is made
in such mortgage or deed of trust, so that regardless of any default or breach
under such mortgage or deed of trust or of any possession or sale of the whole
or any part of the demised premises under or through such mortgage or deed of
trust, this lease and Tenant's possession shall not be disturbed by the
mortgagee or beneficiary or any other party claiming under or through such
mortgage or deed of trust; provided, however, that Tenant shall continue to
observe and perform Tenant's obligations under this lease and pay rent to
whomsoever may be lawfully entitled to same from time to time. Tenant hereby
agrees to execute, if same is required, any and all instruments in writing which
may be requested by Landlord to subordinate Tenant's rights acquired by this
lease to the lien of any such mortgage or deed of trust, all as aforesaid.
Tenant agrees to attorn to any mortgagee subsequently encumbering the demised
premises, and to any party acquiring title to the demised premises, by judicial
foreclosure or a trustee's sale, as the successor to Landlord hereunder.
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ARTICLE XXIII.
Indemnity and Waiver
Section 23.1. Indemnity. Tenant will protect, indemnify and save harmless
Landlord (if Landlord is a trust or a trustee, the term "Landlord" for the
purpose of this Article XXIII, shall include the trustee, its agents, its
beneficiary or beneficiaries and their agents) from and against all liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
(including without limitation, reasonable attorneys' fees and expenses) imposed
upon, incurred by or asserted against Landlord by reason of: (a) any accident,
injury to or death of persons or loss of or damage to property occurring on or
about the demised premises or any part thereof or the adjoining properties,
sidewalks, curbs, streets or ways, or resulting from any act or omission of
Tenant or anyone claiming by, through or under Tenant; (b) any failure on the
part of Tenant to perform or comply with any of the terms of this lease; or (c)
performance of any labor or services or the furnishing of any materials or other
property in respect of the demised premises or any part thereof. In case any
action, suit or proceeding is brought against Landlord by reason of any such
occurrence, Tenant will, at Tenant's sole expense, resist and defend such
action, suit or proceeding, or cause the same to be resisted and defended.
Section 23.2. Tenant Waiver. Tenant waives all claims it may have against
Landlord and Landlord's agents for damage or injury to person or property
sustained by Tenant or any persons claiming through Tenant or by any occupant of
the demised premises, or by any other person, resulting from any part of the
demised premises or any of its improvements, equipment or appurtenances becoming
out of repair, or resulting from any accident on or about the demised premises
or resulting directly or indirectly from any act or neglect of any person,
including Landlord, to the extent permitted by law. This Section 23.2 shall
include, but not by way of limitation, damage caused by water, snow, frost,
steam, excessive heat or cold, sewage, gas, odors, or noise, or caused by
bursting or leaking of pipes or plumbing fixtures, and shall apply equally
whether any such damage results from the act or neglect of Tenant or of any
other person, including Landlord to the extent permitted by law, and whether
such damage be caused or result from any thing or circumstance whether of a like
nature or of a wholly different nature. All personal property belonging to
Tenant or any occupant of the demised premises that is in or on any part of the
demised premises shall be there at the risk of Tenant or of such other person
only, and Landlord shall not be liable for any damage thereto or for the theft
or misappropriation thereof.
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ARTICLE XXIV.
Surrender
Section 24.1. Surrender of Possession. Upon the termination of this lease
whether by forfeiture, lapse of time or otherwise, or upon the termination of
Tenant's right to possession of the demised premises, Tenant will at once
surrender and deliver up the demised premises, together with all improvements
thereon, to Landlord, broom clean, in good order, condition and repair,
reasonable wear and tear excepted. "Broom clean" means free from all debris,
dirt, rubbish, personal property of Tenant, oil, grease, tire tracks or other
substances, inside and outside of the building and on the grounds comprising the
demised premises. Any damage caused by removal of Tenant from the demised
premises, including any damage caused by removal of Tenant's equipment as herein
defined, shall be repaired and paid for by Tenant prior to the expiration of the
lease term. In the event any improvements or Tenant's fixtures are removed by
Tenant after the expiration of the lease term, Tenant shall pay rent until such
improvements and fixtures are removed.
All additions, hardware, and improvements, temporary or permanent, in or
upon the demised premises placed there by Tenant shall become Landlord's
property and shall remain upon the demised premises upon such termination of
this lease by lapse of time or otherwise, without compensation or allowance or
credit to Tenant, unless Landlord requests their removal. If Landlord so
requests removal of said additions, hardware, or improvements and Tenant does
not make such removal by the termination of this lease, or within ten (10) days
after such request, whichever is later, Landlord may remove the same and deliver
the same to any place of business of Tenant or warehouse and Tenant shall pay
the cost of such removal, delivery and warehousing to Landlord on demand.
Section 24.2. Removal of Equipment. Upon the termination of this lease by
lapse of time, Tenant may remove Tenant's equipment provided, however, that
Tenant shall repair any injury or damage to the demised premises which may
result from such removal. If Tenant does not remove Tenant's equipment from the
demised premises prior to the end of the lease term, however ended, Landlord
may, at its option, remove the same and deliver the same to any other place of
business of Tenant or warehouse, and Tenant shall pay the cost of such removal
(including the repair of any injury or damage to the demised premises resulting
from such removal), delivery and warehousing to Landlord on demand, or Landlord
may treat Tenant's equipment as having been conveyed to Landlord with this lease
as a Bill of Sale, without further payment or credit by Landlord to Tenant.
Section 24.3. Holdover. Any holding over by Tenant of the demised premises
after the expiration of this lease shall operate and be construed to be a
tenancy from month to month only, at the same monthly rate of rent then in
effect and other charges payable
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hereunder for the lease term, and upon all of the other covenants and agreements
contained in this lease. If Tenant continues to hold over after a written demand
by Landlord for possession at the expiration of this lease or after termination
by either party of a month-to-month tenancy created pursuant to this Section, or
after termination of the lease or of Tenant's right to possession pursuant to
any other section hereof, Tenant shall pay monthly rental at a rate equal to
double the rate of rent payable hereunder immediately prior to the expiration or
other termination of the lease or Tenant's right to possession and all other
reasonable damages sustained by Landlord resulting from Tenant's possession of
the demised premises, or any part thereof. Nothing contained in this Section
24.3 shall be construed to give Tenant the right to hold over at any time, and
Landlord may exercise any and all remedies at law or in equity to recover
possession of the demised premises, as well as any damages incurred by Landlord
due to Tenant's failure to vacate the demised premises and deliver possession to
Landlord as herein provided.
ARTICLE XXV.
Covenant of Quiet Enjoyment
Landlord agrees that at all times when Tenant is not in default under the
terms of and during the term of this lease, Tenant's quiet and peaceable
enjoyment of the demised premises shall not be disturbed or interfered with by
Landlord or by any person claiming by, through or under Landlord.
ARTICLE XXVI.
Short Form lease
This lease shall not be recorded, but the parties agree, at the request of
either of them, to execute a Short Form lease for recording and containing the
names of the parties, the legal description and the term of this lease.
ARTICLE XXVII.
Notices
All notices to or demands upon Landlord or Tenant desired or required to be
given under any of the provisions hereof, shall be in writing. Any notices or
demands from Landlord to Tenant shall be deemed to have been duly and
sufficiently given if delivered by hand to the party to whose attention it is
directed or if mailed by United States registered or certified mail in an
envelope properly stamped and addressed to 822 West Washington Street, Chicago,
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Illinois 60607 or at such other address as Tenant may theretofore have furnished
by written notice to Landlord, and any notices or demands from Tenant to
Landlord shall be deemed to have been duly and sufficiently given if delivered
by hand to the party to whose attention it is directed or if mailed by United
States registered or certified mail in an envelope properly stamped and
addressed to Landlord at 822 West Washington Street, Chicago, Illinois 60607 or
at such other address as Landlord may theretofore have furnished by written
notice to Tenant. The effective date of such notice shall be three (3) days
after delivery of the same to the United States Post Office for mailing.
ARTICLE XXVIII.
Covenants Binding Upon Successors and Assigns
Section 28.1. Binding Effect. All of the covenants, agreements, conditions,
and undertakings in this lease contained shall extend and inure to and be
binding upon the heirs, executors, administrators, successors, and assigns of
the respective parties hereto, the same as if they were in every case
specifically named, and whenever in this lease reference is made to either of
the parties hereto, it shall be held to include and apply to, wherever
applicable, the heirs, executors, administrators, successors and assigns of such
party. Nothing herein contained shall be construed to grant or confer upon any
person or persons, firm, corporation or governmental authority, other than the
parties hereto, their heirs, executors, administrators, successors and assigns,
any right, claim or privilege by virtue of any covenant, agreement, condition or
undertaking in this lease contained.
Section 28.2. Successor 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 demised premises, and in the event of any transfer of
the title to such fee, the Landlord herein named (and in case of any subsequent
transfers or conveyances, the then grantor) shall be automatically freed and
relieved, from and after the date of such transfer or conveyance, of all
personal liability as respects the performance of any covenants or obligations
on the part of Landlord contained in this lease thereafter to be performed;
provided that any funds in the hands of such Landlord or the then grantor at the
time of such transfer, in which Tenant has an interest, shall be turned over to
the grantee, and any amount then due and payable to Tenant by Landlord or the
then grantor under any provisions of this lease, shall be paid to Tenant.
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ARTICLE XXIX.
Time of Essence
Time is of the essence of this lease, and all provisions herein relating
thereto shall be strictly construed.
ARTICLE XXX
Americans With Disabilities Act
The parties acknowledge that the Americans with Disabilities Act of
1990 (42 U.S.C. ss.12101 et seq.) and regulations and guidelines promulgated
thereunder, as all of the same may be amended and supplemented from time to time
(collectively referred to herein as the "ADA") establish requirements for
business operations, accessibility and barrier removal, and that such
requirements may or may not apply to the Premises depending on, among other
things: (1) whether Tenant's business is deemed a "public accommodation" or a
"commercial facility", (2) whether such requirements are "readily achievable",
and (3) whether a given alteration affects a "primary function area" or triggers
"path of travel" requirements. The parties hereby agree that Tenant shall
perform any required ADA Title III compliance in the Premises, including any
leasehold improvements or other work to be performed in the Premises under or in
connection with this lease, and Landlord may perform, or require that Tenant
perform, and Tenant shall be responsible for the cost of, ADA Title III "path of
travel" requirements triggered by alterations in the Premises. Tenant shall be
solely responsible for requirements under Title I of the ADA relating to
Tenant's employees.
ARTICLE XXXI
Miscellaneous
Section 31.1. Captions. The captions of this lease are for
convenience only and are not to be construed as part of this lease
and shall not be construed as defining or limiting in any way the
scope of intent of the provisions hereof.
Section 31.2. Partial Invalidity. If any covenant, agreement or condition
of this lease or the application thereof to any person, firm or corporation or
to any circumstances, shall to any extent be invalid or unenforceable, the
remainder of this lease, or the application of such covenant, agreement or
condition to persons, firms or corporations or to circumstances other than those
as to which it is invalid or unenforceable, shall not be affected thereby. Each
covenant, agreement or condition of this lease shall be valid and enforceable to
the fullest extent permitted by law.
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Section 31.3. Governing Law. This lease shall be construed
and enforced in accordance with the laws of the State of Illinois.
Section 31.4. Modification. None of the covenants, terms or conditions of
this lease, to be kept and performed by either party, shall in any manner be
altered, waived, modified, changed or abandoned, except by a written instrument,
duly signed, acknowledged and delivered by the party against which enforcement
of such modification, waiver, amendment, discharge or change is sought.
Section 31.5. Relationship of the Parties. Nothing contained herein shall
be deemed or construed by the parties hereto, nor by any third party, as
creating the relationship of principal and agent or of partnership, or of joint
venture by the parties hereto, it being understood and agreed that no provision
contained in this lease nor any acts of the parties hereto shall be deemed to
create any relationship other than the relationship of Landlord and Tenant.
Section 31.6. Brokers. Tenant warrants that it has had no dealings with any
real estate broker and Tenant covenants to pay, hold harmless and indemnify
Landlord from and against any and all cost, expense or liability for any
compensation, commissions and charges claimed by any broker or other agent with
respect to this lease or the negotiation thereof.
Section 31.7. Lesser Payments. No payment by Tenant or receipt by Landlord
of a lesser amount than the monthly rent herein stipulated shall be deemed to be
other than on account of the earliest stipulated rent, nor shall any endorsement
or statement on any check or any letter accompanying any check or payment as
rent be deemed an accord and satisfaction, and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance of such
rent or pursue any other remedy in this lease provided.
Section 31.8. Lease Interest Rate. The term "lease interest
rate", when used herein, shall be 12% per annum.
Section 31.9. Entire Agreement. All understandings and agreements
heretofore had between the parties hereto are merged into this lease, which
alone fully and completely expresses their agreement, and which is entered into
after full investigation, neither party relying on any statement or
representation not embodied in this lease, made by the other.
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This lease has been executed as of the date first written above.
LANDLORD:
ALARON DEVELOPMENT L.L.C.
an Illinois limited liability company
By: ______________________________
Steven A. Greenberg, member
TENANT:
ALARON TRADING CORPORATION,
an Illinois corporation
By: ______________________________
Steven A. Greenberg, President
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EXHIBIT A
LEGAL DESCRIPTION
EXHIBIT 10.9
OFFICE LEASE--FORM A--(Revised 1976)
_____________________________________________________________________________
THIS INDENTURE, made October 6, 1997,
Witnesseth:
THE TAKIFF PROPERTIES GROUP LTD. #2 Sanford Takiff, General
Partner, With Berkson & Sons Ltd. As Managing Agent
Lessor, hereby leases unto ALANORTH, L.L.C., Lessee
And the Lessee accepts the Premises, known as
633 Skokie Boulevard, Northbrook, Illinois 60062, Suite #407 (approximately
2,600 rentable square feet)
Chicago, Illinois, for the Term of Five (5) Years commencing JANUARY 1, 1998;
and ending DECEMBER 31, 2002 unless sooner terminated as provided herein, to be
occupied and used by the Lessee for General Offices
In consideration Thereof, the Parties Covenant and Agree:
1. Rent: Lessee shall pay to the Lessor, or to Berkson & Sons Ltd. In coin or
currency which, at the time or times of payment, is legal tender for public and
private debts in the United States of America, at 333 Skokie Boulevard, Suite
#111, Northbrook, IL 60062 or as directed from time to time by the Lessor's
notice, the sum of Two Hundred Seven Thousand Fifty-Six and 52/100ths Dollars
($207,056.52)in installments as follows:
Commencing JANUARY 1, 1998 thru DECEMBER 31, 1998 - $3,250.00/MO
($39,000.00/Year) Commencing JANUARY 1, 1999 thru DECEMBER 31, 1999 -
$3,347.50/MO ($40,170.00/Year) Commencing JANUARY 1, 2000 thru DECEMBER 31, 2000
- - $3,447.93/MO ($41,375.16/Year) Commencing JANUARY 1, 2001 thru DECEMBER 31,
2001 - $3,551.37/MO ($42,616.44/Year) Commencing JANUARY 1, 2002 thru DECEMBER
31, 2002 - $3,657.91/MO ($43,894.92/Year)
Payable one each in advance promptly on the first day of every calendar month of
the term and at the current rate for fractions of a month if the term shall be
terminated on any day other than the last day of any month. Unpaid rent shall
bear interest at 7% per annum from the date due until paid.
ALANORTH, L.L.C. OFFICE LEASE 1
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2. Service: The Lessor shall provide: (a) Janitor Service in and about the
premises. Saturdays, Sundays and holidays be given, such janitor service shall
be subject to the Lessor's supervision but at the Lessee's sole responsibility.
The Lessee shall not provide any janitor service in the premises except through
a janitor contractor or employees who are, and shall continuously be, in each
and every instance satisfactory to the Lessor.
(b) Heat daily from 8 a.m. to 5 p.m. (Saturdays to 1 p.m.), Sundays and Holidays
excepted, whenever heat shall, in the Lessor's judgment, be required for the
comfortable occupation and use of the premises.
(c) Water from mains for drinking, lavatory and toilet purposes, drawn through
fixtures installed.
(d) Passenger Elevator Service in common with other tenants daily from 8 a.m. to
6 p.m. (Saturdays to 1 p.m.), Sundays and Holidays excepted. Elevator service at
other times shall be optional with the Lessor and, if provided, shall never be
deemed a continuing obligation of the Lessor. The Lessor may change manually
operated and controlled elevators to be operatorless, automatic elevators
operated and controlled by passengers without liability of the Lessor to the
Lessee and without impairing any obligation of the Lessee under this lease.
(e) Electricity if and so long as the Lessor shall generate or distribute
electric current for light and power in the Building. So long as the Lessor
provides electricity in the building, the Lessee shall obtain all current used
in the premises from the Lessor.
The Lessor does not warrant that any of the services above mentioned
will be free from interruptions caused by war, insurrection, civil commotion,
riots, acts of God or the enemy, governmental action, repairs, renewals,
improvements, alterations, strikes, lockouts, picketing, whether legal or
illegal, accidents, inability of the Lessor to obtain fuel or supplies or any
other cause or causes beyond the reasonable control of the Lessor. Any such
interruption of service shall never be deemed an eviction or disturbance of the
Lessee's use and possession of the premises or any part thereof, or render the
Lessor liable to the Lessee for damages, or relieve the Lessee from performance
of the Lessee's obligations under this lease.
3. Lessor's Title: The Lessor's title is and always shall be paramount to the
title of the Lessee, and nothing herein contained shall empower the Lessee to do
any act which can, shall or may encumber the title of the Lessor.
4. Certain Rights Reserved to the Lessor: The Lessor reserves
ALANORTH, L.L.C. OFFICE LEASE 1
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the following rights: (a) to change the name or street address of the Building
notice or liability of the Lessor to the Lessee; (b) to install and maintain a
sign or signs on the exterior of the Building; (c) to have access for the Lessor
and the other tenants of the Building to any mail chutes located on the premises
according to the rules of the United States Post Office; (d) to designate all
sources furnishing sign painting and lettering, ice, drinking water, towels and
toilet supplies used on the premises; (e) during the last ninety days of the
term or any part thereof, if during or prior to that time the Lessee vacates the
premises, to decorate, remodel, repair, alter or otherwise prepare the premises
for reoccupancy; (f) to constantly have pass keys to the premises; (g) to grant
to anyone the exclusive right to conduct any particular business or undertaking
in the Building;(h) to exhibit the premises to others and to display "For Rent"
signs on the premises; (i) to take any and all measures, including inspections,
repairs, alterations, additions and improvements to the premises or the Building
or the Lessor's interests, or as may be necessary or desirable in the operation
of the Building.
The Lessor may enter upon the premises and may exercise any or all of
the foregoing rights hereby reserved without being deemed guilty of an eviction
or disturbance of the Lessee's use or possession and without being liable in any
manner to the Lessee.
5. Default Under Other Lease: If the term of any lease, other than this lease,
made by the Lessee for any premises in the Building shall be terminated or
terminable after the making of this lease because of any default by the Lessee
under such other lease, such fact shall empower the Lessor, at the Lessor's sole
option, to terminate this lease by notice to the Lessee.
6. Liability for Acts or Neglect: If any damage whether to the demised premises
or to the building, or any part thereof, or whether to the Lessor or to other
tenants in the building, results from any act or neglect of the Lessee, or of
the Lessee's agents or employees, the Lessor may, at the Lessor's option, repair
such damage and the Lessee shall, upon demand by the Lessor, reimburse the
Lessor forthwith for the total cost of such repairs. Neither the Lessor nor the
Lessee shall be liable for any damage caused by its act or neglect if the Lessor
or the Lessee or a tenant has recovered the full amount of the damages from
insurance. All property belonging to the Lessee or any occupant in the building
shall be at the risk of the Lessee and such other person only and the Lessor
shall not be liable for damage thereto or theft or misappropriation thereof.
7. Holding Over: If the Lessee retains possession of the premises or any part
thereof after the termination of the term by lapse of time or otherwise, the
Lessee shall pay the Lessor rent at
ALANORTH, L.L.C. OFFICE LEASE 1
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double the rate of rental specified in Section 1 for the time the Lessee thus
remains in possession, and in addition thereto, shall pay the Lessor all damages
sustained by reason of the Lessee's retention of possession. If the Lessee
remains in possession of the premises, or any part thereof, after the
termination of the term by lapse of time or otherwise, such holding over shall,
at the election of the Lessor expressed in a written notice to the Lessee and
not otherwise constitute a renewal of this lease for one year. The provisions of
this Section do not waive the Lessor's rights or reentry or any other right
hereunder.
8. Assignment and Subletting.
[This Section Intentionally Crossed Out]
9. Condition of Premises: The Lessee's taking possession, shall be conclusive
evidence as against the Lessee that the premises were in good order and
satisfactory condition when the Lessee took possession. No promise of the Lessor
to alter, remodel or improve the premises or the Building and no representation
respecting the condition of the premises or the Building have been made by the
Lessor to the Lessee, unless the same in contained herein, or made a part
hereof. This lease does not grant any rights to light or air over property,
except over public streets kept open by public authority. At the termination of
this lease by lapse of time or otherwise, the Lessee shall return the premises
in as good condition as when the Lessee took possession, ordinary wear and loss
by fire excerpted, failing which the Lessor may restore the premises to such
condition and the Lessee shall pay the cost thereof. The Lessee may remove any
floor covering laid by the Lessee, provided (a) the Lessee also removes all
nails, tacks, paper, glue, bases and other vestiges of the floor covering, and
restores the floor surface to the condition existing before such floor covering
was laid, or (b) the Lessee pays to the Lessor, upon request, the cost of
restoring the floor surface to such condition. If the Lessee does not remove the
Lessee's floor coverings, from the premises prior to the end of the term, the
Lessee shall be conclusively presumed to have abandoned the same and title
thereto shall thereby pass to the Lessor without payment or credit by the Lessor
to the Lessee.
10. Alterations: The Lessee shall not make any alterations in or additions to
the premises without the Lessor's advance written consent in each and every
instance. The Lessor's decision to refuse such consent shall be conclusive. If
the Lessor consents to such alterations or additions before commencement of the
work or delivery of any materials onto the premises or into the Building, the
Lessee shall furnish the Lessor with plans and specifications, names and
addresses of contractors, copies of contracts, necessary permits and
indemnification in form and amount satisfactory to Lessor and waivers of lien
against any and all claims, costs,
ALANORTH, L.L.C. OFFICE LEASE 1
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damages, liabilities and expenses which may arise in connection with the
alterations or additions. All additions and alterations shall be installed in a
good, workmanlike manner and only new, high-grade materials shall be used.
Whether the Lessee furnishes the Lessor the foregoing or not, the Lessee hereby
agrees to hold the Lessor harmless from any and all liabilities of every kind
and description which may arise out of or be connected in any way with said
alterations or additions. Before commencing any work in connection with
alterations or additions, the Lessee shall furnish the Lessor with certificates
of insurance from all contractors performing labor or furnishing materials
insuring the Lessor against any and all liabilities which may arise out of or be
connected in any way with said additions or alterations. The Lessee shall pay
the cost of all such alterations and additions and also the cost of decorating
the premises occasioned by such alterations and additions. Upon completing any
alterations or additions, the Lessee shall furnish the Lessor with contractors'
affidavits and full and final waivers of lien and receipted bills covering all
labor and materials expended and used. All alterations and additions shall
comply with all insurance requirements and with all ordinances and regulations
of any department or agency thereof and with the requirements of all statutes
and regulations of the State of Illinois or of any department or agency thereof.
The Lessee shall permit the Lessor to supervise construction operations in
connection with alterations or additions if the Lessor requests to do so. All
additions, hardware, non-trade fixtures and all improvements, temporary or
permanent, in or upon the premises, whether placed there by the Lessee or by the
Lessor, shall, unless the Lessor requests their removal, become the Lessor's
property and shall remain upon the premises at the termination of this lease by
lapse of time or otherwise without compensation or allowance or credit to the
Lessee. If, upon the Lessor's request, the Lessee does not remove said
additions, hardware, non-trade fixtures and improvements, the Lessor may remove
the same and the Lessee shall pay the cost of such removal to the Lessor upon
demand. The Lessee shall remove the Lessee's furniture, machinery, safe or
safes, trade fixtures and other items of personal property of every kind and
description from the premises prior to the end of the term, however ended. If
not so removed, the Lessor may request their removal, and if the Lessee does not
remove them, the Lessor may do so and the Lessee shall pay the cost of such
removal to the Lessor upon demand. If the Lessor does not request their removal,
all such items shall be conclusively presumed to have been conveyed by the
Lessee to the Lessor under this lease as a bill of sale without further payment
or credit by the Lessor to the Lessee.
11. Use of Premises: (a) The Lessee shall occupy and use the premises during the
term for the purpose above specified and none other. (b) The Lessee shall not
exhibit, sell or offer for sale on
ALANORTH, L.L.C. OFFICE LEASE 1
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the premises or in the Building any article or thing except those articles and
things essentially connected with the stated use of the premises without the
advance written consent of the Lessor. (c) The Lessee will not make or permit to
be made any use of the premises which, directly or indirectly is forbidden by
public law, ordinance or governmental regulation or which may be dangerous to
life, limb or property, or which may invalidate or increase the premium cost of
any policy of insurance carried on the Building or covering its operations. (d)
The Lessee shall not display, inscribe, print, paint, maintain or affix on any
place in or about the Building any sign, notice, legend, direction, figure or
advertisement, except on the doors of the premises and on the Directory Boards,
and then only such name or names and matter, and in such color, size, style,
place and material, as shall first have been approved by the Lessor in writing.
(e) The Lessee shall not advertise the business, profession or activities of the
Lessee conducted in the Building in any manner which violates the letter or
spirit of any code of ethics adopted by any recognized association or
organization pertaining to such business, profession or activities, and shall
not use the name of the Building for any purpose other than that of business
address of the Lessee, and shall never use any picture or likeness of the
Building in any circulars, notices, advertisements, or correspondence without
the Lessor's express consent in writing. (f) The Lessee shall not obstruct, or
use for storage, or for any purpose other than ingress and egress, the
sidewalks, entrances, passages, courts, corridors, vestibules, halls, elevators
and stairways of the Building. (g) No bicycle or other vehicle and no dog or
other animal or bird shall be brought or permitted to be in the Building or any
part thereof. (h) The Lessee shall not make or permit any noise or odor that is
objectionable to other occupants of the Building to emanate from the premises,
and shall not create or maintain a nuisance thereon, and shall not disturb,
solicit or canvass any occupant of the Building, and shall not do any act
tending to injure the reputation of the Building. (i) The Lessee shall not place
or permit to be placed any article of any kind on the window ledges or on the
exterior walls, and shall not throw or permit to be thrown or dropped any
article from any window of the Building. (k) The Lessee shall not undertake to
regulate any thermostat, and shall not waste water by tying, wedging or
otherwise fastening open any faucet. (l) No additional locks or similar devices
shall be attached to any door or window. No keys for any door other than those
provided by the Lessor shall be made. If more than two keys for one lock are
desired by the Lessee, the Lessor may provide the same upon payment by the
Lessee. Upon termination of this lease or of the Lessee's possession the Lessee
shall surrender all keys of the premises and shall make known to the Lessor the
explanation of all combination locks on safes, cabinets and vaults. (m) The
Lessee shall be responsible for the locking of doors and the closing of transoms
and windows in and to the premises. (n) If the
ALANORTH, L.L.C. OFFICE LEASE 1
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Lessee desires telegraphic, telephone burglar alarm or signal service, the
Lessor will, upon request, direct where and how connections and all wiring for
such service shall be introduced and run. Without such directions, no boring,
cutting or installation of wires or cables is permitted. (o) If the Lessee
desires and the Lessor permits blinds, shades, awnings, or other form of inside
or outside window covering, or window ventilators or similar devices, they shall
be furnished, installed and maintained at the expense of the Lessee and must be
of such shape, color, material and make as approved by the Lessor. (p) All
persons entering or leaving the Building between the hours of 6 p.m. and 8 a.m.,
Monday through Friday, or at any time on Saturdays, Sundays or holidays, may be
required to identify themselves to a watchman by registration or otherwise and
to establish their rights to enter or leave the Building. The Lessor may exclude
or expel any peddler, solicitor or beggar at any time. (q) The Lessee shall not
overload any floor. The Lessor may direct the routing and location of safes and
other heavy articles. Safes, furniture and all large articles shall be brought
through the Building and into the premises at such times and in such manner as
the Lessor shall direct and at the Lessee's sole risk and responsibility. (r)
Unless the Lessor gives advance written consent in each and every instance, the
Lessee shall not install or operate any steam or internal combustion engine,
boiler, machinery, refrigerating or heating device or air-conditioning apparatus
in or about the premises, or carry on any mechanical business therein, or use
the premises for housing accommodations or lodging or sleeping purposes, or do
any cooking therein, or use any illumination other than electric light, or use
or permit to be brought into the Building any inflammable oils or fluids such as
gasoline, kerosene, naphtha and benzine, or any explosives or other articles
deemed extra hazardous to life, limb or property. (s) The Lessee shall not place
or allow anything to be against or near the glass of partitions or doors of the
premises which may diminish the light in, or be unsightly from, halls or
corridors. (t) The Lessee shall not install in the premises any equipment which
uses a substantial amount of electricity without the advance written consent of
the Lessor. The Lessee shall ascertain from the Lessor the maximum amount of
electrical current which can safely be used in the demised premises, taking into
account the capacity of the electric wiring in the Building and the premises and
the needs of other tenants in the Building and shall not use more than such safe
capacity. The Lessor's consent to the installation of electric equipment shall
not relieve the Lessee from the obligation not to use more electricity that such
safe capacity. (u) The Lessee shall not lay linoleum or other similar floor
covering so that such floor covering shall come in direct contact with the floor
of the premises, and if linoleum or other similar floor covering is used, an
interliner of builder's deadening felt shall first be affixed to the floor by
paste or other material soluble in water. The use of cement or other
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similar material is prohibited. (v) In addition to all other liabilities for
breach of any covenant of this Section 11, the Lessee shall pay to the Lessor
all damages caused by such breach and shall also pay to the Lessor an amount
equal to any increase in insurance premium or premiums caused by such breach.
The violation of any covenant of this Section 11 may be restrained by
injunction.
12. Repairs
[This Section Intentionally Crossed Out.]
13. Untenantability: If the premises or the Building are made untenantable by
fire or other casualty the Lessor may elect (a) to terminate this lease as of
the date of the fire or casualty by notice to the Lessee within thirty days
after that date, or (b) to repair, restore or rehabilitate the Building or the
premises at the Lessor's expense within one hundred twenty days after the Lessor
is enabled to take possession of the injured premises and undertake
reconstruction or repairs, in which latter event the lease shall not terminate
but rent shall be abated on a per diem basis while the premises are
untenantable. If the Lessor elects so to repair, restore or rehabilitate the
Building or the premises and does not substantially complete the work within the
one hundred twenty day period, either party can terminate this lease as of the
date of the fire or casualty by notice to the other party not later than one
hundred thirty days after the Lessor is enabled to take possession of the
injured premises and undertake reconstruction or repairs. In the event of
termination of the lease pursuant to this Section 13, rent shall be appropriated
on a per diem basis and be paid to the date of the fire or casualty.
14. Eminent Domain: If the Building, or any portion thereof which includes a
substantial part of the premises or which prevents the operation of the
building, shall be taken or condemned by any competent authority for any public
use or purpose, the term of this lease shall end upon, and not before, the date
when the possession of the part so taken shall be required for such use or
purpose, and without apportionment of the condemnation award. The Lessee shall
have not right to share in such award. Current Rent shall be apportioned as of
the date of such termination. If any condemnation proceeding shall be instituted
in which it is sought to take or damage any part of the Building, or the land
under it, or if the grade of any street or alley adjacent to the Building is
changed by any competent authority and such change of grade makes it necessary
or desirable to remodel the Building to conform to the changed grade, the Lessor
shall have the right to cancel this lease upon not less than ninety days' notice
prior to the date of cancellation designated in the notice. No money or other
consideration shall be payable by the Lessor to the Lessee for the right of
cancellation, and the Lessee shall have no right to share in the condemnation
award or in any judgment for damages caused by
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the change of grade.
15. Lessor's Remedies: All rights and remedies of the Lessor herein enumerated
shall be cumulated, and none shall exclude any other right or remedy allowed by
law.
(a) If any voluntary or involuntary petition or similar pleading under
any section or sections of any bankruptcy act shall be filed by or against the
Lessee, or any voluntary or involuntary proceeding in any court or tribunal
shall be instituted to declare the Lessee insolvent or unable to pay the
Lessee's debts, and in the case of an involuntary petition or proceeding, the
petition or proceeding is not dismissed within thirty days from the date it is
filed the Lessor may elect, but is not required, and with or without notice of
such election, and with or without entry or other action by the Lessor, to
forthwith terminate this lease, and, notwithstanding any other provision of this
lease, the Lessor shall forthwith upon such termination be entitled to recover
damages in an amount equal to the then present value of the rent specified in
Section 1 of this lease for the residue of the stated term hereof, less the fair
rental value of the premises for the residue of the stated term.
(b) If the Lessee defaults in the payment of rent, and the Lessee does
not cure the default within five days after demand for payment of such rent, or
if the Lessee defaults in the prompt and full performance of any other
provisions of this lease, and the Lessee does not cure the default within twenty
days (forthwith if the default involves a hazardous condition) after written
demand by the Lessor that the default be cured unless the default involves a
hazardous condition, which shall be cured forthwith upon the Lessor's demand, or
if the leasehold interest of the Lessee be levied upon under execution or be
attached by process of law, or the Lessee makes an assignment for the benefit of
creditors, or if a receiver be appointed for any property of the Lessee, or if
the Lessee abandons the premises, then and in any such event the Lessor may, if
the Lessor so elects but not otherwise, and with or without notice of such
election and with or without any demand whatsoever either forthwith terminate
this lease and the Lessee's right to possession of the premises or, without
terminating this lease forthwith terminate the Lessee's right to possession of
the premises.
(c) Upon any termination of this lease whether by lapse of time or
otherwise or upon any termination of the Lessee's right to possession without
termination of the _____, the Lessee shall surrender _______immediately and
deliver possession thereof to the Lessor, and hereby grants to the Lessor full
and free license to enter into and upon the premises in such event with or
without process of law and to repossess the Lessor of the premises as of
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the Lessor's former estate and to expel or remove the Lessee and any others who
may be occupying or within the premises and to remove any and all property
therefrom, using such force as may be necessary, without being deemed in any
manner guilty of trespass, eviction or forcible entry or detainer and without
relinquishing the Lessor's rights to rent or any other right given to the Lessor
hereunder or by operation of law.
(d) If the Lessee abandons the premises or otherwise entitles the
Lessor so to elect, and the Lessor elects to terminate the Lessee's right to
possession only, without terminating the lease, the Lessor may, at the Lessor's
option enter into the premises, remove the Lessee's signs and other evidences of
tenancy, and take and hold possession thereof as in Paragraph (c) of this
Section 15 provided, without such entry and possession terminating the lease or
releasing the Lessee, in whole or in part, from the Lessee's obligation to pay
the rent hereunder for the full term, and in any such case the Lessee, shall pay
forthwith to the Lessor, if the Lessor so elects, a sum equal to the entire
amount of the rent specified in Section 1 of this lease for the residue of the
stated term plus any other sums then due hereunder. Upon and after entry into
possession without termination of the lease, the Lessor may, but need not, relet
the premises or any part thereof for the account of the Lessee to any person,
firm or corporation other than the Lessee for such rent, for such time and upon
such terms as the Lessor in the Lessor's sole discretion shall determine, and
the Lessor shall not be required to accept any tenant offered by the Lessee or
to observe any instructions given by the Lessee about such reletting. In any
such case, the Lessor may make repairs, alterations and additions in or to the
premises, and redecorate the same to the extent deemed by the Lessor necessary
or desirable, and the Lessee shall, upon demand, pay the cost thereof, together
with the Lessor's expenses of the reletting. If the consideration collected by
the Lessor upon any such reletting for the Lessee's account is not sufficient to
pay monthly the full amount of the rent reserved in this lease, together with
the costs of repairs, alterations, additions, redecorating and the Lessor's
expenses, the Lessee shall pay to the Lessor the amount of each monthly
deficiency upon demand; and if the consideration is collected from any such
reletting is more than sufficient to pay the full amount of the rent reserved
herein, together with the costs and expenses of the Lessor, the Lessor, at the
end of the stated term of the lease, shall account for the surplus to the
Lessee.
(e) [Deliberately Struck Out]
(f) Any and all property which may be removed from the premises by the
Lessor pursuant to the authority of the lease or of law, to which the Lessee is
or may be entitled, may be handled, removed or stored by the Lessor at the risk,
cost and expense of
ALANORTH, L.L.C. OFFICE LEASE 1
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<PAGE>
the Lessee, and the Lessor shall in no event be responsible for the value,
preservation or safekeeping thereof. The Lessee shall pay to the Lessor, upon
demand, any and all expenses incurred in such removal and all storage charges
against such property of the Lessee not retaken from storage by the Lessee
within thirty days after the end of the term, however terminated, shall be
conclusively presumed to have been conveyed by the Lessee to the Lessor under
this lease as a bill of sale without further payment or credit by the Lessor to
the Lessee.
(g) The Lessee shall pay upon demand all the Lessor's costs, charges
and expenses, including the fees of counsel, agents and others retained by the
Lessor, incurred in enforcing the Lessee's obligations hereunder or incurred by
the Lessor in any litigation, negotiation or transaction in which the Lessee
causes the Lessor, without the Lessor's fault, to become involved or concerned.
16. Subordination of Lease: The rights of the Lessee under this lease shall be
and are subject and subordinate at all times to the lien of any mortgage or
mortgages now or hereafter in force against the Building or the underlying
leasehold estate, if any, and to all advances made or hereafter to be made upon
the security thereof, and the Lessee shall execute such further instruments
subordinating this lease to the lien or liens of any such mortgage or mortgages
as shall be requested by the Lessor.
17. Notices: In every instance where it shall be necessary or desirable for the
Lessor to serve any notice or demand upon the Lessee, it shall be sufficient (a)
to deliver or cause to be delivered to the Lessee a written or printed copy
thereof, or (b) to send a written or printed copy thereof by United States
certified or registered mail, postage prepaid, addressed to the Lessee at the
demised premises, in which event the notice or demand shall be deemed to have
been served at the time the copy is posted, or (c) to leave a written or printed
copy thereof with some person above the age of ten years in possession of the
demised premises or to affix the same upon any door leading into the demised
premises, in which event the notice or demand shall be deemed to have been
served at the time the copy is so left or affixed. All notices or demands shall
be signed by or on behalf of the Lessor.
18. Miscellaneous: (a) No receipt of money by the Lessor from the Lessee after
the termination of this lease or after the service of any notice or after the
commencement of any suit, or after final judgment for possession of the premises
shall renew, reinstate, continue or extend the term of this lease or affect any
such notice, demand or suit.
(b) No waiver of any default of the Lessee hereunder shall be implied
from any omission by the Lessor to take any action on
ALANORTH, L.L.C. OFFICE LEASE 1
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<PAGE>
account of such default if such default persists or be repeated, and no express
waiver shall affect any default other than the default specified in the express
waiver and that only for the time and to the extent therein stated. The
invalidity or unenforceability of any provision hereof shall not affect or
impair any other provision.
(c) In the absence of fraud, no person, firm or corporation, or the
heirs, legal representatives, successors and assigns, respectively, thereof,
executing this lease as agent, trustee or in any other representative capacity
shall ever be deemed or held individually liable hereunder for any reason or
cause whatsoever.
(d) The words "Lessor" and "Lessee" wherever used in this lease shall
be construed to mean Lessors or Lessees in all cases where there is more than
one lessor or lessee, and the necessary grammatical changes required to make the
provisions hereof apply either to corporations or individuals, men or women,
shall in all cases be assumed as though in each case fully expressed.
(e) Provisions inserted herein or affixed hereto shall not be valid
unless appearing in the duplicate original hereof held by the Lessor. In event
of variation or discrepancy, the Lessor's duplicate shall control.
(f) Each provision hereof shall extend to and shall, as the case may
require, bind and inure to the benefit of the Lessor and the Lessee and their
respective heirs, legal representatives and successors, and assigns in the event
this lease has been assigned with the express, written consent of the Lessor.
(g) Submission of this instrument for examination does not constitute a
reservation of or option for the premises. The instrument becomes effective as a
lease upon execution and delivery by both Lessor and Lessee.
(h) The heading of sections are for convenience only and do not limit
or construe the contents of the sections.
(i) All amounts (other than the Rent) owed by the Lessee to the Lessor
hereunder shall be paid within ten days from the date the Lessor renders
statements of account therefor and shall bear interest at the rate of 7% per
annum thereafter until paid.
(j) Provisions typed on the back of this lease and signed by the Lessor
and the Lessee and all riders attached to this lease and signed by the Lessor
and the Lessee are hereby made a part of this lease as though inserted at length
in this lease.
(k) If the Lessee shall occupy the premises prior to the
ALANORTH, L.L.C. OFFICE LEASE 1
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<PAGE>
beginning of the term of this lease with the Lessor's consent, all the
provisions of this lease shall be in full force and effect as soon as the Lessee
occupies the premises. Rent for any period prior to the beginning of the term of
this lease shall be fixed by agreement between the Lessor and Lessee.
ALANORTH, L.L.C. OFFICE LEASE 1
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<PAGE>
ASSIGNMENT
For value received, the undersigned Lessee hereby assigns all the Lessee's
right, title and interest in and to the within lease from and a
________________________unto___________________________________ the premises to
be use and occupied for _______________________________ and for no other purpose
agreed this assignment shall not release or relieve the undersigned, as Original
Lessee, from any liability under the covenants of the ___ provisions of
paragraph (e) of Section 15 of this lease.
LESSEE:________________________
________________________
Dated__________________, 19___
================================================================================
ACCEPTANCE OF ASSIGNMENT
In consideration of the above assignment and the written consent of the Lessor
thereto, the undersigned Assignee (binding also the__ representatives and
successors), hereby assumes the obligations of said lease imposed on the Lessee
and promises to make all payments ___ perform all conditions and covenants of
the lease by the Lessee to be kept and performed commencing ____________________
adopting for the undersigned the provisions of paragraph (e) of Section 15 of
the lease as though here restated.
LESSEE:________________________
________________________
Dated__________________, 19___
Lessor: THE TAKIFF PROPERTIES GROUP
------------------------------------
#2, Sanford Takiff, General Partner
With Berkson & Sons Ltd. As Managing Agent
Lessee: ALANORTH, L.L.C.
------------------------------------
- --------------------------------------------
ALANORTH, L.L.C. OFFICE LEASE 1
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<PAGE>
Premises: 633 Skokie Blvd. Ste. #407
Northbrook, IL 60062
Term: Five (5) years
From: JANUARY 1,
To: DECEMBER 31, 2002
Rent: 1/1/98 - 12/3/198 - $3250.00/mo
1/1/99 - 12/31/99 - $3347.50/mo
1/1/00 - 12/31/00 - $3447.93/mo
1/1/01 - 12/31/01 - $3551.37/mo
1/1/02 - 12/31/02 - $3657.91/mo
CONSENT TO ASSIGNMENT
Lessor hereby consents to the above Assignment upon the express condition that
Original Lessee shall remain liable for the prompt pay ___ the keeping and
performance of all conditions and covenants of the lease by the Lessee to be
kept and performed. The Lessor does ___ any further Assignment or to any
subletting of the premises.
LESSOR:______________________
_____________________________
Dated__________________, 19___
================================================================================
GUARANTY
[Blank line/space indicates illegible text]In consideration of the making of the
above lease by the Lessor with the Lessee at the request of the undersigned and
in reliance on this ____ signed hereby guarantees the payment of the Rent to be
paid by the Lessee and the performance by the Lessee of all the terms,
conditions, ___ agreements of the lease, and the undersigned promises to pay all
the Lessor's expenses, including reasonable attorney's fees, incurred by ___ all
obligations of the Lessee under the lease or incurred by the Lessor in enforcing
this guaranty. The Lessor's consent to any assign__ and successive assignments
by the Lessee and Lessee's assigns, of this lease, made either with or without
notice to the undersigned, or a ___ use of the demised premises, or Lessor's
forbearance, delays, extensions of time or any other reason whether similar to
or differen___ shall in no wise or manner release the undersigned from liability
as guarantor.
WITNESS the hand and seal of the undersigned at the date of the above lease.
ALANORTH, L.L.C. OFFICE LEASE 1
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<PAGE>
R I D E R
In the event there is an inconsistency or contradiction between the provisions
of this Rider and the printed portion of this lease, the provisions of this
Rider shall prevail.
Lessor, at Lessor's cost and expense, shall keep the heating, air conditioning,
electrical, plumbing and other work systems in the Building in good order,
condition and repair and shall keep the public and other portions of the
Building necessary to the enjoyment and use of the demised premises by Lessee in
good order, condition and repair. At any reasonable time or times the Lessor,
either voluntarily or pursuant to government requirements may at Lessor's own
expense make repairs, alterations or improvements in or to the Building or any
part thereof, including the demised premises, and during such work operations,
Lessor may, if reasonably appropriate, close entrances, doors, corridors or
other facilities all without any liability to Lessee by reason of interference,
inconvenience or annoyance. To the full extent permitted by law, Lessee hereby
waives and releases all claims against Lessor, its employees and agents for any
expense, injury, loss or damage to persons or property sustained in or to any
part of the Building or the demised premises or upon any adjacent or nearby
building, land, street or alley, except due to negligence of Lessor, its
employees and agents.
Lessee shall at its own expense, keep the demised premises in good order,
condition and repair, subject however to the provisions of Section 13, and shall
promptly and adequately repair all damage to the demised premises and the
Building caused by Lessee or its employees and invitees, including replacing or
repairing all damaged or broken glass, fixtures and appurtenances under the
supervision and with the approval of Lessor and within any reasonable period of
time specified by Lessor, and if Lessee does not do so, Lessor may, but not need
make such repairs and replacements and Lessee shall pay Lessor the cost thereof.
Lessee shall install and use at all times, floor pads or protective mats under
all movable chairs and Lessee shall be responsible for damage to carpeting in
the demised premises caused directly or indirectly by Lessee's failure to
install such floor pads or protective mats.
Lessor, at Lessor's cost and expense, shall furnish Lessee with Levolor blinds
in the demised premises. If Lessee desires to hang drapes over blinds, all
drapes must be lined with a white fabric and be approved by Lessor.
Lessor, at Lessor's cost and expense, shall furnish to Lessee air
conditioning daily from 8:00 a.m. to 6:00 p.m. Monday thru Friday,
and 8:00 a.m. to 1:00 p.m. on Saturdays (Sundays and Holidays
ALANORTH, L.L.C. OFFICE LEASE 1
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<PAGE>
excepted) wherever air conditioning shall be required for the comfortable
occupancy and use of the demised premises.
Included in the Janitor Service referred to in the printed portion of this
lease, Lessor at Lessor's cost and expense, shall furnish to Lessee nightly
cleaning service in accordance with cleaning service schedule (Saturdays,
Sundays and Holidays excepted).
Lessor agrees that Lessee shall have the right to sublease or assign the demised
premises to a reputable tenant, subject to approval by Lessor. Such approval
shall not be unreasonable withheld. Lessee agrees to furnish Lessor with a copy
of said sublease at the time of Lessee's request for approval. Subleasing of
demised premises shall not release Lessee from the obligations of this lease and
Lessee shall remain fully liable for the payment of rent and additional rent due
and to become due hereunder and for the performance of all the covenants,
conditions, agreements and terms contained in this lease on the part of Lessee
to be performed.
All rent must be fully paid, at least fourteen days prior to Lessee's moving out
of the demised premises.
Whenever consent, approval or permission of Lessor may be required under the
provisions of this lease, such consent, approval or permission shall not be
unreasonably withheld or delayed.
Lessor warrants that Lessor has full right and lawful authority to lease to
Lessee the demised premises and hereby consents and agrees to defend the
leasehold right and the title created in Lessee by this lease and this
undisturbed quiet and peaceful possession of the demised premises by Lessee.
Lessee acknowledges and agrees that during such time as Aetna Life Insurance
Company may be Lessor's mortgage lender, Lessee may not terminate this Lease on
account of Lessor's default unless Lessee has sent a copy of its of notice of
default of Aetna Life Insurance Company, One Civic Center Plaza, P.O. Box 1414,
Hartford, Connecticut 06143, by certified or registered mail, postage prepaid,
and offered Aetna sixty (60) days within which to cure such default; whereupon
Lessee shall not have the right so to terminate this Lease if Aetna obligates
itself so to cure such default by written notice to Lessee given within fifteen
(15) days of Lessee's written notice to Aetna and so cures such default within
said sixty (60) days period.
Real Estate Taxes. Lessee agrees to pay, in addition to the monthly rent
provided herein, additional rent to be made with respect to each calendar year
of the term or portion thereof, if the Ownership Taxes for any year of the term
(including the year I
ALANORTH, L.L.C. OFFICE LEASE 1
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<PAGE>
which this lease terminates) reflects a tax in excess of the tax per square foot
of building area as same may be determined based upon the 1996* Tax Bill; then
such excess of the tax per square foot so determined shall be paid by Lessee for
the number of square feet of area leased hereunder. Lessor shall deliver to
Lessee a statement containing the necessary information with respect to
Ownership Taxes and Lessee's share thereof, if any shall be due, shall be paid
by Lessee within fifteen (15) days thereafter. The additional taxes for any
fractional year shall be computed on the basis of the most recent ascertainable
tax bill paid on or before the termination date of this lease. "Ownership Taxes"
are defined as the general real estate taxes levied or assessed against the land
of the Site and the Building in which the leased premises are located, if any,
levied or assessed against said property limited, however, to the installment
which applies to the calendar year in which paid. There shall be included in
Real Estate Taxes the amount of fees, costs, and expenses including reasonable
attorney fees paid or incurred by Lessor in seeking or obtaining a refund or
reduction in such taxes. The ratio for such adjustment shall be 2600/48,400
square feet. *To be paid in 1997.
Electric Charges. Lessee agrees to pay in addition to the monthly rent provided
herein, additional rent to be made with respect to the electrical charges for
any calendar year of the term or portion thereof. If the electric bill for any
one year of the term (including the year in which this lease terminates)
reflects an increase, then Lessee is obligated to pay their proportionate share
of the increase over the base year. Said base year shall be the 1997 total
electric bill. Said electrical charges, exclusive of the restaurant, shall be
calculated under the following ratio - 2600 /36,000 square feet.
On or about March 1, 1998 and on or about March 1, of each year thereafter,
Lessor shall furnish to Lessee copies of invoices of electrical charges paid by
the Building for the previous calendar year together with a statement for any
additional rent due pursuant to this paragraph, which additional rent shall be
due and payable within ten (10) days after receipt of such statement.
As security for the faithful performance of the terms and obligations of this
lease, Lessee has deposited with the Lessor the sum of Three Thousand Two
Hundred Fifty ($3,250.00) and no/100ths-- -- DOLLARS. At no time shall said
security deposit be considered as payment of advance rental. Provided that the
Lessee is not in default in the payment of the rent or any other terms of this
lease, Lessor shall return said security deposit to the Lessee within a
reasonable period of time after the expiration of the term hereof. However,
should Lessee default in the terms hereof, the said security deposit shall
thereupon without further notice to Lessee become the sole and exclusive
property of the Lessor and in
ALANORTH, L.L.C. OFFICE LEASE 1
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<PAGE>
the event said security deposit shall be insufficient to cover the damages
sustained by the Lessor, Lessor shall have the right to proceed against the
Lessee for the recovery of the balance of the damages due it and shall be
entitled to take any further action against the Lessee by virtue of any existing
statute or in any other manner. In the event the premises are sold or
transferred prior to the expiration of this lease, Lessee agrees that the
aforesaid security deposit may be transferred to the purchaser of said premises
or the grantee thereof and that Lessee shall look to said purchaser or grantee
for the return of said security deposit. All rents, excess taxes, and electrical
charges due and owing under said lease must be paid in full before said security
deposit is returned.
Hazardous Waste. The term "Hazardous Substances", as used in this lease shall
mean pollutants, contaminants, toxic or hazardous wastes, or any other
substances, the use and/or the removal of which is required or the use of which
is restricted, prohibited or penalized by any "Environmental Law", which term
shall mean any federal, state or local law, ordinance or other statute of a
governmental or quasi-governmental authority relating to pollution or protection
of the environment. Tenant hereby agrees that (A) no activity will be conducted
on the premises that will produce any Hazardous Substance, except for such
activities that are part of the ordinary course of Lessee's business activities
(the "Permitted Activities") provided said Permitted Activities are conducted in
accordance with all Environmental Laws and have been approved in advance in
writing by Lessor; Lessee shall be responsible for obtaining any required
permits and paying any fees and providing any testing required by any
governmental agency; (B) the premises will not be used in any manner for the
storage of any Hazardous Substances except for the temporary storage of such
materials that are used in the ordinary course of Lessee's business (the
"Permitted Materials") provided such Materials are property stored in a manner
and location meeting all Environmental Laws and approved in advance in writing
by Lessor; Lessee shall be responsible for obtaining any required permits and
paying any fees and providing any testing required by any governmental agency;
(C) no portion of the premises will be used as a landfill or a dump; (D) Lessee
will not install any underground tanks of any type; (E) Lessee will not allow
any surface or subsurface conditions to exit or come into existence that
constitute, or with the passage of time may constitute a public or private
nuisance; (F) Lessee will not permit any Hazardous Substances to be brought into
the premises, except for the Permitted materials described above, and if so
brought or found located thereon, the same shall be immediately removed, with
proper disposal, and all required cleanup procedures shall be diligently
undertaken pursuant to all Environmental Laws. Lessor or Lessor's representative
shall have the right but not the obligation to enter the premises for the
purpose of inspecting the
ALANORTH, L.L.C. OFFICE LEASE 1
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<PAGE>
storage, use and disposal Permitted Materials to ensure compliance with all
Environmental Laws. Should it be determined, in Lessor's sole opinion, that said
Permitted Materials are being improperly stored, used, or disposed of, then
Lessee shall immediately take such correction action as required by Lessor.
Should Lessee fail to take such corrective action within 24 hours, Lessor shall
have the right to perform such work and Lessee shall promptly reimburse Lessor
for any and all costs associated with said work. If at any time during or after
the term of the lease, the premises are found to be so contaminated or subject
to said conditions, Lessee shall diligently institute proper and thorough
cleanup procedures at Lessee's sole cost and Lessee agrees to indemnify and hold
Lessor harmless from all claims, demands, actions, liabilities, costs, expenses,
damages, and obligations of any nature arising from or as a result of the use of
the premises by Lessee. The foregoing indemnification and the responsibility of
Lessee shall survive the termination or expiration of this Lease.
Casualty Insurance. Tenant agrees at all times during the term hereof at its
expense to keep its merchandise, fixtures, equipment, leasehold improvements and
other property situated within the Premises insured against fire, with extended
coverage to the extent of at least 80% of the replacement value thereof. Tenant
further agrees that, at all times, when a "boiler" as that term is defined for
the purposes of boiler insurance, is located on premises insurance with policy
limits of not less than $100,000 insuring both Landlord and tenant against loss
or liability caused by the operation or malfunction of such boiler shall be
required. Such insurance shall be carried with companies satisfactory to
Landlord, and shall be in form satisfactory to Landlord. Tenant shall obtain a
written obligation of each insurance company to notify Landlord at lease 30 days
prior to modification, change, or cancellation of such insurance. Such policies
or duly executed certificates of insurance shall be delivered to Landlord prior
to the commencement of Tenant's occupancy hereunder and renewals thereof as
required shall be delivered to Landlord at least 3 days prior to the expiration
of the respective policy terms.
The proceeds to Tenant of such insurance shall not be used, except with the
consent of Landlord, for any purpose other than the repair or replacement of
merchandise, fixtures, equipment, leasehold improvements and other property
situated within the Premises.
Liability Insurance. Tenant agrees to carry during the term hereof public
liability insurance in respect of the Premises written by a company satisfactory
to Landlord providing comprehensive general liability (including bodily injury
and property damage coverage) with a broad form coverage endorsement and a
combined single limit of at least $1 million. Such insurance shall name
Landlord, its agents, beneficiaries, and employees as additional insured parties
ALANORTH, L.L.C. OFFICE LEASE 1
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<PAGE>
and shall provide that Landlord shall be given a minimum of 30 days notice by
the insurance company prior to cancellation, termination or change of such
insurance. Tenant shall provide Landlord with copies of the policies or
certificates evidencing that such insurance is in full force and effect and
stating the terms thereof.
Indemnity. Tenant shall indemnify, defend and hold harmless Landlord, its agents
and employees,(except for Landlord's gross negligence or willful misconduct),
from and against all claims, liabilities, losses, damages and expenses,
including attorneys fees and court costs, for injury to or death of any person
or loss of or damage to property in or upon the Premises and including the
person and property of Tenant, if caused or contributed to by Tenant, its
employees, agents, invitees, licensees or others, it being understood and agreed
that all property kept, stored, or maintained in or upon the Premises, shall be
at risk of Tenant. Landlord shall indemnify hold harmless and defend Tenant
(except for Tenant's gross negligence or willful misconduct) against all claims,
losses or liabilities for injury or death to any person or for damage to or loss
of use of any property arising out of any occurrence in, on or about the
Building or land (other than the Premises) if caused by Landlord or Landlord's
agents, (other tenants or their invitees or agents shall not be considered
Landlord's agents). Such indemnification shall include and apply to attorney's
fees, investigation costs, and other costs actually incurred by the Tenant. Such
indemnification shall include and apply to attorney's fees, investigation costs,
and other costs actually incurred by Landlord.
Substitution. Landlord reserves the right, upon thirty (30) days written notice
to Tenant, to substitute other premises within the building for the premises
described above. The substituted premises shall contain at least the same square
footage as the leased premises, shall contain comparable Tenant improvements,
and the rental shall be at the then current rate for such space, but in no way
to exceed the rental specified herein. Landlord shall pay all reasonable moving
expenses of Tenant inciden__ to such substitution of premises.
From and after a default in the payment of rent or other money due Lessor under
this Lease, at the option of Lessor, Lessee shall thereafter pay all sums due
Lessor by cashier's or certified check.
1.Lessor, at Lessor's cost and expense shall demolish six perimeter offices and
one coat closet per Exhibit "A" at a cost of
______________.
2.Lessor, at Lessor's cost and expense, shall patch, paint and recarpet using
building standard paint and carpet.
ALANORTH, L.L.C. OFFICE LEASE 1
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<PAGE>
3.Lessee shall have the right to terminate this lease at the end of the third
(3rd) year with six (6) months written notice and a check paying Landlord's
unamortized remodeling cost amortized on a straight line basis.
4.Lessor shall provide Lessee with Landlord's remodeling costs within 30 days of
the commencement of the term.
5.In the event that Landlord/Lessor must enter the Premises for any reason,
Landlord/Lessor must provide Lessee reasonable notice prior to entry.
THIS RIDER IS ATTACHED TO AND MADE PART OF A CERTAIN OFFICE LEASE dated October
6, 1997 by and between THE TAKIFF PROPERTIES GROUP LTD. #2 Sanford Takiff,
General Partner, with Berkson & Sons Ltd. As Managing Agent as Lessor and ALARON
TRADING CORP. as Lessee for the office space commonly known as 633 SKOKIE
BOULEVARD, SUITE #407, NORTHBROOK, ILLINOIS 60062, for a term commencing
December 1, 1997 and ending November 30, 2002.
LESSOR: LESSEE:
THE TAKIFF PROPERTIES GROUP LTD. ALANORTH, L.L.C
#2, Sanford Takiff, General
Partner, with Berkson & Sons Ltd.
as Managing Agent
BY:____________________________ BY:__________________________
Its Duly Authorized Agent
* Landlord shall indemnify, hold harmless and defend Tenant (except for
Tenant's gross negligence or willful misconduct) against all claims, losses
or liabilities, for injury or death to any person or for damage to or loss
of use of any property arising out of any occurrence in, on or about the
Building or land (other than the Premises) if caused by Landlord or
Landlord's agents, (other tenants or their invitees or agents shall not be
considered Landlord's agents). Such indemnification shall include and apply
to attorney's fees, investigation costs, and other costs actually incurred
by the Tenant.
ALANORTH, L.L.C. OFFICE LEASE 1
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<PAGE>
THIS PAGE FOR BUILDING PLAN
633 Skokie Blvd., Northbrook, IL
Suite 407
2,600 sq. ft. Rentable
$15.00 sq. ft./$3,250.00 mo
BERKSON & SONS REALTORS 498-6000
Jack Leahy
Sales Manager
43.333 Skokie Boulevard - Suite 111
Northbrook, Illinois 60062
(847) 498-6000 (847) 498-4529
Northbrook Fax
ALANORTH, L.L.C. OFFICE LEASE 1
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EXHIBIT 10.10
LEASE
Between
ALARON DEVELOPMENT, L. L. C.
an Illinois Limited Liability Company
and
ALARON TRADING CORPORATION,
an Illinois Corporation
TABLE OF CONTENTS
ARTICLE I. Premises.............................................1
ARTICLE II. Term.................................................1
ARTICLE III. Rent.................................................1
ARTICLE IV. Use..................................................2
ARTICLE V. Maintenance of Premises..............................2
ARTICLE VI. Signs................................................3
ARTICLE VII. Insurance............................................3
ARTICLE VIII. Damage or Destruction................................5
ARTICLE IX. Liens................................................6
ARTICLE X. Alterations and Improvements.........................7
ARTICLE XI. Condemnation.........................................7
ARTICLE XII. Rent Absolute........................................8
ARTICLE XIII. Assignment and Subletting............................9
ARTICLE XIV. Indemnity for Litigation.............................9
ARTICLE XV. Estoppel Certificate.................................9
ARTICLE XVI. Condition and Inspection of Premises................10
ARTICLE XVII. Fixtures............................................10
ARTICLE XVIII Default.............................................10
ARTICLE XIX. Landlord's Performance of Tenant's Covenants........12
ARTICLE XX. Exercise of Remedies................................13
ARTICLE XXI. Subordination to Mortgages..........................13
ARTICLE XXII. Indemnity and Waiver................................14
ARTICLE XXIII Surrender...........................................14
ARTICLE XXIV. Covenant of Quiet Enjoyment.........................15
ARTICLE XXV. Short Form Lease....................................15
ARTICLE XXVI. Notices.............................................16
ARTICLE XXVII Covenants Binding Upon Successors and Assigns.......16
ARTICLE XXVII Time of Essence.....................................16
ARTICLE XXIX. Americans With Disabilities Act.....................17
ARTICLE XXX. Miscellaneous.......................................17
<PAGE>
LEASE
THIS LEASE is made this 1st day of July, 1998 between Alaron
Development L.L.C., an Illinois Limited Liability Company (hereinafter referred
to as "Landlord"), and Alaron Trading Corporation, an Illinois corporation
(hereinafter referred to as
("Tenant").
W I T N E S S E T H:
A. Landlord owns the property commonly known as 660 South Federal
Highway, Pompano Beach, Florida.
B. Tenant desires to lease the Premises (as hereinafter defined) on the
terms and conditions hereinafter set forth.
C. Landlord is willing to enter into this Lease on the terms and
conditions hereinafter set forth.
Now, therefore, Landlord and Tenant agree as follows:
ARTICLE I.
Premises
Landlord, for and in consideration of the rents herein reserved and of
the covenants and agreements herein contained on the part of the Tenant to be
kept, observed and performed, does by these presents, lease to Tenant and Tenant
does hereby lease from Landlord, the real estate described in Exhibit A attached
hereto and made a part hereof, together with all buildings and improvements now
located thereon, and subject to covenants, agreements, easements, encumbrances,
restrictions and current general and special real estate taxes and assessments
affecting said real estate and the improvements thereon. Said real estate and
improvements are hereinafter referred to as the "demised premises".
ARTICLE II.
Term
The term of this Lease shall commence on the date hereof ("Commencement
Date") and shall terminate on June 30, 2002 ("Expiration Date") (collectively,
the "lease term"), unless sooner terminated as herein set forth.
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ARTICLE III.
Rent
Section 3.1. Base Rent. During the lease term Tenant shall pay to
Landlord as base rent (the "Base Rent") for the demised premises, without offset
or deduction of any kind, the following amounts. During the lease term Tenant
shall pay to Landlord as Rent for the demised premises the sum of Three Hundred
Sixty Thousand Dollars and No Cents ($360,000.00), without offset or deduction
of any kind, payable in equal monthly installments of $7,500 each. All such
payments shall be made in advance on the first day of the month to Alaron
Development L.L.C. at 822 West Washington Boulevard, Chicago, Illinois 60607, or
at such other place as Landlord in writing directs.
Section 3.2. Net Lease. All rent payable under this Lease shall be
absolutely net to the Landlord so that this Lease shall yield, net, to the
Landlord, the specified Rent in each specified period during the lease term.
Section 3.3. Past Due Rent. If Tenant shall fail to pay when the same
is due and payable, any Base Rent, any additional rent, or any amount or charges
accruing or payable under this lease, such unpaid amounts shall bear interest
from the due date thereof to the date of payment at the lease interest rate (as
hereinafter defined).
ARTICLE IV.
Use
The demised premises shall be used solely for general office purposes
Tenant shall not use or occupy the demised premises or permit the demised
premises to be used or occupied contrary to any statute, rule, order, ordinance,
requirement, regulation or restrictive covenant applicable thereto or in any
manner which would violate any certificate of occupancy affecting the same or
which would render the insurance thereon void or which would cause structural
injury to the improvements or cause the value or usefulness of the demised
premises or any part thereof to diminish or which would constitute a public or
private nuisance or waste, and Tenant agrees that it will, promptly upon
discovery of any such use, take all necessary steps to compel the discontinuance
of such use.
ARTICLE V.
Maintenance of Premises
Section 5.1. Maintenance and Repairs by Tenant. Tenant
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shall maintain the demised premises and any buildings, structures, facilities,
improvements and appurtenances now or hereafter erected thereon in good order
and repair, both inside and outside, structurally and nonstructurally, and keep
the same and al parts thereof, including, without limiting the generality of the
foregoing, foundations, walls, floors, roof, sidewalks, curbs, water and sewer
connections, windows and other glass, plumbing, water, gas and electric
fixtures, pipes, wires and conduits, heating, cooling and electrical and
plumbing systems, elevators, boilers, machinery, fixtures, equipment,
furnishings, facilities, appliances, roadways, walkways, parking areas and
landscaping in, or on connected with the demised premises, in good, clean,
healthful, and safe order and condition, all in accordance with applicable
municipal and other governmental statutes rules, orders and regulations and
ordinances and the direction of proper public officers, suffering no waste or
injury, and shall, at Tenant's sole expense, promptly make or cause to be made
all needed repairs, replacements, renewals and additions, structural or
otherwise, whether ordinary or extraordinary, foreseen or unforeseen, in and to
any of the foregoing, all as may be necessary to maintain the value of the
building and other improvements which comprise a portion of the demised premises
throughout the lease term. All such repairs, replacements, renewals and
additions shall be of good quality and sufficient for the proper maintenance and
operation of the demised premises and any buildings, structures, facilities,
furnishings, equipment, fixtures, improvements and appurtenances now or
hereafter erected thereon and shall be constructed and installed in compliance
with all requirements of all governmental authorities having jurisdiction
thereof and of the appropriate Board of Fire Underwriters or any successor
thereof. Tenant shall not permit anything to be done upon the demised premises
which would invalidate or prevent the procurement or any insurance policies
which may at any time be required pursuant to the provisions of this lease.
Section 5.2 Maintenance by Landlord on Tenant's Default. If Tenant
refuses or neglects to make any repairs as required hereunder to the reasonable
satisfaction of Landlord, Landlord, within seven (7) days after written demand,
may made such repairs without liability to Tenant for any loss or damage that
may accrue to Tenant's merchandise, fixtures, or other property or to Tenant's
business by reason thereof, and upon completion thereof, Tenant shall pay
Landlord's costs for making such repairs plus twenty percent (20) of such costs
for overhead upon presentation of a bill therefore, as additional rent.
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ARTICLE VI.
Signs
Tenant will not place or suffer to be placed or maintained on any
exterior wall or the roof of the building comprising a portion of the demised
premises any sign or advertising matter or other thing of any kind, without
first obtaining Landlord's written consent, which consent shall not be
unreasonably withheld so long as such item complies with all applicable
municipal and governmental statutes, rules, orders and regulations and
ordinances and does not affect the structure of such building.
Tenant further agrees to maintain any such sign or advertising matte as
may be approved in good condition and repair at all times.
ARTICLE VII.
Insurance
Section 7.1. Liability Insurance. Tenant covenants to defend, save
harmless, and indemnify Landlord, its agents, beneficiaries and officers and
employees or any of them from any liability for injury, loss, accident or damage
to any person or property, and from any claims, actions, proceedings and
expenses and costs in connection therewith (including without limitation
reasonable counsel fees) arising from the omission, fault, willful act or
negligence of Tenant, its officers, agents, servants or employees in connection
with Tenant's use of the demised premises. Tenant shall at all times during the
lease term, at Tenant's expense, maintain public liability insurance covering
the demised premises insuring Landlord as well as Tenant with limits of not less
than $1,000,000 for each injury or death to a person and $1,000,00 for each
incident involving personal injury or death to persons and, in each case of
property damage, not less than $500,000 for any one occurrence. If by reason of
changed economic conditions the coverages and amounts of public liability
insurance referred to above become inadequate, Tenant agrees to increase the
coverages and amounts of such insurance promptly upon Landlord's request.
Section 7.2. Hazard Insurance. Tenant shall at all times during the
lease term, at Tenant's expense, keep the demised premises insured against loss
by fire and those risks now or hereafter normally covered by the term "all risk
extended coverage", in the amount of the full replacement cost (without
depreciation) of the buildings and other improvements (above foundations)
located on the demised premises. For the purposes of determining the amount of
insurance hereunder, Landlord may request a written appraisal furnished by an
insurance company
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insuring the improvements, or an independent appraisal company, not more
frequently than once every three years, and such appraisal shall be binding upon
Landlord and Tenant. Tenant shall bear the expense, if any, of such appraisals.
At the commencement of the lease term, the full replacement cost (without
depreciation) of the building and other improvements shall be 5250,000.
Section 7.3. Business Interruption Insurance. Upon the written request
of Landlord, Tenant shall at all times during the lease term, at Tenant's
expense, maintain all risk business interruption rental use and occupancy
insurance in an amount equal to Base Rent and real estate taxes and all
additional charges hereunder for a period of twelve (12) months, to insure
payment of all charges due to Landlord hereunder in the event of the
interruption of Tenant's business for any reason whatsoever.
Section 7.4. Workmen's Compensation Insurance. In the event, that
Tenant or any one holding or claiming by, through or under Tenant employs any
person or persons upon the demised premises, then Tenant or such person holding
or claiming by, through or under Tenant shall provide at its expense for
Workmen's Compensation Insurance in the usual form indemnifying Tenant and
Landlord against loss or damage resulting from any accident or casualty within
the purview of the Illinois Workmen's Compensation Lard and in the amount as
required from time to time by statute.
Section 7.5. Boiler Scaffolding and Plate Glass Insurance. Upon the
written request of Landlord, Tenant shall procure, at Tenant's expense,
scaffolding insurance when needed by reason of Fork performed on the demised
premises. Tenant shall also maintain, in full force and effect during the lease
term at Tenant's expense, boiler insurance in an amount equal to the total cost
of the boiler as installed and improved and insurance against breakage of all
plat glass used in the demised premises.
Section 7.6. Other Insurance. In the event that any type of legislation
may hereafter be enacted imposing special liability upon Landlord by virtue of
the use of the demised premises for any purpose, Tenant shall provide Landlord
(prior to using the demised premises for such purpose), with insurance in
customary form and with insurers and limits satisfactory to Landlord against any
and all such liability. Tenant shall procure, at Tenant's expense, any
additional type of insurance coverage necessitated by activities carried on by
Tenant on the demised premises or reasonably requested by Landlord to protect
Landlord's interest in the demised premises such policies of insurance shall be
in customary form, with insurers and limits
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satisfactory to Landlord, against any and all such liability, and naming
Landlord and such other parties as Landlord may designate as additional insured
parties thereunder.
Section 7.4. Evidence of Insurance. The policies of insurance obtained
in compliance with this Article VIII shall specify that the loss, if any, shall
be payable to Landlord or such other persons, corporation or parties as Landlord
shall designate, except that policies of insurance obtained in compliance with
Section 8.1 hereof shall specify that the loss, if any, shall be payable to
Landlord and Tenant as their respective interests may appear. In the event the
demised premises are owned by a trust, Tenant shall maintain all insurance
required pursuant to this lease in the name of the beneficiaries of said trust
as well as the trustee. All policies of insurance obtained in compliance with
this Article VIII shall contain a clause that the insurer will not cancel or
change the insurance without first giving Landlord and Tenant thirty (30) days
prior written notice. The policies of insurance obtained by Tenant hereunder
shall be with responsible insurance companies qualified to do business in
Minnesota and satisfactory to Landlord and Landlord shall be named as an
additional insured. A copy of each such policy or a certificate of insurance
with respect thereto shall be delivered to Landlord whenever requested by
Landlord. Landlord shall notify Tenant within sixty (60) days of receipt of such
insurance if such insurance shall fail to conform to the requirements of this
lease. Thereafter, until Landlord otherwise notifies Tenant, the insurance shall
be deemed to meet the requirements of this lease. Landlord shall hold all
policies of insurance as provided hereunder for the benefit of Landlord and
Tenant, all as their respective interests may appear. At the request of
Landlord, a mortgage clause may be included in said policies covering Landlord's
mortgagee, if any.
Section 7.8. Failure to Provide Insurance. In the event Tenant shall
fail, when required, to furnish evidence of any of the insurance provided for in
this Article VIII, or in the event such insurance shall be cancelled, terminated
or changed, Landlord shall have the right at its election (but without being
obligated so to do) to procure or renew the same; and the amount or amounts made
therefor shall become so much additional rent under the terms hereof, due and
payable with the next succeeding installment of rent due hereunder, with
interest at the lease interest rate from the date of payment thereof.
Section 7.9. Failure to Provide Insurance. In the event Tenant shall
fail, when required, to furnish evidence of any of the insurance provided for in
this Article VIII, or in the event such insurance shall be cancelled, terminated
or changed,
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Landlord shall have the right at its election (but without being obligated so to
do) to procure or renew the same; and the amount or amounts made therefor shall
become so much additional rent under the terms hereof, due and payable with the
next succeeding installment of rent due hereunder, with interest at the lease
interest rate from the date of payment thereof.
Section 7.9. Application of Insurance Proceeds. Landlord shall be
entitled to collect all monies due under the insurance policies provided for
hereunder which are payable in the event and by reason of loss or damage to the
demised premises. Such proceeds may be disbursed by the Landlord for repair or
reconstruction of the demised premises (if Landlord so elects) or otherwise
applied in accordance with the pertinent provisions of this lease. All policies
of insurance shall, to the extent obtainable, provide that any loss shall be
payable to Landlord notwithstanding any act or negligence of Tenant which might
otherwise result in a forfeiture of said insurance.
ARTICLE VIII.
Damage or Destruction
Section 8.1. Obligation to Repair. Tenant agrees that in case of damage
to or destruction of any building or improvements on the demised premises or of
the fixtures and equipment therein, by fire or other casualty, it will promptly,
at its sole cost and expense, repair, restore or rebuild the same and upon the
completion of such repairs, restoration or rebuilding, the value and rental
value or the buildings and improvements upon the demised premises shall be equal
to the value and rental value of the buildings and improvements thereon
immediately prior to the happening of such fire or other casualty. Rent shall
not abate during the period of such repair, restoration or rebuilding and during
any period that the improvements are not tenantable because of such damage or
destruction.
Section 8.2. Major Repairs. Before commencing such repairing,
restoration or rebuilding, involving an estimated cost or more than $25,000, (a)
Tenant shall have plans and specifications therefor, prepared by a licensed
architect, submitted to and approved by Landlord; and (b) Tenant shall have
furnished to Landlord an estimate of the cost of the proposed work, certified by
the architect who prepared such plans and specifications.
Section 8.3. Insurance Funds. In the event of loss under any policy or
policies of insurance described in Article VIII hereof and if Tenant is not in
default under this lease, the net
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amount of insurance proceeds so collected by Landlord after payment of expenses
incurred in such collection shall be disbursed to Tenant in the same manner and
following the customs ordinarily employed by a mortgage bank making construction
loans and be applied toward the expense of repairing or rebuilding the buildings
or improvements which have been damaged or destroyed; provided, however, that it
shall first appear to the satisfaction of Landlord that the amount of insurance
money available, plus any additional funds deposited by Tenant, shall at all
times be sufficient to pay for the completion of said repairs or rebuilding.
Upon the completion of said repairs or rebuilding, free from all liens of
mechanics and others, any surplus funds shall be paid to Tenant. All payouts by
the Landlord as hereinabove required, shall be made after making provision for
reasonable holdbacks and upon receipt of a certificate of the architect or
engineer in charge of the repairs and rebuilding stating:
(a) that the sum requested is due to the contractors, materialmen,
laborers, engineers, architects, or other persons (whose names and addresses
shall be stated) who have furnished services or materials for the repairs end
restoration, or is required to reimburse Tenant for expenditures made by Tenant
in connection with the repairs and restoration;
(b) that the sum requested when added to all sums previously paid out
under this Article for the repairs and restoration does not exceed the value of
the repairs and restoration done to the date of such certificate;
(c) the progress of the repairs and restoration;
(d) That the repairs and restoration have been done pursuant to all
plans and specifications required by Section 9.2 hereof; and
(e) that in the opinion of the architect or engineer, the remaining
amount of the sum on deposit will be sufficient upon the completion of the
repairs and restoration to pay for the same in full.
Tenant shall furnish the Landlord at the time of any such payment with
such statements and waivers of lien as may be required under the mechanic's lien
law of Illinois and an official search, or other evidence satisfactory to the
Landlord, that there has not been filed with respect to the demised premises any
mechanic's or other lien which has not been discharged of record, in respect of
any work, labor, services or materials performed, furnished or supplied, in
connection with
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the repair and restoration, and that all of said materials have been purchased
free and clear of any security agreement of title retention agreement. The
Landlord shall not be required to pay out any sum when the demised premises
shall be encumbered with any such lien or agreement, or when the Tenant is in
default under any covenant or obligation set forth herein.
ARTICLE IX.
Liens
Section 9.1. Prohibition of Liens. Tenant shall not do any act which
shall in any way encumber the title of Landlord in and to the demised premises,
nor shall any interest or estate of Landlord in the demised premises be in any
way subject to any claim by way of lien or encumbrance, whether by operation of
law or by virtue or any express or implied contract by Tenant and any claim to
or lien upon the demised premises arising from any act or omission of Tenant
shall accrue only against the leasehold estate of Tenant and shall in all
respects be subject and subordinate to the paramount title and rights of
Landlord in and to the demised premises. Tenant will not permit the demised
premises to become subject to any mechanics', laborers', or materialmen's lien
on account of labor or material furnished to Tenant or claimed to have been
furnished to Tenant in connection with work of any character performed or
claimed to have been performed on the demised premises by or at the direction or
sufferance of Tenant; provided, however, that Tenant shall have the right to
contest in good faith and with reasonable diligence, the validity of any such
lien or claimed lien if Tenant First gives to Landlord such security as may be
demanded by Landlord to insure payment thereof and to prevent any sale,
foreclosure or forfeiture of the demised premises by reason of non-payment
thereof and if on final determination of the lien or claim for lien, Tenant will
immediately pay any judgment rendered, with all proper costs and charges, and
will, at its own expense, have the lien released and any judgment satisfied.
Section 9.2. Landlord's Right to Act. If Tenant shall fail to contest
the validity of any lien or claimed lien or fail to give security to Landlord to
insure payment thereof, or shall fail to Prosecute such contest with diligence,
or shall fail to have the same released and satisfy any judgment rendered
thereon, then Landlord may, at its election (but shall not be required to)
remove or discharge such lien or claim for lien (with the right, in its
discretion, to settle or compromise the same), and any amounts advanced by
Landlord, including reasonable attorneys' fees, for such purposes shall be so
much additional rental due from Tenant to Landlord at the next rent date after
any such
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payment, with interest at the lease interest rate.
ARTICLE X.
Alterations and Improvements
Tenant shall not at any time during the lease term make any alteration,
addition or improvement to the Premises or any improvements located thereon,
including without limitation creating any openings in the roof or exterior
walls, without in each instance the prior written consent of Landlord. Landlord
shall not unreasonably withhold its consent to minor, non-structural alterations
and improvements made by Tenant, provided the costs of any such alterations or
improvements shall not exceed $25,000.00. No alteration, addition or improvement
to the Premises shall be commenced by Tenant until Tenant has furnished Landlord
with a satisfactory certificate or certificates from an insurance company
acceptable to Landlord, evidencing workmen's compensation coverage in amounts
satisfactory to Landlord and protecting Landlord against public liability and
property damage to any person or property, on or off the Premises shall be
commenced by Tenant until Tenant has furnished Landlord with a satisfactory
certificate or certificates from an insurance company acceptable to Landlord,
evidencing workmen's compensation coverage in amounts satisfactory to Landlord
and protecting Landlord against public liability and property damage to any
person or property, on or off the Premises, arising out of and during the making
of such alterations, additions or improvements. All alterations, additions and
improvements (except Tenant's equipment, as hereinafter defined), made at the
expense of Tenant, shall become the property of Landlord and shall remain upon
and be surrendered with the Premises as a part thereof at the termination of
this lease, or at Landlord's option, Landlord may require Tenant to remove such
alterations, additions and improvements and restore the Premises to its original
condition Landlord may require Tenant to remove such alterations, additions and
improvements and restore the Premises to its original condition. Tenant, at its
sole cost and expense, will make all additions, improvements and alterations on
the Premises and to the improvements, appurtenances and equipment thereon which
may be necessary by the act or neglect of any other person or corporation
(public or private), including supporting the streets and alleys adjoining the
Premises. No additions, improvements or alterations exceeding the cost of
$25,000.00 shall be commenced until Tenant has first satisfied the requirements
set forth in Section 9.2 hereof.
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ARTICLE XI.
Condemnation
Section 11.1. Total Condemnation. In the event the whole of the demised
premises shall be taken as a result of the exercise of the power of eminent
domain or condemned for a public or quasi-public use or purpose by any competent
authority or sold to the condemning authority under threat of condemnation, or
in the event a portion of the demised premises shall be taken or sold as a
result of such event, and as a result thereof the balance of the demised
premises cannot be used for the same purpose as before such taking, sale or
condemnation, then and in either of such events, the term of this lease shall
terminate as of the date of vesting of title pursuant to such proceeding or
sale. The total award, compensation or damages received from such proceeding or
sale (hereinafter called the "award") shall be paid to and be the property of
Landlord, whether the award shall be made as compensation for diminution of the
value of the leasehold or the fee of the demised Premises or otherwise, and the
Tenant hereby assigns to Landlord, all of Tenant's right, title and interest in
and to the award. Tenant shall execute, immediately upon demand of Landlord,
such documents as may be necessary to facilitate collection by Landlord of any
such award, compensation or damages.
Section 11.1. Partial Condemnation. In the event only a part of the
demised premises shall be taken as a result of the exercise of the power of
eminent domain or condemned for a public or quasi-public use or purpose by any
competent authority or sold to the condemning authority under threat of
condemnation, or in the event a portion of the demised premises shall be taken
or sold as a result of such event, and as a result thereof the balance of the
demised premises cannot be used for the same purpose as before such taking, sale
or condemnation, then and in either of such events, the term of this lease shall
terminate as of the date of vesting of title pursuant to such proceeding or
sale. The total award, compensation or damages received from such proceeding or
sale (hereinafter called the "award") shall be paid to and be the property of
Landlord, whether the award shall be made as compensation for diminution of the
value of the leasehold or the fee of the demised Premises or otherwise, and the
Tenant hereby assigns to Landlord, all of Tenant's right, title and interest in
and to the award. Tenant shall execute, immediately upon demand of Landlord,
such documents as may be necessary to facilitate collection by Landlord of any
such award, compensation or damages.
Section 11.2. Partial Condemnation. In the event only a part of the
demised premises shall be taken as a result of the exercise of the power of
eminent domain or condemned for a public
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or quasi-public use or purpose by any competent authority or sold to the
condemning authority under threat of condemnation, and as a result thereof the
balance of the demised premises can be used for the same purpose as before such
taking, sale or condemnation, this lease shall not terminate and Tenant, at its
sole cost and expense, shall promptly repair and restore the premises and all
improvements thereon. Any award, compensation or damages paid as a consequence
of such taking, sale, or condemnation, shall be paid to Landlord and shall be
disbursed in accord with the provisions of Section 8.9 hereof. Any sums not so
disbursed shall be retained by Landlord. In such event, rent shall abate
equitably if such taking shall affect the building or a substantial portion of
the demised premises. In the event Tenant shall not promptly commence the repair
or restoration required hereby, and diligently pursue the completion of same,
Tenant shall be deemed in default under this lease and, in addition to any
remedy of Landlord provided for under this lease, at law or in equity, Landlord
may retain the award, compensation or damages or the balance thereof remaining
in the hands of Landlord.
Section 11.1. Tenants Claims. In any condemnation proceeding, Tenant
shall be permitted to make claim with the condemning authority for a separate
award for the value of Tenant's fixtures, installations, improvements and
decorations which lie and are located in the area taken by the condemning
authority.
ARTICLE XII.
Rent Absolute
Any damage or destruction to all or any portion of the buildings,
structures and fixtures upon the demised premises, by fire, the elements, or any
other cause whatsoever, whether with or without fault on the part of Tenant,
shall not, terminate this lease or entitle Tenant to surrender the demised
premises or entitle Tenant to any abatement of or reduction in the rent payable,
or otherwise affect the respective obligations of the parties hereto. If the use
of the demised premises for any purpose should, at any time during the term of
this lease, be prohibited by law or ordinance or other governmental regulation,
or prevented by injunction, this lease shall not be thereby terminated, nor
shall Tenant be entitled by reason thereof to surrender the demised premises, o
to any abatement or reduction in rent, nor shall the respective obligations of
the parties hereby be otherwise affected unless such eviction is due to the act
of Landlord or any person or persons claiming any interest in the demised
premises by or under Landlord.
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ARTICLE XIII.
Assignment and Subletting
Section 13.1. Requirements. Tenant shall not assign this lease or any
interest hereunder without the prior written consent of Landlord Tenant shall
not sublet or permit the use or occupancy of the demised premises or any part
thereof by anyone other then Tenant without the prior written consent of
Landlord. No assignment or subletting shall relieve Tenant of its obligations
hereunder, and Tenant shall continue to be liable as a principal and not as a
guarantor or surety, to the same extent as though no assignment or sublease had
been made, unless specifically provided to the contrary in Landlord's consent.
Consent by Landlord pursuant to this Article shall not be deemed, construed or
held to be consented to any additional assignment or subletting, but each
successive act shall require similar consent of the Landlord. Landlord shall be
reimbursed by Tenant for any costs or expense incurred pursuant to any request
by Tenant for approval to any such assignment or subletting.
Section 13.2. Transfer of Tenant's Interest. Tenant shall not allow or
permit any transfer of this lease, or any interest hereunder, by operation of
law or otherwise, or convey, mortgage, pledge or encumber this lease or any
interest hereunder.
Section 13.1. Transfer of Landlord's Interest. Notwithstanding anything
in this lease to the contrary, Tenant acknowledges that Landlord has the right
to transfer Landlord's interest in the Premises and in this lease (including,
without limitation, the transfer of such interest to a trust), in whole or in
part, at any time during the lease term.
ARTICLE XIV.
Indemnity for Litigation
Tenant covenants and agrees that in case Landlord shall without fault
on its part be made a party to any litigation commenced by or against Tenant,
then Tenant shall pay all costs and expenses; including reasonable attorneys'
fees, incurred by or imposed on the Landlord by or in connection with such
litigation; and also shall pay all costs and expenses, including attorneys'
fees, which may be incurred by Landlord in enforcing any of the covenants and
agreements of this lease, and all such costs, expenses and attorneys' fees
shall, if paid by Landlord herein, be so much additional rent due on the next
rent date after such payment or payments, together with interest at the lease
interest rate from the date of payment.
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ARTICLE XV.
Estoppel Certificate
Tenant agrees at any time and from time to time, upon not less than ten
(10) days prior written request by Landlord, to execute, acknowledge and deliver
to Landlord, or Landlord's mortgagee, a statement in writing certifying that
this lease is unmodified and in full force and effect (or if there have been
modifications, that the same is in full force and effect as modified, and
stating the modifications), the date to which the rental and other charges have
been paid in advance, if any, and further providing such other reasonable
information requested by Landlord's mortgagee, assignee of such mortgage, or any
prospective purchaser of the fee, if being intended that any such statement
delivered pursuant to this Article XVI may be relied upon by any such
prospective purchase, mortgagee or assignee.
ARTICLE XVI
Condition and Inspection of Premises
Section 16.1. No Representations. Tenant acknowledges that it has
inspected the demised premises and finds them to be in and acknowledges that
Landlord has made no representations to Tenant as to the condition, safety,
fitness for use; or state of repair thereof.
Section 16.2. Inspections. Tenant agrees to permit Landlord and any
authorized representative of Landlord, to enter the demised premises at all
reasonable times during business hours for the purpose of inspecting the same.
Any such inspections shall be solely for Landlord's purposes and may not be
relied upon by Tenant or any other person, nor shall such inspection constitute
a waiver by Landlord or any of Tenant's obligations under this lease.
Section 16.3. Access. Tenant agrees to permit Landlord and any
authorized representative of Landlord to enter the demised premises at all
reasonable times during business hours to exhibit the same for the purpose of
sale, mortgage or lease, and during the final year of the term hereof Landlord
may display on the demised premises the usual "For Sale" or "For Rent'1 signs
ARTICLE XVII.
Fixtures
Section 17.1. Ownership of Fixtures. All buildings and
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improvements and all plumbing, heating, lighting, electrical and
air-conditioning fixtures and equipment, and other articles of personal property
used in the operation of the demised premises (as distinguished from operations
incident to the business of Tenant), whether or not attached or affixed to the
demised premises (hereinafter referred to as "building fixtures"), shall be and
remain a part of the demised premises and shall constitute the property of
Landlord following the termination of this lease.
Section 17.2. Tenant's Equipment. All of Tenant's trade fixtures and
all personal property, fixtures, apparatus, machinery and equipment now or
hereafter located upon the demised premises, other than building fixtures as
defined in Section 18.1 hereof, shall be and remain the personal property of
Tenant, and the same are herein referred to as "Tenant's equipment."
Section 17.3. Removal of Equipment Tenant's equipment may be removed
from time to time by Tenant, provided, however, that if such removal shall
injure or damage the demised premises, Tenant shall repair the damage and place
the demised premises in substantially the same condition as it would have been
if such equipment had not been installed, ordinary wear and tear excepted.
ARTICLE XVIII.
Default
Section 18.1 Events of Default. Tenant agrees that any one or more of
the following events shall be considered events of default as said term is used
herein:
(a) If an order, judgment or decree shall be entered by any court
adjudicating the Tenant a bankrupt or insolvent or approving a petition seeking
reorganization of the Tenant or appointing a receiver, trustee or liquidator of
the Tenant or of all or a substantial part of its assets, and such order,
judgment or decree shall continue unstated and in effect for any period of sixty
(60) days; or,
(b) Tenant shall file an answer admitting the material allegations of a
petition filed against the Tenant in any bankruptcy, reorganization or
insolvency proceeding or under any laws relating to the relief of debtors,
readjustment of indebtedness, reorganization, extension; or, arrangements,
composition; or,
(c) Tenant shall make any assignment for creditors or shall apply for
or consent to the a receiver, trustee or liquidator of
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Tenant, assets of Tenant; or,
(d) Tenant shall file a voluntary petition in bankruptcy, or admit in
writing its inability to pay its debts as they come due, or file a petition or
an answer seeking reorganization or arrangement with creditors or take advantage
of any insolvency law; or,
(e) A decree or order appointing a receiver or the property of Tenant
shall be made and such decree or order shall not have been vacated within sixty
(60) days from the date of entry or granting thereof; or,
(f) Tenant shall vacate the demised premises or abandon the same during
the term hereof; or,
(g) Tenant shall default in any payment of rent or other payment
required to be made by Tenant hereunder when due as herein provided; or,
(h) Tenant shall repeatedly be late in the payment of rent or other
charges required to be paid hereunder or shall repeatedly default in the
keeping, observing, or performing of any other covenants or agreements herein
contained to be kept, observed or performed by Tenant; or,
(i) Tenant shall be in default in the performance or compliance with
any of the agreements, terms, covenants or conditions in this lease other than
those referred to in the foregoing paragraphs (a) through (h) of this Section
for a period of twenty (20) days after written notice from Landlord to Tenant
specifying the items in default.
Section 18.2. Remedies. Upon the occurrence of any one or more of such
events of default, Landlord may at its election terminate this lease or
terminate Tenant's right to possession only, without terminating this lease.
Upon termination of this lease, whether by lapse of time or otherwise, or upon
any termination of Tenant's right to possession without termination or this
lease, Tenant shall surrender possession and vacate the demised premises
immediately, and deliver possession thereof to the Landlord. Tenant hereby
grants to Landlord full and free license to enter into and upon the demised
premises in such event, with or without process of law, and to repossess
Landlord of the demised premises as of Landlord's former estate and to expel or
remove Tenant and any others who may be occupying or within the demised premises
and to remove any and all property therefrom, using such force as may be
necessary, without being deemed in any manner guilty of trespass, eviction or
forcible
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entry or detainer or conversion of property and without relinquishing the
Landlord's rights to rent or any other right given to Landlord hereunder or by
operation of law. Tenant expressly waives the service of any demand for the
payment of rent or for possession and the service of any notice of Landlord's
election to terminate this lease or to re-enter the demised premises, including
any and every form of demand and notice prescribed by any statute or other law,
and agrees that the simple breach of any covenant or provision of this lease by
Tenant shall, of itself, without the service of any notice or demand whatsoever,
constitute a forcible detained by Tenant of the demised premises within the
meaning of the statutes of Illinois.
Section 18.3. Abandonment or Termination of Possession. If Tenant
abandons the demised premises or if Landlord elects to terminate Tenant's right
to possession only, without terminating the lease pursuant to a right granted to
Landlord hereunder, Landlord may, at Landlord's option, enter into the demised
premises, remove Tenants signs and other evidences of tenancy and take and hold
possession thereof as in this Section provided, without such entry and
possession terminating the lease or releasing Tenant, in whole or in part, from
Tenant's obligation to pay the rent hereunder for the full term. In any such
case, Tenant shall pay forthwith to Landlord, if Landlord so elects, in lieu of
making the regular payments of rent required hereunder, a sum equal to
Landlord's Damages (hereinafter defined) in payment of the damages Landlord
incurred by reason of Tenant's default. As used herein, "Landlord's Damages"
shall mean the sum of (i) the present value of the Base Rent and additional rent
specified in this lease for' the residue of the stated term following
termination of the lease or of Tenant's rights to possession less the present
value of fair market rental value of the demised premises for such residue and
(ii) any other sums then due to Landlord hereunder. In calculating the amount of
Landlord's damages (x) present value shall be computed on the basis of a
discount of ten percent (l0~) per year and (y) the additional rent due Landlord
for the rest of the lease term shall be deemed to equal the additional rent
payable for the last calendar year of the lease term prior to termination of
this lease or of Tenant's right to possession (or the additional rent which
would have been paid for the calendar year in which such termination occurred,
if no additional rent had previously been paid).
Section 18.4. Reletting. Upon and after entry into possession without
termination of the lease, Landlord may, but need not, relet the demised premises
or any part thereof for the account or Tenant to any person, firm or corporation
other than Tenant for such rent1 for such time and upon such terms as
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Landlord in Landlord's sole discretion shall determine. Landlord shall not be
required to accept any tenant offered by Tenant or to observe any instructions
given by Tenant about such reletting. In any such case, Landlord may make
repairs, alterations and additions in or to the demised premises and redecorate
the same to the extent deemed by Landlord necessary or desirable. Tenant shall,
upon demand, pay the cost thereof, together with Landlord's expenses of the
reletting.
Section 18.5. Deficiencies. If Landlord has not elected to collect
Landlord's Damages and if the consideration collected by Landlord upon any such
reletting for Tenant's account is not sufficient to Day monthly the full amount
of the Base Rent and additional rental reserved in this lease, together with,
the costs of repairs, alterations, additions, redecorating, leasing commissions,
and Landlord's other costs and expenses of regaining possession and reletting
the demised premises, Tenant shall pay to Landlord the amount of each monthly
deficiency upon demand.
Section 18.6. Removal of Property. Any and all property which may be
removed from the demised premises by Landlord pursuant to the authority of this
lease or of law, to which Tenant is or may be entitled, may be handled, removed
or stored in a commercial warehouse or otherwise by Landlord at Tenant's risk,
cost and expense and Landlord shall in no event be responsible for the value,
preservation or safekeeping thereon Tenant shall pay to Landlord, upon demand,
any and all expenses incurred in such removal and all storage charges against
such property so long as the same shall be in Landlord's possession or under the
Landlord's control. Any such property of Tenant not removed from the demised
premises or retaken from storage by Tenant within thirty (30) days after the end
of the term, however terminated, shall be conclusively presumed to have been
abandoned by Tenant.
ARTICLE XIX.
Landlord's Performance of Tenant's Covenants
Should Tenant at any time fail to do any act or make any payment
required to be done or made by it under the provisions of this lease, Landlord,
at its option, may (but shall not be required to) do the same or cause the same
to be done, and the amounts paid by Landlord in connection therewith shall be so
much additional rent due on the next rent date after such payment, together with
interest at the lease interest rate from the date of payment by Landlord.
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ARTICLE XX.
Exercise of Remedies
Section 20.1. Cumulative Remedies. No remedy contained herein or
otherwise conferred upon or reserved to Landlord, shall be considered exclusive
of any other remedy, but the same shall be cumulative and shall be in addition
to every other remedy given herein or now hereafter existing at law or in equity
or by statute, and every power and remedy given by this lease to Landlord may be
exercised from time to time and as often as occasion may arise or as may be
deemed expedient. No delay or omission of Landlord to exercise any right or
power arising from any default, shall impair any such right or power or shall be
construed to be a waiver of and such default or an acquiescence therein.
Section 20.2. Waivers. No waiver or any breach of any of the covenants
of this lease shall be construed, taken or held to be a waiver of any other
breach or waiver, acquiescence in or consent to any further or succeeding breach
of the same covenant. The acceptance by Landlord of any payment of rent or other
charges hereunder after the termination by Landlord of this lease or of Tenant's
right to possession hereunder shall not, in the absence of agreement in writing
to the contrary by Landlord, be deemed to restore this lease or Tenant's right
to possession hereunder, as the case may be, but shall be construed as a payment
on account and not in satisfaction of damages due from Tenant to Landlord.
Section 20.3. Anticipatory Breach. In the event of any breach or
threatened breach by Tenant of any of the agreements, terms, covenants or
conditions contained in this lease, Landlord shall be entitled to enjoin such
breach or threatened breach and shall have the right to invoke any right and
remedy allowed at law or in equity or by statute or otherwise as though
re-entry, summary proceedings, and other remedies were not provided for in this
lease.
ARTICLE XXI.
Subordination to Mortgages
At the option of any mortgagee of Landlord, this lease shall be subject
and subordinate to any first mortgage or deed of trust now or hereafter placed
upon the demised premises; provided, however, that the mortgagee or beneficiary
under such deed of trust agrees in writing with Tenant or adequate provision is
made in such mortgage or deed of trust, so that regardless of any default or
breach under such mortgage or deed of trust or of any possession or sale of the
whole or any part of the demised
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premises under or through such mortgage or deed of trust, this lease and
Tenant's possession shall not be disturbed by the mortgagee or beneficiary or
any other party claiming under or through such mortgage or deed of trust;
provided, however, that Tenant shall continue to observe and perform Tenant's
obligations under this lease and pay rent to whomsoever may be lawfully entitled
to same from time to time. Tenant hereby agrees to execute, if same is required,
any and all instruments in writing which may be requested by Landlord to
subordinate Tenant's rights acquired by this lease to the lien of any such
mortgage or deed of trust, all as aforesaid. Tenant agrees to adorn to any
mortgagee subsequently encumbering the demised premises, and to any party
acquiring title to the demised premises, by judicial foreclosure or a trustee's
sale, as the successor to Landlord hereunder.
ARTICLE XXII.
Indemnity and Waiver
Section 22.1. Indemnity. Tenant will protect, indemnify and save
harmless Landlord (if Landlord is a trust or a trustee, the term "Landlord" for
the purpose or this Article XXIII, shall include the trustee, its agents, its
beneficiary or beneficiaries and their agents) from and against all liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
(including without limitation, reasonable attorneys' fees and expenses) imposed
upon, incurred by or asserted against Landlord by reason of: (a) any accident,
injury to or death of persons or loss of or damage to property occurring on or
about the demised premises or any part thereof or the adjoining properties,
sidewalks, curbs, streets or ways, or resulting from any act or omission of
Tenant or anyone claiming by, through or under Tenant; (b) any failure on the
part of Tenant to perform or comply with any of the terms of this lease; or (c)
performance of any labor or services or the furnishing of any materials or other
property in respect of the demised premises or any part thereof. In case any
action, suit or proceeding is brought against Landlord by reason of any such
occurrence, Tenant will, at Tenant's sole expense, resist and defend such
action, suit or proceeding, or cause the same to be resisted and defended.
Section 22.2. Tenant Waiver. Tenant waives all claims it may have
against Landlord and Landlord's agents for damage or injury to person or
property sustained by Tenant or any persons claiming through Tenant or by any
occupant of the demised premises, or by any other person, resulting from any
part of the demised premises or any of its improvements, equipment or
appurtenances becoming out of repair, or resulting from any
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accident on or about the demised premises or resulting directly or indirectly
from any act or neglect of any person, including Landlord, to the extent
permitted by law. This Section 23.2 shall include, but not by way of limitation,
damage caused by water, snow, frost, steam, excessive heat or cold, sewage, gas,
odors, or noise, or caused by bursting or leaking of pipes or plumbing fixtures,
and shall apply equally whether any such damage results from the act or neglect
of Tenant or of any other person, including Landlord to the extent permitted by
law, and whether such damage be caused or result from any thing or circumstance
whether of a like nature or of a wholly different nature. All personal property
belonging to Tenant or any occupant of the demised premises that is in or on any
part of the demised premises shall be there at the risk of Tenant or of such
other person only, and Landlord shall not be liable for any damage thereto or
for the theft or misappropriation thereof.
ARTICLE XXIII.
Surrender
Section 23.1. Surrender of Possession. Upon the termination of this
lease whether by forfeiture, lapse of time or otherwise, or upon the termination
of Tenant's right to possession of the demised premises1 Tenant will at once
surrender and deliver up the demised premises, together with all improvements
thereon, to Landlord, broom clean, in good order, condition and repair,
reasonable wear and tear excepted. "Broom clean" means free from all debris,
dirt, rubbish, personal property of Tenant, oil, grease, tire tracks or other
substances, inside and outside of the building and on the grounds comprising the
demised premises. Any damage caused by removal of Tenant from the demised
premises, including any damage caused by removal of Tenant's equipment as herein
defined, shall be repaired and paid for by Tenant prior to the expiration of the
lease term. In the event any improvements or Tenant's fixtures are removed by
Tenant after the expiration of the lease term, Tenant shall pay rent until such
improvements and fixtures are removed.
All additions, hardware, and improvements, temporary or permanent, In
or upon the demised premises placed there by Tenant shall become Landlord's
property and shall remain upon the demised premises upon such termination of
this lease by lapse of time or otherwise, without compensation or allowance or
credit to Tenant, unless Landlord requests their removal. If Landlord so
requests removal of said additions, hardware, or improvements and Tenant does
not make such removal by the termination of this lease, or within ten (10) days
after such request, whichever is later, Landlord may remove the same and deliver
the same to any
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place of business of Tenant or warehouse and Tenant shall pay the cost of such
removal, delivery and warehousing to Landlord on demand.
Section 23.2. Removal of Equipment Upon the termination of this lease
by lapse of time, Tenant may remove Tenant's equipment provided, however, that
Tenant shall repair any injury or damage to the demised premises which may
result from such removal. If Tenant does not remove Tenant's equipment from the
demised premises prior to the end of the lease term, however ended, Landlord
may, at its option, remove the same and deliver the same to any other place of
business of Tenant or warehouse, and Tenant shall pay the cost of such removal
(including the repair of any injury or damage to the demised premises resulting
from such removal), delivery and warehousing to Landlord on demand, or Landlord
may treat Tenant's equipment as having been conveyed to Landlord with this lease
as a Bill of Sale, without further payment or credit by Landlord to Tenant.
Section 23.3. Holdover. Any holding over by Tenant of the demised
premises after the expiration of this lease shall operate and be construed to be
a tenancy from month to month only, at the same monthly rate of rent then in
effect and other charges payable hereunder for the lease term, and upon all of
the other covenants and agreements contained in this lease. If Tenant continues
to hold over after a written demand by Landlord for possession at the expiration
of this lease or after termination by either party of a month-to-month tenancy
created pursuant to this Section, or after termination of the lease or of
Tenant's right to possession pursuant to any other section hereof, Tenant shall
Day monthly rental at a rate equal to double the rate of rent payable hereunder
immediately prior to the expiration or other termination of the lease or
Tenant's right to possession and all other reasonable damages sustained by
Landlord resulting from Tenant's possession of the demised premises, or any part
thereof. Nothing contained in this Section 24.3 shall be construed to give
Tenant the right to hold over at any time, and Landlord may exercise any and all
remedies at law or in equity to recover possession of the demised premises, as
well as any damages incurred by Landlord due to Tenant's failure to vacate the
demised premises and deliver possession to Landlord as herein provided.
ARTICLE XXIV.
Covenant of Quiet Enjoyment
Landlord agrees that at all times when Tenant is not in default under
the terms of and during the term of this lease,
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Tenant's quiet and peaceable enjoyment of the demised premises shall not be
disturbed or interfered with by Landlord or by any person claiming by, through
or-under Landlord.
ARTICLE XXV.
Short Form lease
This lease shall not be recorded, but the parties agree, at the request
of either of them, to execute a Short Form lease for recording and containing
the names of the parties, the legal description and the term of this lease.
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ARTICLE XXVI.
Notices
All notices to or demands upon Landlord or Tenant desired or required
to be given under any of the provisions hereof, shall be in writing. Any notices
or demands from Landlord to Tenant shall be deemed to have been duly and
sufficiently given if delivered by hand to the party to whose attention it is
directed or if mailed by United States registered or certified mail in an
envelope properly stamped and addressed to 822 West Washington Street, Chicago,
Illinois 60607 or at such other address as Tenant may theretofore have furnished
by written notice to Landlord, and any notices or demands from Tenant to
Landlord shall be deemed to have been duly and sufficiently given if delivered
by hand to the party to whose attention it is directed or if mailed by United
States registered or certified mail in an envelope properly stamped and
addressed to Landlord at 822 West Washington Street, Chicago, Illinois 60607 or
at such other address as Landlord may theretofore have furnished by written
notice to Tenant. The effective date of such notice shall be three (3) days
after delivery of the same to the United States Post Office for mailing.
ARTICLE XXVII.
Covenants Binding Upon Successors and Assigns
Section 27.1. Binding Effect All of the covenants, agreements,
conditions, and undertakings in this lease contained shall extend and inure to
and be binding upon the heirs, executors, administrators, successors, and
assigns of the respective parties hereto, the same as if they were in every case
specifically named, and whenever in this lease reference is made to either of
the parties hereto, it shall be held to include and apply to, wherever
applicable, the heirs, executors, administrators, successors and assigns of such
party. Nothing herein contained shall be construed to grant or confer upon any
person or persons, firm, corporation or governmental authority, other than the
parties hereto, their heirs, executors, administrators, successors and assigns,
any right, claim or privilege by virtue of any covenant, agreement, condition or
undertaking in this lease contained.
Section 27.2. Successor 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 demised premises, and in the event of any transfer of
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the title to such fee, the Landlord herein named (and in case of any subsequent
transfers or conveyances, the then grantor) shall be automatically freed and
relieved, from and after the date of such transfer or conveyance, of all
personal liability as respects the performance of any covenants or obligations
on the part of Landlord contained in this lease thereafter to be performed;
provided that any funds in the hands of such Landlord or the then grantor at the
time-of such transfer, in which Tenant has an interest, shall be turned over to
the grantee, and any amount then due and payable to Tenant by Landlord or the
then grantor under any provisions of this lease, shall be paid to Tenant.
ARTICLE XXIII
Time of Essence:
Time is of the essence of this lease, and all provisions herein
relating thereto shall be strictly construed.
ARTICLE XXIX
Americans With Disabilities Act
The parties acknowledge that the Americans with Disabilities Act of
1990 (42 U.S.C. ~l2l0l et seq.) And regulations and guidelines promulgated
thereunder, as all of the same may be amended and supplemented from time to time
(collectively referred to herein as the "ADA") establish requirements for
business operations, accessibility and barrier/removal, and that such
requirements may or may not apply to the Premises depending on, among other
things: (1) whether Tenant's business is deemed a "public accommodation" or a
"commercial facility", (2) whether such requirements are "readily achievable",
and (3) whether a given alteration affects a "primary function area" or triggers
"path of travel" requirements. The parties hereby agree that Tenant shall
perform any required ADA Title III compliance in the Premises, including any
leasehold improvements or other work to be performed in the Premises under or in
connection with this lease, and Landlord may perform, or require that Tenant
perform, and Tenant shall be responsible for the cost of, ADA Title III "path of
travel" requirements triggered by alterations in the Premises. Tenant shall be
solely responsible for requirements under Title I of the ADA relating to
Tenant's employees.
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ARTICLE XXX
Miscellaneous
Section 30.1. Cautions. The captions of this lease are for convenience
only and are not to be construed as part of this lease and shall not be
construed as defining or limiting in any way the scope of intent of the
provisions hereof.
Section 30.2. Partial Invalidity. If any covenant, agreement or
condition of this lease or the application thereof to any person, firm or
corporation or to any circumstances, shall to any extent be invalid or
unenforceable, the remainder of this lease, or the application of such covenant,
agreement or condition to persons, firms or corporations or to circumstances
other than those as to which it is invalid or unenforceable, shall not be
affected thereby. Each covenant, agreement or condition of this lease shall be
valid and enforceable to the fullest extent Permitted by law.
Section 30.3. Governing Law. This lease shall be construed and enforced
in accordance with the laws of the State of Illinois.
Section 30.4. Modification: None of the covenants, terms or conditions
of this lease, to be kept and performed by either a party, shall in-any manner
be altered, waived, modified, changed or abandoned, except by a written
instrument duly signed, acknowledged and delivered by the party against which
enforcement of such modification, waiver, amendment, discharge or chance is
sought.
Section 30.5. Relationship of the Parties. Nothing contained herein
shall be deemed or construed by the parties hereto, nor by any third party; as
creating the relationship of principal and agent or of partnership, or of joint
venture by the parties hereto, it being understood and agreed that no provision
contained in this lease nor any acts of the parties hereto shall be deemed to
create any relationship other than the relationship of Landlord and Tenant.
Section 30.6. Brokers. Tenant warrants that it has had no dealings with
any real estate broker and Tenant covenants to pay, hold harmless and indemnify
Landlord from and against any and all cost, expense or liability for any
compensation, commissions and charges claimed by any broker or other agent with
respect to this lease or the negotiation thereof.
Section 30.7. Lesser Payments. No payment by Tenant or receipt by
Landlord of a lesser amount than the monthly rent 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
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payment as rent be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such rent or pursue any other remedy in this lease provided.
Section 30.8. Lease Interest Rate. The term "lease interest
rate", when used herein, shall be 12oo per annum.
Section 30.9. Entire Agreement. All understandings and agreements
heretofore had between the parties hereto are merged into this lease, which
alone fully and completely expresses their agreement, and which is entered into
after full investigation, neither party relying on any statement or
representation not embodied in this lease, made by the other.
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This Lease has been executed as of the date first written above.
LANDLORD:
ALARON DEVELOPMENT, L.L.C.
By: ____________________________________
Steven A. Greenberg, member
TENANT:
ALARON TRADING CORPORATION
By: ___________________________________
Steven A. Greenberg, President
28
EXHIBIT 10.11
THIS IS MORE THAN A RECEIPT
FOR MONEY OR PRELIMINARY
MEMORANDUM. IT WILL AFFECT
YOUR LEGAL RIGHTS. READ IT
CAREFULLY.
LEASE - OFFICE BUILDING FORM
THIS LEASE, made this 1st day of September _______, 1998
PARTIES between Kinta Haller
and Alaron Trading Corp. An Illinois Corporation hereinafter
called respectively Lessor and Lessee, without regard to
number or gender.
PREMISES WITNESSETH: That Lessor hereby leases unto
Lessee, and Lessee hereby hires from Lessor, those
certain premises known as the southern half (1,156
sq. ft) on the 5th floor of that certain building
known as the 442 Post Street in the City of San
Francisco, County of SF State of California.
<PAGE>
USE Said premises shall be used as general offices and
for no other business or purpose, without the
written consent of Lessor.
TERM The term shall be for 2 years, commencing on the
1st day of September ________, 1998 and ending on
the 31st day of August 2000, at the total rent or
sum of ___________________ Dollars ($___________),
lawful money of the United States of
RENTAL America, which Lessee agrees to pay to Lessor,
without deduction or offset, at such place in the
State of California as may be designated from time
to time by Lessor, in installments as follows:
$1,285 on the 1st of each and every month
It is further mutually agreed between the
parties as follows:
2
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POSSESSION If Lessor, for any reason whatsoever, cannot
deliver possession of the said premises to Lessee
at the commencement of the said term, as
hereinbefore specified, this lease shall not be
void or voidable, nor shall Lessor be liable to
Lessee for any loss or damage resulting therefrom;
but in that event there shall be a proportionate
deduction of rent covering the period between the
commencement of the said term and the time when
Lessor can deliver possession.
Lessee shall not use, or permit said premises, or
USES any part thereof, to be used, for any purpose or
PROHIBITED purposes other than the purpose or purposes for
which the said premises hereby leased; and no use
shall be made or permitted to be made of the said
premises, nor acts done, which will increase the
existing rate of insurance upon the building in
which said premises may be located or cause a
cancellation of any insurance policy covering said
building, or any part thereof, nor shall Lessee
COMPLIANCE sell, or permit to be kept, used, or sold, in or
WITH about said premises, any article which may be
GOVERNMENTAL prohibited by the standard form of fire insurance
REGULATIONS policies. Lessee shall not commit, or suffer to be
committed, any waste upon the said premises, or any
public or private nuisance, or other act or thing
which may disturb the quiet enjoyment of any other
tenant in the building in which the demised
premises may be located, nor, without limiting the
generality of the foregoing, shall Lessee allow
said premises to be used for any improper, immoral,
unlawful or objectionable purpose, or for the
keeping, storing or selling of intoxicating
liquors, or for any kind of eating house, or for
sleeping purposes, or for washing clothes, or
cooking therein, and nothing shall be prepared,
manufactured or mixed in said premises which might
emit an odor in the corridors of said building, nor
shall Lessee use any apparatus, machinery or device
in or about the demised premises which shall make
any noise or set up any vibration or which shall in
any way increase the amount of electricity, water,
or compressed air agreed to be furnished or
supplied under this lease (if any), and Lessee
further agrees not to connect with electric wires,
water or air pipes any apparatus, machinery or
device without the consent of Lessor. Lessee shall,
at his sole cost and expense, comply with all of
the requirements of all Municipal, State and
Federal authorities now in force, or which may
hereafter be in force, pertaining to the said
premises, and shall faithfully observe in the use
of the premises all Municipal ordinances and State
and Federal statues now in force or which may
hereafter be in force.
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ABANDONMENT 3. Lessee shall not vacate or abandon the
premises at any time during the term; and if Lessee
shall abandon, vacate or surrender said premises,
or be dispossessed by process of law, or otherwise,
any personal property belonging to Lessee and left
on the premises shall be deemed to be abandoned, at
the option of Lessor, except such property as may
be mortgaged to Lessor.
ALTERATIONS 4. Lessee agrees that the premises are now
AND in a tenantable and good condition; that Lessee
REPAIRS shall take good care of the premises and they shall
not be altered, repaired or changed without the
written consent of Lessor. Lessee hereby waives all
right to make repairs at Lessor's expense under the
provisions of Section 1942 of the Civil Code of
California and all rights provided for under
Section 1941 of said Civil Code. Unless otherwise
provided by written agreement, all alterations,
improvements and changes that may be required shall
be done either by, or under the direction of,
Lessor, but at the cost of the Lessee; and shall
become the property of Lessor and shall remain
upon, and be surrendered with, the premises;
provided however, that at Lessor's option, Lessee
shall, when surrendering said premises, remove
therefrom and from said building, at Lessee's
expense, all partitions, counters, railings, and
all other types of installation placed in said
premises by Lessee. All damage or injury done to
the premises by Lessee or by any person who may be
in or upon the premises with Lessee's consent,
shall be paid for by Lessee, and Lessee shall, at
the termination of this lease, surrender the
premises to Lessor in as good condition and repair
as when received, reasonable and proper use
thereof, and damage by fire or by the elements,
excepted.
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FREE Lessee shall keep the demised premises and the
FROM LIENS property in which the demised premises are
situated, free from any liens arising out of any
work performed, materials furnished, or obligations
incurred by Lessee
Lessee, as a material part of the consideration
INDEMNIFICATION to be rendered to Lessor under this lease, hereby
OF LESSOR waives all claims against Lesso for damages to
goods, wares and merchandise, and all other
personal property, in, upon or about said
premises and for injuries to persons in or about
said premises, from any cause arising at any time,
and Lessee will hold Lessor exempt and harmless for
and on account of any damage or injury to any
person, or to the goods, wares and merchandise and
all other personal property of any person, arising
from the use of the premises by Lessee, or arising
from the failure of Lessee to keep the premises in
good condition as herein provided. Lessor shall not
be liable to Lessee for any damage by or from any
act or negligence of any co-tenant or other
occupant of the same building, or by any owner or
occupant of adjoining or contiguous property.
Lessee agrees to pay for all damage to the
building, as well as all damage to tenants or
occupants thereof and to the property of such
tenants and occupants caused by Lessee's misuse or
neglect of said premises, its apparatus or
appurtenances.
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ENTRY BY Lessee shall permit Lessor and his agents to
LESSOR enter into and upon said premises at all reasonable
times for purpose of inspecting the same,
cleaning windows and performing other janitor
service, or for the purpose of maintaining the
building in which the said premises are situated,
or for the purpose of making repairs, alternations
or additions to any other portion of said building,
including the erection of scaffolding, props, or
other mechanical devices, or for the purpose of
posting notices of non-responsibility for
alterations, additions, or repairs, or for the
purpose of placing upon the property in which the
said premises are located any usual or ordinary
"for sale" signs, without any rebate of rent to
Lessee or damages for any loss of occupation or
quiet enjoyment of the premises thereby occasioned;
and shall permit Lessor, and his agents, at anytime
within thirty (30) days prior to the expiration of
this lease, to place upon the windows and doors of
said premises any usual or ordinary "to let" or "to
lease" signs. Lessor and his agents may during said
last-mentioned period, at reasonable hours, enter
upon said premises and exhibit the same to
perspective tenants.
In the event of a partial destruction of
DESTRUCTION the said premises during the said term, from any
OF cause, Lessor shall forthwith repair the same,
PREMISES provided such repairs can be made within sixty (60)
the laws and regulations of State,
County, Federal or Municipal authorities, but such
partial destruction shall in no wise annul or void
this lease, except that Lessee shall be entitled to
a proportionate deduction of rent while such
repairs are being made, such proportionate
deduction to be based upon the extent to which the
making of such repairs shall interfere with the
business carried on by Lessee in the said premises.
If such repairs cannot be made in sixty (60) days,
Lessor may, at his option, make same within a
reasonable time, this lease continuing in full
force and effect and the rent to be proportionately
rebated as aforesaid in this paragraph provided. In
the event that Lessor does not so elect to make
such repairs which cannot be made in sixty (60)
days, or such repairs cannot be made under such
laws and regulations, this lease may be terminated
at the option of either party. In respect to any
partial destruction which Lessor is obligated to
repair or may elect to repair under the terms of
this paragraph, the provisions of Section 1932,
Subdivision 2, and of Section 1933, Subdivision 4,
of the Civil Code of the State of California are
waived by Lessee. In the event that the building in
which the demised premises may be situated be
destroyed to the extent of not less than 331/3% of
the replacement cost thereof, Lessor may elect to
terminate this
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lease, whether the demised premises be injured or
not. A total destruction of the building in which
the said premises may be situated shall terminate
this lease. In the event of any dispute between
Lessor and Lessee relative to the provisions of
this paragraph, they shall each select an
arbitrator, the two arbitrators so selected shall
select a third arbitrator and the three arbitrators
so selected shall hear and determine the
controversy and their decision thereon shall be
final and binding upon both Lessor and Lessee, who
shall bear the cost of such arbitration equally
between them.
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Lessee may assign this lease or an interest
ASSIGNMENT therein and may also sublet the whole of said
AND premises, provided the written consent of Lessor to
SUBLETTING any such assignment or subletting is first obtained
by Lessee. If, during the term of this lease,
Lessee requests the written consent of Lessor to
any such assignment or subletting, Lessor's consent
thereto shall not unreasonably be withheld. A
consent to one assignment or subletting shall not
be deemed to be a consent to any subsequent
assignment or subletting, and any such subsequent
assignment or subletting without Lessor's consent
shall be void and shall be, at Lessor's option,
terminate this lease. This lease shall not, nor
shall any interest therein, be assignable as to the
interest of Lessee any operation of law without the
written consent of Lessor, but such consent shall
not unreasonably be withheld.
INSOLVENCY Either (a) the appointment of a receiver to
OR take possession of all or substantially all of the
BANKRUPTCY assets of Lessee, or (b) a general assignment by
Lessee for the benefit of creditors, or (c) any
action taken or suffered by Lessee under any
insolvency or bankruptcy act shall constitute a
breach of this lease by Lessee. Upon the happening
of any such event this lease shall terminate ten
(10) days after written notice of termination from
Lessor to Lessee.
In the event of any breach of this lease by
Lessee, then Lessor, besides other rights and
remedies he may have, shall have the immediate
DEFAULT right of re-entry and may remove all persons and
property from the premises. If the Lessor's right
of re- entry is exercised following abandonment of
the premises by the Lessee, then Lessor may
consider any personal property belonging to Lessee
and left of the premises to also have been
abandoned, in which case Lessor may dispose of all
such personal property in any manner Lessor shall
deem proper and is hereby relieved of all liability
for doing so.
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<PAGE>
If Lessee breaches this lease and abandons the
property before the end of the term, or if Lessee's
right to possession is terminated by Lessor because
of a breach of the lease, then in either such case,
Lessor may recover from Lessee all damages suffered
by Lessor as the result of Lessor's failure to
perform his obligations hereunder, including, but
not restricted to, the worth at the time of the
award (computed in accordance with paragraph (3) of
Subdivision (a) of Section 1951.2 of the California
Civil Code) of the amount by which the rent then
unpaid hereunder for the balance of the lease term
exceeds the amount of such rental loss for the same
period which the Lessee proves could be reasonably
avoided by Lessor, and in such case, Lessor, prior
to the award, may relet the premises for the
purpose of mitigating damages suffered by Lessor
because of Lessee's failure to perform his
obligations hereunder; provided, however, that even
though Lessee has abandoned the premises following
such breach, this lease shall nevertheless continue
in full force and effect for as long as the Lessor
does not terminate Lessee's right of possession,
and until such termination Lessor may enforce all
his rights and remedies under this lease, including
the right to recover the rent from Lessee as it
becomes due hereunder.
SURRENDER 12. The voluntary or other surrender of this
OF lease by Lessee, or a mutual cancellation thereof,
LEASE shall not work a merger, and shall, at the option
of Lessor, terminate all or any existing subleases
or subtenancies, or may, at the option of Lessor,
operate as an assignment to him or any or all such
subleases or subtenancies.
ATTORNEY'S 13. In case suit is brought by either party
FEE because of the breach of any term, covenant or
condition herein contained, the prevailing party
shall be entitled to recover against the other
party a reasonable attorney's fee to be fixed by
the court.
NOTICES
14. All notices to be given to Lessee may be
given in writing personally or by depositing the
same in the United States mail, postage prepaid,
and addressed to Lessee at the said premises,
whether or not Lessee has departed from, abandoned
or vacated the premises.
TRANSFER OF
SECURITY 15. If any security be given by Lessee to
secure the faithful performance of all or any of
the covenants of this lease on the part of Lessee,
Lessor may transfer and/or deliver the security, as
such, to the purchaser of the reversion, in the
event that the reversion be sold, and thereupon
Lessor shall be discharged from any further
liability in reference thereto.
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WAIVER 16. The waiver by Lessor any breach of any
term, covenant or condition herein contained shall
not be deemed to be a waiver of such term, covenant
or condition or any subsequent breach of the same
or any other term, covenant or condition herein
contained. The subsequent acceptance of rent
hereunder by Lessor shall not be deemed to be a
waiver of any preceding breach by Lessee of any
term, covenant or condition of this lease, other
than the failure of Lessee to pay the particular
rental so accepted, regardless of Lessor's
HOLDING knowledge of such preceding breach at the time of
OVER acceptance of such rent.
17. Any holding over after the expiration of
the said term, with the consent of Lessor, shall be
construed to be a tenancy from month to month, at a
rental of _______________________ ($___________)
RULES Dollars a month, and shall otherwise be on the
terms and conditions herein specified, so far as
applicable.
18. The rules and regulations printed on this
lease, as well as such rules and regulations as may
be hereafter adopted by Lessor for the safety, care
REMEDIES and cleanliness of the premises and the
CUMULATIVE preservation of good order thereon, are hereby
expressly made a part hereof, and Lessee agrees to
obey all such rules and regulations.
19. It is understood and agreed that the
remedies herein given to Lessor shall be
cumulative, and the exercise of any one remedy by
Lessor shall not be the exclusion of any other
remedy.
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SUCCESSORS The covenants and conditions herein contained
AND ASSIGNS shall, subject to the provisions as to assignment,
apply to and bind the heirs, successors,
executors, administrators and assigns of all of the
parties hereto; and all of the parties hereto shall
be jointly and severally liable hereunder.
Lessor agrees to furnish the demised premises
SERVICES during reasonable building hours as the same may be
determined from time to time by Lessor and while
Lessee is not in default under any of the
provisions of this lease, and subject to the
regulations of the building wherein the demised
premises are situated, with:
water and elevator only
and Lessee agrees to pay for all other services
supplied to said premises not herein before in this
paragraph enumerated. Lessor, however, shall not be
liable for failure to furnish any of the foregoing
when such failure is caused by conditions beyond
the control of Lessor, or by accidents, repairs,
strikes, labor disturbances or labor disturbances
or labor disputes of any character, whether
resulting from or caused by acts of Lessor or
otherwise, nor shall such failure constitute an
eviction; nor shall Lessor be liable under any
circumstances for loss of or injury to property,
however occurring, through or in connection with or
incidental to the furnishing of any of the
foregoing.
TIME 22. time is of the essence of the lease.
MARGINAL 23. The captions in the margins of this
CAPTIONS lease are for convenience only and are not a part
of this lease and do not in any way limit or
amplify the terms and provisions of thislease.
24. Lessee hereby agrees to accept
possession of the demised premises in their
existing condition and at lessee's expense to make
all repairs, improvements, and installations that
lessee may deem necessary for the conduct o his
business.
24. Lessee hereby agrees to accept
possession of the demised premises in their
existing condition and at lessee's expense to make
all repairs, improvements, and installations that
lessee may deem necessary for the conduct o his
business.
25. Lessor has received a $1,285 security
deposit to ensure lessee's acceptance and
performance of lease terms. This deposit will be
refunded upon lessee's surrender of the premises at
the end of the lease term.
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<PAGE>
26. Lessee has the right to terminate the
lease any time after 18 months with a minimum of 60
days notice to lessor and the payment of 6 months
rent.
BROKER IS NOT AUTHORIZED TO GIVE
LEGAL OR TAX ADVICE. IF YOU
DESIRE LEGAL OR TAX ADVICE CONSULT
YOUR ATTORNEY BEFORE SIGNING.
CONSULT YOUR ATTORNEY - This document has been prepared for submission to your
attorney for his approval if he finds the same satisfactory from the standpoint
of protection of your legal rights. No representation or recommendation is made
by broker or its agents or employees as to the legal sufficiency, legal effect
or tax consequences of this document or the transaction relating thereto. These
are questions for your attorney.
CONSULT YOUR ATTORNEY - This document has been prepared for submission to your
attorney for his approval if he finds the same satisfactory from the standpoint
of protection of your legal rights. No representation or recommendation is made
by broker or its agents or employees as to the legal sufficiency, legal effect
or tax consequences of this document or the transaction relating thereto. These
are questions for your attorney
Broker is not authorized to give legal or tax advice. If you desire legal or tax
advice consult your attorney before signing.
IN WITNESS WHEREOF, Lessor and Lessee have executed these presents in duplicate
the day and year first above written.
LESSOR LESSEE
Kinta Haller Alaron Trading Co.
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EXHIBIT 10.12
COMMERCIAL LEASE AGREEMENT BETWEEN:
J's K Realty, Inc.
Landlord
AND
Alaron Trading Corporation
Tenant
<PAGE>
Table of Contents
I. DESCRIPTION OF PREMISES..............................................1
II. TERM AND RENT........................................................1
III. OPTIONS - ADDITIONAL RENT - EXPENSE..................................2
IV. USE..................................................................2
V. PAYMENT OF RENT......................................................2
VI. SUB-LETTING AND ASSIGNMENT...........................................4
VII. PREMISES - CARE AND ALTERATIONS......................................5
VIII. MAINTENANCE-REPAIRS-DESTRUCTION......................................6
IX. REFUSE-RECYCLING-AIR QUALITY- HAZARDOUS WASTE-ECRA...................8
X. COMPLIANCE WITH ENVIRONMENTAL LAWS AND
INDEMNIFICATION......................................................8
XI. INSURANCE AND LIABILITIES...........................................11
XII. UTILITIES...........................................................13
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XIII. LAWS AND PERMITS....................................................13
XIV. SIGNS...............................................................14
XV. SUBORDINATION.......................................................14
XVI. RULES AND REGULATIONS...............................................14
XVII. DEFAULTS - PENALTIES................................................15
XVIII. NOTICES - CHANGES...................................................16
XIX. HOLDOVER............................................................17
XX. GUARANTEES..........................................................17
XXI. ESTOPPEL............................................................17
XXII. CONDEMNATION........................................................18
XXIII. SECURITY DEPOSIT....................................................18
XXIV. ARBITRATION.........................................................19
XXV. RIGHTS AND REMEDIES.................................................19
XXVI. SUPPLY OF SERVICES..................................................19
XXVII. LEASE EXECUTION.....................................................20
XXVIII. ADDITIONAL AGREEMENTS..............................................20
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LEASE
THIS LEASE, dated the I day of November, 1998, between J's K Realty, Inc.,
hereinafter referred to as the Landlord, and Alaron Trading Corporation,
hereinafter referred to as the Tenant.
WITNESSETH: That the Landlord hereby demises and leases unto the Tenant, and the
Tenant hereby hires and takes from the Landlord for the term and upon the
rentals hereinafter specified, the premises as described as follows, situated in
the Town of Sparta, County of Sussex and State of New Jersey.
I.DESCRIPTION OF PREMISES
Tenant is accepting the premises in "as is" condition. Unit 204F is
approximately 550 square feet more or less. The unit is located at 191 Woodport
Road, Sparta, New Jersey and is to be used as office space.
II.TERM AND RENT
The term of this demise shall be for twelve (12) months beginning November 1,
1998 and ending October 31, 1999. The tenant shall have two, one year options to
lease at the end of the first term. Beginning in year two, and each year
thereafter for the term of the Lease and options, the rent shall increase by the
percentage increase in the Consumer Price Index (CPI). Rent increases indexed to
the CPI shall occur on the anniversary dates of the Lease, in the years
specified, and will be by a percentage equal to 100% of the increase in the CPI
for Urban Wage Earners for Northeastern New Jersey (or its equivalent, if it is
discontinued), over the prior year.
The base rent for the demised term shall be eight thousand, forty dollars
($8,040.00).
The said rent is to be payable monthly in advance on the first day of each
calendar month for the term hereof, in installments as follows: Six hundred
Seventy Dollars ($670.00); payable to: J's K Realty, Inc., c/o McIntyre &
Company, CPAS, 191 Woodport Road, Sparta, NJ 07871 or as may be otherwise
directed by the Landlord in writing.
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THE ABOVE LETTING IS UPON THE FOLLOWING CONDITIONS:
1. All references herein to any parties, persons, entities or
corporations, the use of any particular gender or the plural or singular number
is intended to include the appropriate gender or number as the tent of within
Lease may require.
I
III.OPTIONS - ADDITIONAL RENT - EXPENSE
2. The rent shall increase, at the beginning of year two, by the
percentage increase in the Consumer Price Index (CPI) of the previous twelve
months.
3. Deleted.
4. If this Lease contains any rental option periods, then Tenant must
notify Landlord of his intentions to execute such option six months prior to the
beginning date of the option period. Failure to notify landlord shall void the
option and all future options.
5. The Landlord covenants that the Tenant, on paying the said rental
and performing the covenants and conditions in this Lease contained, shall and
may peaceably and quietly have, hold and enjoy the demised premises for the term
aforesaid.
IV.USE
6. The Tenant covenants and agrees to use the demised premises as
office/retail space and agrees not to use or permit the premises to be used for
any other purpose without the prior written consent of Landlord endorsed hereon.
Premises may not be used as a public accommodation or in any manner that would
cause the premises to be deemed a "place of public accommodation" under the
Americans with Disabilities Act of 1990.
V.PAYMENT OF RENT
7. The Tenant shall, without any previous demand, therefore, pay to the
Landlord, or its agent, the said rent at the times and in the manner above
provided. In the event of the non-payment of said rent, or any installment
thereof,
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<PAGE>
at the times and in the manner above provided, and if the same shall remain in
default for ten days after becoming due, or if the Tenant shall be dispossessed
for nonpayment of rent, or fi the leased premises shall be deserted or vacated,
the Landlord or its agents shall have the right to and may enter the said
premises as the agent of the Tenant, either by force or otherwise, without being
liable for any prosecution or damages, therefore, and may relet the premises as
the agent of the Tenant, and receive the rent therefore, upon such terms as
shall be satisfactory to the Landlord, and all rights of the Tenant to repossess
the premises under this Lease shall be forfeited. Such re-entry by the Landlord
shall not operate to release the Tenant from any rent to be paid or covenants to
be preformed hereunder during the full term of this Lease. For the purpose of
reletting, the Landlord shall be authorized to make such repairs or alterations
in or to the leased premises as may be necessary to place the same in good order
and condition. The Tenant shall be liable to the Landlord for the costs of such
repairs or alterations, and all expenses of such reletting. If the sum realized
or to be realized from the reletting is insufficient to satisfy the monthly or
term rent provided in this lease, the Landlord, at its option, may require the
Tenant to pay such deficiency month by month, or may hold the Tenant in advance
for the entire deficiency to be realized during the term of the reletting. The
Tenant shall not be entitled to any surplus accruing as a result of the
reletting. The Landlord is hereby granted a lien, in addition to any statutory
lien or right to distraint that may exist, on all the personal property of the
Tenant in or upon the demised premises, to secure payment of the rent and
performance of the covenants and conditions of this Lease. The Landlord shall
have the right, as agent of the Tenant, to take possession of any furniture,
fixtures or other personal property of the Tenant found in or about the
premises, and sell the same at public or private sale and to apply the proceeds
thereof to the payment of any monies becoming due under this lease, the Tenant
hereby waiving the benefit of all laws exempting property from execution, levy
and sale or distress or judgement. The Tenant agrees to pay, as additional rent,
all reasonable court costs, attorney, professional and management fees, and
other expenses incurred by the Landlord in enforcing any of the obligations
under this Lease. These costs are in addition to rent and penalties due.
8. A. Rents are to be paid in equal monthly installments on the first
day of each month. There will be a late charge of $50 for any rent payment
received after the 10th day of the month. There will be an interest charge at
the monthly rate of 1% for any rent 30 or more days past due. This shall be in
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<PAGE>
addition to any other late penalties. Tenant agrees that the late charge imposed
is fair and reasonable, to the best of the Landlord and Tenant's knowledge it
complies with all laws, statutes and regulations, and constitutes an agreement
between Landlord and Tenant as to the estimated compensation for costs and
administrative expenses incurred by Owner due to the late payment to Landlord by
Tenant. Tenant further agrees that the late charge assessed does not constitute
a lender or borrower/creditor relationship between the Landlord and Tenant.
9. B. Rent that is more than 15 days late shall be an automatic default
of the Lease and shall require a notice of default from the Landlord. Landlord
may immediately pursue all legal remedies. If Landlord has to sue for collection
of rent, Tenant shall pay all reasonable court costs, attorney, professional and
management fees in addition to rent and assessments due.
10. C. Notwithstanding any other provisions in this Lease, the Landlord
may terminate this Lease if the Tenant is chronically late with rent payments.
Chronically late payment is defined as paying rent 15 days or more after the due
date on three or more occasions during any 12 month period of the Lease term.
11. D. Failure of the Landlord to insist upon the strict performance of
any provisions of the Lease shall not be construed as a waiver for the future of
any such provision. No payment by the Tenant or receipt by the Landlord of a
lesser amount than the monthly rent or assessment shall be deemed to be other
than on account. Landlord may accept a payment without prejudice to Landlord's
right to recover the balance of rent using all available remedies. nor shall the
"late charge" provision be construed as a waiver of Landlord's right to
terminate this lease for failure to make timely rental payments.
12. E If- Tenant makes any payment to Landlord by check, such payment
shall be by check of Tenant and Landlord shall not be required to accept the
check of any other Person, and any check received by Landlord shall be deemed
received Subject to collection. If any check is mailed by Tenant, Tenant shall
post such check in sufficient time prior to the date when payment is due, so
that such check will be received by Landlord on or before the date when payment
is due. Tenant shall assume the risk of lateness. Failure of delivery of the
mails will not excuse Tenant from its obligation to have made the payment in
question
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<PAGE>
when required under this Lease.
13. F. Any free rent or other monetary consideration or discounts given
to the Tenant must be repaid if Tenant defaults on any of the terms and
conditions of this Lease or terminates this Lease prior to the termination date.
VI.SUB-LETTING AND ASSIGNMENT
14. A. The Tenant shall not sub-let the demised premises nor any
portion thereof, nor shall this Lease be assigned by the tenant without the
prior written consent of the Landlord endorsed hereon.
15. B. In the event the Landlord consents to a subtenant for the
demised premises, the following shall apply:
1. Subtenant's Defaults. Sublandlord and Subtenant hereby
agree that, if Subtenant shall be in default of any
obligation of Subtenant under the Sublease which default
also constitutes a default by Sublandlord under the Prime
Lease, then overlandlord shall be permitted to avail
itself of all the rights and remedies available to
Sublandlord in connection herewith.
2. Overlandlord's Rights. Without limiting the Generality of
the foregoing, Overlandlord shall be permitted (by
assignment of a cause of action or otherwise) to institute
an action or proceeding against Subtenant in the name of
Sublandlord in order to enforce Sublandlord's rights under
the Sublease, and also shall be permitted to take all
ancillary actions (e.g., serve default notices and
demands) in the name of Sublandlord as Overlandlord
reasonably shall determine to be necessary.
3. Sublandlord's Cooperation. Sublandlord agrees to cooperate
with Overlandord, and to execute such documents as shall
be reasonably necessary, in connection with the
implementation of the foregoing rights of Overlandlord.
4. Subtenant Remains Liable. Sublandlord expressly
acknowledges and agrees that the exercise by Overlandlord
of any of the foregoing rights and remedies shall not
constitute an election of remedies, and shall not in any
way impair Overlandlord's entitlement to pursue other
rights and remedies directly against Sublandlord.
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<PAGE>
4. 16. C. If Tenant sublets space at a rate higher than current rent,
then Landlord will receive an automatic 10% increase in all future rents or 50%
of the new higher rent increase, whichever, is greater. This 50% share would
also apply to any payment outside of rent made to the Tenant by the new tenant
or his agent. Landlord shall also have the option of taking the space back and
relieving the Tenant of all liability and responsibility for the terms of this
Lease.
4. 17. D. Landlord shall have the right to assign this Lease with all
its terms and conditions to any other entity or person. Such assignment shall
relieve Landlord of any past or future liability concerning this Lease
agreement. All liabilities shall be assumed by new owner, landlord or assignee.
4.VII.PREMISES - CARE AND ALTERATIONS
4. 18. A. The Tenant has examined the demised premises, and accepts
them in their present condition (except as otherwise expressly provided herein)
and without any representations on the part of the Landlord or its agents as to
the present or future condition of the said premises.
4. 19. B. The Tenant shall keep the demised premises in good
condition, and shall redecorate, paint and renovate the said premises as may be
necessary to keep them in repair and good appearance.
4. 20. C. Deleted.
4. 21. D. The Tenant shall not make any alterations,
additions and improvements to said premises without the prior written consent of
the Landlord. All renovations, improvements, electrical and plumbing,- work must
meet Municipal, County, State and Federal codes. All elections, alterations,
additions and improvements, whether temporary or permanent in character, which
may be made upon the premises either by the Landlord or the Tenant, except
furniture or moveable trade fixtures installed at the expense of the Tenant,
shall be the property of the Landlord and shall remain upon and be surrendered
with the premises as a part thereof at the termination of this Lease, without
compensation to the Tenant. Tenant agrees to cooperate fully with the Landlord
for any interior and exterior renovations and maintenance to the premises.
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<PAGE>
4.VIII.MAINTENANCE-REPAIRS-DESTRUCTION
4. 22. A. For the term of this Lease, the Landlord shall be
responsible for structural repairs, and repair and care of common areas of the
building. Tenant shall be responsible for care and maintenance of the interior
premises.
4. 23. B. The Tenant agrees to replace, at the Tenant's expense, any
and all glass which may become broken in and on the demised premises. Plate
glass and mirrors, if any, shall be insured by the Tenant at their full
insurable value in a company satisfactory to the Landlord. Said policy shall be
of the full premium type, and shall be deposited with the Landlord or its agent.
4. 24. C. Tenant shall not create, permit or suffer any mechanic's or
other lien or encumbrance on or affecting the demised premises or fee estate.
Landlord will not be liable for any labor, services or materials furnished to
any Tenant or subtenant in connection with any work performed on or at the
demised premises. Should such a lien or encumbrance be filed, or attached to the
premises, Tenant shall have thirty (30) days to have same removed. Failure to
remove lien or encumbrance shall be considered a default of this Lease. and
Landlord may terminate the Lease and may pay the said lien, without inquiring
into the validity thereof, and the Tenant shall forthwith reimburse the Landlord
the total expense and costs incurred by the .Landlord in discharging the said
lien, as additional rent hereunder.
4. 25. D. The Tenant shall quit and surrender the premises at the
end of the demised term in as good condition as the reasonable use thereof will
permit.
4. 26. E. The Landlord, or its agents, upon twenty-four (24) hours
notice (except in emergencies) shall have the right to enter the demised
premises at reasonable hours in the day or night to examine the same, or to run
telephone or other wires, or to make such repairs, additions or alterations as
it shall deem necessary for the safety, preservation or restoration of the
improvements, or for the safety or convenience of the occupants or users thereof
(there being no obligation, however,, on the part of the Landlord to make any
such repairs. additions or alterations), or to exhibit the same to prospective
purchasers and put upon the premises a suitable "For Sale" sign. For three
months prior to the expiration of the demised term, the Landlord, or its agents,
may similarly exhibit
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the premises to prospective tenants, and may place the usual "To Let" signs
thereon. Landlord may enter the demised premises at any time for the purpose of
emergency repairs. If Tenant has not provided Landlord with key or other access
to premises, then Landlord shall not be responsible for any damages which may
occur while entering the premises.
4. 27. F. In the event of the destruction of the demised premises or
the building containing the said premises by fire, explosion, the elements or
otherwise during the term hereby created, or previous thereto, or such partial
destruction thereof as to render the premises wholly untenable or unfit for
occupancy, or- should the demised premises be so badly injured that the same
cannot be repaired within ninety days from the happening of such injury, then
and in such case, the term hereby creates shall, at the option of the Landlord,
cease and become null and void from the date of such damage or- destruction, and
the Tenant shall immediately surrender said premises and all the Tenant's
interest therein to the Landlord, and shall pay rent only to the time of such
surrender, in which event the Landlord may re-enter and re-possess the premises
thus discharged from this Lease and may remove all parties therefrom. Should the
demised premises be rendered untenantable and unfit for occupancy, but yet be
repairable within ninety days from the happening of said injury, the Landlord
may enter and repair the same with reasonable speed, and the rent shall not
accrue after said injury or while repairs are being made, but shall re-commence
immediately after said repairs shall be completed. But if the premises shall be
so slightly injured as not to be rendered untenantable and unfit for occupancy,
then the Landlord agrees to repair the same with reasonable promptness and in
that case the rent accrued and accruing shall not cease or determine. The Tenant
shall immediately notify the Landlord in case of fire or other- damage to the
premises.
4.IX.REFUSE-RECYCLING-AIR QUALITY- HAZARDOUS WASTE-ECRA
4. 28. Should the recycling of garbage be required, then Tenant is
obligated as follows:
4. 29. A. To comply with all present and future laws and regulations of
all municipal, county, state and federal governments and agencies regarding the
collection, sorting, separation and recycling of waste products, garbage, refuse
and trash. Tenants shall sort and separate such items into
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categories as provided by law, and in accordance with the rules and regulations
adopted by the Landlord.
4. 30. B. Landlord reserves the right to refuse to collect or accept
from Tenant any waste products, garbage, refuse or trash which is not separated
and sorted as required by law, or is considered hazardous waste or requires
special waste/environmental handling and to require Tenant to arrange for such
collection, at Tenant's sole cost and expense, using a contractor satisfactory
to the Landlord.
4. 31. C. Tenant shall pay all costs, expenses, fines, penalties or
damages imposed on Landlord or Tenant by reason of Tenant's failure to comply
with (A) and (B) above. Continuing failure to comply with the regulations shall
be considered a default of the Lease by the Tenant.
4. 32. D. In the event Landlord is penalized in any way, or suffers any
other damage as a result of Tenant's failure to comply with recycling
regulations and statutes or to promptly and properly place its non-recyclable
garbage in designated containers, Tenant shall be fully liable to Landlord, and
any damages, additional costs, attorney and professional fees or fines incurred
by Landlord shall be payable by Tenant to Landlord as additional rent.
4. 33. E. Deleted.
4. 34. F. Smoking is forbidden in all areas of the building. Landlord
shall be released from all responsibility for air quality of the building
interior.
4.X.COMPLIANCE WITH ENVIRONMENTAL LAWS AND INDEMNIFICATION
4. 35. G. The Tenant represents that it will not use the property or
the leased premises to refine, produce, store, handle, transfer, process or
transport "Hazardous Substances", as such term defined in N.J.S.A. 58:10-
23.11b(k) in violation of any applicable law, rule or regulation, and the Tenant
has not in the past, nor does Tenant intend in the future, to use said property,
including, but not limited to the Leased Premises, for the purpose of refining,
producing, storing, handling, transferring, processing or transporting any
"Hazardous Substances" in violation of any applicable law, rules or regulations
of the Federal Government or the State of New Jersey.
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4. 36. H. Tenant expressly agrees, covenants, represents and warrants
that, neither it nor anyone under its direction or control shall bring into or
onto the Leased Premises, or receive, store, prepare, manufacture, convert, mix,
use, distribute or dispose of at the Leased Premises in any manner, or do or
refrain from doing any act, which would violate any environmental laws
("Environmental Laws"), including the provisions of the Spill Compensation and
Control Act, N.J.S.A. 58:10-23.11 et seq. ("Spill Act"), the Environmental
CleanUp Responsibility Act, N.J.S.A. 13:1K-6, et seq. ("ECRA") the Industrial
Site Recovery Act ("ISRA"), the Leaking Underground Storage Tank Act, N.J.S.A.
58: 1 OA-21 et seq. ("LUST"), the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C.A. 9601, et seq. ("CERCLA"). The
Resource Conservation and Recovery act 42 U.S.C.A. 6901, et seq. ("RCRA") and
administrative rules and/or regulations, relating thereto, regardless of whether
now existing or enacted subsequent to the execution of this Lease and as same
may be supplemented, amended or replaced, from time to time. Tenant represents
that there are presently no existing liens for Spill Act, ECRA, ISRA or from
violation of any Environmental Laws against Tenant or Leased Premises.
4. 37. I. Tenant, at its sole expense, shall comply on a timely basis
with the provisions of all Environmental Laws affecting the initiation,
operation or termination of its business at the Leased Premises, including
without limitations the Spill Act, ECRA, ISRA, LUST, CERCLA, RCRA and the
administrative regulations promulgated thereunder. Tenant. at its sole expense,
shall make all submissions to, provide all applications and information to,
effectuate all cleanups and comply with all requirements of, the Bureau of
Industrial Site Evaluation (the "Bureau") of the New Jersey Department of
Environmental Protection and Energy ("NJDEPE"). If the Bureau or any other
division of NJDEPE determines that a cleanup plan be prepared and a cleanup
undertaken at the Leased Premises due to the creation or exacerbation of any
toxic or, environmental problem during the term of the Lease or any occupation
of the Leased Premises by the Tenant, the Tenant shall, at its sole expense,
undertake all testing and prepare and submit the required cleanup plans and
financial assurances, including without limitation, surety bond, standby trust
agreements, guarantees, and/or letters of credit, and carry out the approved
cleanup plan. Tenant's obligation under this Section shall arise regardless of
whether the cause of the event triggering ECPA, ISRA or any other Environmental
Law is due to ail action of the Tenant or due to Mortgagee's foreclosure upon or
the sale of the Leased Premises, any change in the
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ownership of the Leased Premises, the leasing, subleasing, or assignment of any
lease for all or part of the Leased Premises.
4. 38. J. Tenant agrees to pay for and to indemnify, defend and save
Landlord harmless from all liabilities, losses, claims, actions, suites,
proceedings, judgments, fines, penalties, costs, expenses, and fees, including
attorney's fees, or any kind whatsoever incurred by Landlord or arising out of
or in any way connected with any violation of the obligations imposed upon
Tenant in this Section which require remedial action by the Landlord pursuant to
any law or which results in governmental agency action. Such obligations and
liabilities of Tenant under this Section shall survive the cancellation.
modification. or discharge of the Lease and the termination of Tenant's
liability to Landlord under any guarantee. In the event Tenant fails to comply
with the provisions of this Section, Landlord, in addition to all other remedies
available against Tenant, shall be entitled to obtain an order of specific
performance from a court of competent jurisdiction directing Tenant to comply
with the provisions of this Section, but Landlord shall not be obligated to seek
such an order and shall not, by entering into or enforcing its rights under this
Lease, be held liable or responsible for complying with, overseeing 0 compliance
with ECRA, ISRA, LUST. The Spill Act, CERCLA, RCPA, or any and all other
Environmental Laws.
4. 39. K. Tenant shall promptly furnish copies of the following to
Landlord:
1. All documentation and correspondence which Tenant
provides to NJDEPE pursuant to the Worker and Community
right to Know Act. N.J.S.A. 34:5A-1. et seq. and the
administrative regulations promulgated thereunder
("Right to Know Act").
2. All reports and notices submitted by Tenant pursuant to
the Hazardous Substance Discharge Reports and Notices
Act, N.J.S.A. 13:1K-15, et seq. and the administrative
regulations promulgated thereunder ("Reports and
Notices Act").
3. All notices, correspondence and submissions made by the
Tenant to NJDEPE, the United States Environmental
Protection Agency ("EPA"), the United States
Occupational Safety and Health Administration ("OSHA"),
or any other municipal, county, state or federal
authority which requires submission of any information
or documentation concerning environmental matters or
hazardous or toxic wastes or substances; and
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4. Notices served on Tenant by any governmental agency
alleging a violation of any Environmental Laws.
L. Landlord's delay or failure to enforce the Tenant's obligations
under this Section shall not be deemed to constitute a waiver of Landlord's
rights nor impose any liability upon Landlord for any obligation of Tenant
M. Notwithstanding anything contained in this Section to the contrary,
Landlord, from time to time, at Tenant's expense, shall have the right, but not
the obligation, to come oil the Leased Premises with environmental consultants
and/or engineers in order to make periodic inspections for toxic, hazardous,
carcinogenic, or environmentally sensitive wastes or substances (collectively
"Toxic Wastes"). If Toxic Wastes are discovered at the Leased Premises, Tenant
shall immediately, at its sole cost and expense, using New Jersey licensed
companies satisfactory to landlord specializing in toxic waste cleanup and
disposal and in a manner acceptable to Landlord and its engineers and
consultants, effectuate a complete cleanup and remediation of any Toxic Wastes
and shall provide Landlord 'With certifications of the cleanup by the company
undertaking the same. Tenant shall be responsible for all of Landlord's expenses
in conducting these Toxic Wastes tests in monitoring Tenant's cleanup and on
demand shall reimburse Landlord for same. In the event Tenant fails on demand
from the Landlord to promptly effectuate the Toxic Wastes cleanup, the Landlord
may, but shall not be obligated to, undertake the cleanup Itself and Tenant on
demand shall reimburse Landlord for all expenses incurred with regard to the
cleanup.
N. In the event that there shall be filed a lien against the Leased
Premises arising out of Tenant's violation of its obligation under this Section,
then the Tenant shall, within thirty (30) days from the date that the Tenant is
given notice that the lien has been placed against the Leased Premises or within
such shorter period of time in the event that the State of New Jersey has
commenced steps to cause the Leased Premises to be sold pursuant to the lien,
either (1) pay the claim and remove the lien from the Leased premises, or (2)
furnish (a) a bond satisfactory to the Landlord in the amount of the claim out
of which the lien arises, (b) a cash deposit in the amount of the claim out of
which the lien arises, or (c) other security reasonable, satisfactory to
Landlord in an amount sufficient to discharge the claim Out of which the lien
arises.
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4.XI.INSURANCE AND LIABILITIES
4. 40. A. Tenant will maintain comprehensive general public liability
insurance to insure against claims of bodily injury, death, or property damage
occurring in, on or about the demised premises and common areas. Landlord shall
be named "additional insured" on the policy. Minimum levels of coverage shall be
not less than $1,000,000. To protect Tenant and Landlord against all claims and
liability, said policy shall name the Landlord as additional insured. Insurance
must be provided by a BEST A VI rated insurance company. Landlord shall not be
responsible for- personal or business property of the Tenant under any
circumstances, except in the event of Landlord's negligence or willful act.
Tenant agrees to carry a Personal Business Property Insurance policy to
sufficiently protect all his property and contents within the leased premises.
At the beginning of each year, Landlord will be given copies of the Liability
Policies. Tenant agrees to and shall indemnify and hold harmless Landlord from
any and all claims, losses, thefts, costs, expenses and liability, including
liability for attorney fees in connection with, or resulting from, any accident,
injury or damage whatsoever caused to any person or property and arising,
directly or indirectly, in whole or in part, out of the business conducted in or
the use of the demised premises and common areas, or occurring in, on or about
the demised premises or common areas or any part thereof, arising, directly or
indirectly, in whole or in part, from-any act or omission, other than due to
negligence of the Landlord.
4. 41. B. Tenant shall keep their equipment, fixtures and contents
insured during the term of this Lease, against loss or damage by fire, water,
flood, theft and against loss or damage by other risks. Such insurance is
commonly known as Extended Coverage. Landlord shall not be responsible for loss
or damage to Tenant's equipment, fixtures, inventory or contents.
4. 42. C. Tenant assumes full responsibility for protecting its space
from theft, robbery and pilferage.
4. 43. D. Should the business, type of business or use of the Tenant
cause the Landlord's property and liability insurance to increase then the
Tenant shall pay the full cost and amount of the increase which shall be deemed
additional rent.
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4. 44. The Landlord shall not be responsible for the loss of or damage
to property, or injury to persons, occurring in or about the demised premises,
by reason of any existing or future condition, defect, matter or thing in said
demised premises or the property of which the premises are a part, or for the
acts, omissions or negligence of other persons or tenants in or about the said
property. The Tenant agrees to indemnify and save the Landlord harmless from all
claims and liability for losses of or damage to property, or injuries to persons
occurring in or about the demised premises, except that caused specifically by
the negligence of the Landlord.
4.XII.UTILITIES
4. 45. Utilities and services furnished to the demised premises for the
benefit of the Tenant shall be provided and pad for as follows: water by the
Landlord; gas by the Landlord; electricity by the Landlord; head by the
Landlord; refrigeration by the Landlord; hot water by the Landlord; sewage by
Landlord, garbage by the Landlord; recycling by the Landlord. The Landlord shall
not be liable for any interruption or delay of any of the above services for any
reason.
*Refrigeration means air conditioning as provided by the building air
conditioning system. The use of refrigerators or additional air conditioning by
the Tenant will result in a prorata charge resulting in increased rent. If
Landlord pays utilities and charges Tenant their share of charges, this shall be
considered "additional rent".
The Management hours of operation for this building are Monday - Friday, 8:00
a.m. to 6:00 p.m.
4.XIII.LAWS AND PERMITS
4. 46. The Tenant agrees to observe and comply with all laws,
ordinances, rules and regulations of the Federal, State, County and municipal
authorities applicable to the business to be conducted by the Tenant in the
demised premises. Prior to and during the operation of any business on the
premises, the Tenant agrees not to do or permit anything to be done in said
premises, or keep anything therein, which will increase the rate of fire
insurance premiums on the improvements or any part thereof, or on property kept
therein, or which will obstruct or interfere with the rights of other tenants,
or conflict with the regulations of the Fire Department or with any insurance
policy upon said
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improvements or any part thereof. In the event of any increase in insurance
premiums resulting from the Tenant's occupancy of the premises, or from any act
or omission on the part of the Tenant, the Tenant agrees to pay said increase in
insurance premiums on the improvements or contents there of as additional rent.
4. 47. In the event that the Tenant requires construction of the
premises, it is the Tenant's responsibility to secure all Federal, State, County
and Municipal permits and Certificates of Occupancy, at Tenant's expense, prior
to operation of any business on the premises. If Tenant is unable to secure a
Certificate of Occupancy (C.O.), despite his best efforts, he shall notify
Landlord. Landlord shall have the option to secure a C.O. within thirty (30)
days or declare Lease null and void and return Tenant's security deposit.
4. 48. The premises may not be used for any unlawful activities or in a
manner which would create or maintain a threat to the health and safety of the
general public or other tenants.
4.XIV.SIGNS
4. 49. A. No sign, advertisement or notice shall be affixed or placed
upon any part of the demised premises by the Tenant, except in such manner, and
of such size, design and color as shall be approved in advance in writing by the
Landlord. Any sign installed without Landlord's written consent will be removed
by Landlord or his agent at Tenant's expense.
B. All signage design, construction and installation is at
Tenant's expense.
C. At no time may the Tenant display "going out of business",
"out of business", "retirement sale", etc, signs.
D. All signs must comply with municipal ordinances and
regulations.
4.XV.SUBORDINATION
4. 50. This Lease is subject and is hereby subordinated to all present
and future mortgages, deeds of trust and other encumbrances affecting the
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demised premises or the property of which said premises are a part. The Tenant
agrees to execute, at no expense to the Landlord, any instrument which may be
deemed necessary or desirable by the Landlord to further effect the
subordination of the Lease to any such mortgage, deed or trust or encumbrance.
4. 51. Deleted.
4.XVI.RULES AND REGULATIONS
4. 52. The rules and regulations regarding the demised premises,
affixed to this Lease, if any, as well as any other and further reasonable rules
and regulations which shall be made by the Landlord, shall be observed by the
Tenant and by the Tenant's employees, agents and customers. The Landlord
reserves the right to rescind any presently existing rules applicable to the
demised premises, and to make such other and further reasonable rules and
regulations as, in its judgement, may from time to time be desirable for the
safety, care and cleanliness of the premises, and for the preservation of good
order therein, which rules, when so made and notice thereof given to Tenant,
shall have the same force and effect as if originally made a part of this Lease.
Such other and further rules shall not, however, be inconsistent with the proper
and rightful enjoyment by the Tenant of the demised premises.
4. 53. In case of violation of the Tenant of any of the covenants,
agreements and conditions of this Lease, or of the rules and regulations now or
hereafter to be reasonably established by the Landlord, and upon failure to
discontinue such violation within fifteen (15) days after written notice thereof
given to the Tenant, this Lease shall thenceforth, at the option of the
Landlord, become null and void, and the Landlord may re-enter without further
notice or demand. The rent in such case shall become due, be apportioned and
paid on and up to the day of such reentry, and the tenant shall be liable for
all loss or damage resulting from such violation as aforesaid. No waiver by the
Landlord of any violation or breach of condition by the Tenant shall constitute
or be construed as a waiver of any other violation or breach of condition, nor
shall lapse of time after breach of condition by the Tenant before the Landlord
shall exercise its option under this paragraph operate to defeat the right of
the Landlord to declare this Lease null and void and to re-enter upon the
demised premises after the said breach or violation.
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4.XVII.DEFAULTS - PENALTIES
4. 54. A. If the rental of this Lease or other charges to be paid by
Tenant, or any part thereof, are not paid when due or fifteen (15) days after
written notice, or if Tenant shall fail to promptly perform any other covenant,
condition or agreement as stated in the Lease fifteen (15) days after securing a
court order, without further notice, may, at its option, re-enter and take
possession of the demised premises, including all improvements thereof and
fixtures and equipment located at, in or about the same and re-let the demised
premises. In the event that Tenant abandons the demised premises, Landlord can
act as specified above without first securing a court order. In the event, the
proceeds or rentals received by the Landlord under the provisions of this
Paragraph are insufficient to pay all costs and all amount due and becoming due
hereunder, the Tenant shall pay to the Landlord such deficiency as may occur for
the term of the Lease.
4. 55. B. In the event that Tenant defaults three or more times in a
twelve month period, Landlord shall not be required to give notice of default
and there will be no time period to cure the default. In addition, Landlord may
require Tenant to increase his security deposit by an additional 25% with each
monetary default. Tenant will be required to pay all Landlord costs incurred in
rectifying any default.
4. 56. Failure to cure any default as stipulated in this Lease shall
result in termination of Tenant's occupancy of the premises. However, Tenant
shall remain liable for the terms, conditions and obligations of this Lease.
4.XVIII.NOTICES - CHANGES
4. 57. All notices and demands, legal or otherwise, incidental to this
Lease, or the occupation of the demised premises, shall be in writing. If the
Landlord or its agent desires to give or serve upon the Tenant any notice or
demand, it shall be sufficient to send a copy thereof by registered or certified
mail, addressed to the Tenant at the demised premises, or to leave a copy
thereof with a person of suitable age found on the premises, or to post a copy
thereof upon the door to said premises. Notices from the Tenant to the Landlord
shall be sent by registered or certified mail or delivered to the Landlord at
the place hereinbefore designated for the payment of rent, or to such party or
place
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as the Landlord may from time to time designate in writing.
4. 58. A. No change can be made in this Lease or its provisions except
in writing and signed by both Tenant and Landlord. If any provision of this
Lease is invalid, it shall be considered deleted from this Lease and shall not
invalidate the remaining provisions of this Lease
B. No oral promises, representations, or agreements have been made by
Landlord or by the Landlord's representative(s). This Lease is the entire
agreement between the parties. Landlord's representatives do not have the
authority to waive, amend, or terminate this Lease or any part of it and do not
have authority to make promises, representations, or agreements which impose
duties or other obligations on the Landlord unless done in writing.
4. 59. It is -further agreed that at any time during the term of this
Lease, the Tenant shall make any assignment for the benefit of creditors, or be
decreed insolvent or bankrupt according to law, or if a receiver shall be
appointed for the Tenant, then the Landlord may, at its option, terminate this
Lease. Exercise of such option shall be evidenced by notice to that effect
served upon the assignee, receiver, trustee or other person in charge of the
liquidation of the property of the Tenant or the Tenant's estate. But, such
termination shall not release or discharge any payment of rent payable hereunder
and then accrued, or any liability then accrued by reason of any agreement or
covenant herein contained on the part of the Tenant, or the Tenant's legal
representatives.
4.XIX.HOLDOVER
4. 60. In the event that the Tenant shall remain in the demised
premises after the expiration of the term of this Lease without having executed
a new written Lease with the Landlord, such holding over shall not constitute a
renewal or extension of tills Lease. The Landlord may, at its options elect to
treat the Tenant as one who has not removed at the end of his term, and
thereupon be entitled to all the remedies against the Tenant provided by law in
that situation. Or the Landlord may elect, at its option, to construe such
holding over as a tenancy from month to month, Subject to all the terms and
conditions of this Lease, except as to the duration there-of, and except that
the Landlord, at its option, may charge the Tenant a monthly rent equivalent to
two hundred percent
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(200%) of the monthly rent due for the last month of the term. Said increased
rent shall not be construed to be liquidated damages and, therefore, if the
premises are not surrendered at the end of the term, or any renewal or extension
thereof, Tenant shall be responsible to Landlord for all damage which Landlord
shall suffer by reason thereof Tenant shall indemnify, hold harmless and defend
Landlord from all claims made by a successor tenant resulting from Landlord's
delay in delivering possession of the premises to such successor tenant.
4.XX.GUARANTEES
4. 61. Tenant guarantees performance of all terms and obligations,
specified or implied, of this Lease. If the Lease is renewed or its term
extended, for any period beyond the original termination date specified in the
Lease, either pursuant to any option granted under the Lease or otherwise at any
time, or if the Tenant holds over beyond the term of the Lease, or if the Lease
is modified in any way, the obligations hereunder of the Guarantor shall extend
and apply with respect to the full performance and observation of all the
covenants, terms and conditions of the Lease, as existing, extended, renewed or
modified and of any Such amendment thereof
4.XXI.ESTOPPEL
4. 62. Tenant must provide Estoppel Certificates on demand. Within no
more than ten days after receipt of written request, the Tenant shall furnish to
the Landlord a certificate, duly acknowledged, certifying, to the extent true:
A. that this Lease is in full force and effect;
B. that the Tenant knows of no default hereunder on the
part of the Landlord, or if it has reason to believe
that such a default exists, the nature thereof in
reasonable detail;
C. the amount of the Rent being paid and the last date to
which Rent has been paid;
D. that this Lease has not been modified, or it if has
been modified, the terms and dates of such
modifications;
E. that the term of this Lease has been commenced;
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F. the commencement and expiration dates;
G. whether all work to be performed by the Landlord has
been completed;
H. whether the Renewal Term option, if any, has been
exercised;
I. whether there exist any claims or deductions from, or
defenses to, the payment of Rent; and
J. such other matters as may be reasonably requested by
the Landlord.
If the Tenant fails to execute and deliver to the Landlord a completed
certificate as required under this Paragraph, the Tenant hereby appoints the
Landlord as his attorney-in-fact to execute and deliver such certificate for and
on behalf of the Tenant.
J.XXII.CONDEMNATION
J. 63. If the property or any part thereof wherein the demised premises
are located shall be taken by public or quasi-public authority under any power
of eminent domain or condemnation, this Lease, at the option of the Landlord,
shall forthwith terminate and the Tenant shall have no claim or interest in or
to any award of damages for such taking. In such situation, neither the Landlord
nor the Tenant shall be held liable for the terms of the Lease.
J.XXIII.SECURITY DEPOSIT
J. 64. The Tenant has this day deposited with the Landlord the sum of
$1,340.00 as security for the full and faithful performance by the Tenant of all
the terms, covenants and conditions of this Lease upon the Tenant's part to be
performed. Said sum shall be returned to the Tenant after the time fixed as the
expiration of the term here-in, provided the Tenant has fully and faithfully
carried Out all of said terms, covenants and conditions on Tenant's part to be
performed. In the event of a bona fide sale, subject to this Lease. the Landlord
shall have the right to transfer the security to the vendee for the benefit of
the Tenant and the Landlord shall be considered to be released by the Tenant
from all liability for the return of such security; and the Tenant agrees to
look to the new Landlord solely for the return of the said security, and it is
agreed that this shall apply to every transfer or assi2iiiiient made of the
security to a new Landlord. The security
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<PAGE>
deposited under this Lease shall not be mortgaged, assigned or encumbered by the
Tenant without the written consent of the Landlord.
J.XXIV.ARBITRATION
J. 65. Deleted.
J.XXV.RIGHTS AND REMEDIES
J. 66. No rights are to be conferred upon the Tenant until this Lease
has been signed by the Landlord, and an executed copy has been delivered to the
Tenant.
J. 67. The foregoing rights and remedies are not intended to be
exclusive but as additional to all rights and remedies the Landlord would
otherwise have by law.
J. 68. All of the terms, covenants and conditions of this Lease shall
inure to the benefit of and be binding upon the respective heirs, executors,
administrators, successors and assigns of the parties hereto. However, in the
event of the death of the Tenant, if an individual, the Landlord may, at its
option terminate this Lease by notifying the executor or administrator of the
Tenant at the demised premises.
J. 69. Tenant shall not record this Lease or a short-form memorandum
hereof without prior written consent of Landlord. Upon Landlord's request,
Tenant agrees to execute a short-form memorandum of this Lease for recordation
purposes.
J.XXVI.SUPPLY OF SERVICES
J. 70. This Lease and the obligation of Tenant to pay rent hereunder
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<PAGE>
and perform all of the other covenants and agreements hereunder on part of
Tenant to be performed shall be in nowise affected, impaired or excused because
Landlord is unable to supply or is delayed in supplying any service expressly or
implied to be supplied or is unable to make, or is delayed in making any
repairs, additions. alterations or decorations or is unable to supply or is
delayed in supplying any equipment or fixtures if Landlord is prevent or delayed
from doing so by reason of government preemption in connection with the National
Emergency declared by the President of the United States or in connection with
any rule, order or regulation of any department or Subdivision thereof of any
governmental agency or by reason of the conditions of supply and demand which
have been or are affected by the war or by other conditions beyond the
Landlord's control.
J.XXVII.LEASE EXECUTION
J. 71. This Lease is not valid until signed and delivered to the Tenant
with signed approval from the Landlord.
J. 72. This Lease shall be null and void if not signed by Tenant
fifteen (15) days from Lease date at beginning of this Lease.
J.XXVIII.ADDITIONAL AGREEMENTS
IN WITNESS WHEREOF, the parties have hereunder set their hands and seals the day
and year first above written.
- --------------------------------------------------------------
Tenant Date
- -------------------------------------------------------------
J's K Realty, Inc., Landlord Date
- ------------------------------------------------------------
Witness Date
-22-
EXHIBIT 10.13a
ALARON.COM CORPORATION
1999 STOCK OPTION PLAN
1. Purpose.
The purpose of this 1999 Stock Option Plan (the "Plan") of Alaron.com
Corporation, a Delaware corporation (the "Company"), is to advance the interests
of the Company's stockholders by enhancing the Company's ability to attract,
retain and motivate persons who make (or are expected to make) important
contributions to the Company by providing such persons with equity ownership
opportunities and performance-based incentives and thereby better aligning the
interests of such persons with those of the Company's stockholders. Except where
the context otherwise requires, the term "Company' shall include any present or
future affiliate corporation of the Company as the term "affiliate" is defined
under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
2. Eligibility.
All of the Company's full-time, salaried or commissioned employees are
eligible to be granted options or other stock-based awards (each, an "Award")
under this Plan. Any person who has been granted an Award under this Plan shall
be deemed a "Participant".
3. Administration, Delegation.
(a) Administration by Board of Directors. This Plan will be construed,
administered and interpreted by the Board of Directors of the Company (the
"Board"). The Board shall have authority to grant Awards and to adopt, amend and
repeal such administrative rules, guidelines and practices relating to this Plan
as it shall deem advisable. The Board may correct any defect, supply any
omission or reconcile any inconsistency in this Plan or any Award in the manner
and to the extent it shall deem expedient to carry this Plan into effect and it
shall be the sole and final judge of such expediency. All decisions by the Board
shall be made in the Board's sole discretion and shall be final and binding on
all persons having or claiming any interest in this Plan or in any Award. No
director or person acting pursuant to the authority delegated by the Board shall
be liable for any action or determination relating to or under this Plan made in
good faith.
(b) Delegation.
(1) Delegation to Executive Officers. To the extent permitted
by applicable law, the Board may delegate to one or more executive officers of
the Company such power other than the power to make Awards under this Plan as
the Board may determine.
<PAGE>
(2) Delegation to Committees. To the extent permitted by
applicable law, the Board may delegate any or all of its powers under this Plan
to one or more committees or subcommittees of the Board (a "Committee"). If and
when the shares of common stock of the Company ("Common Shares") are registered
under the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act"),
the Board shall appoint one such Committee of not less than two members, each
member of which shall be an "outside director" within the meaning of Section
162(m) of the U.S. Internal Revenue Code of 1986, as amended, and any
regulations promulgated thereunder (the "Code"), and a "non-employee director"
as defined in Rule 16b-3 promulgated under the Exchange Act. Such Committee
shall, at a minimum, have the authority to grant Awards to the Company's
executive officers.
(3) Meaning of Board. All references in this Plan to the
"Board" shall mean the Board or a Committee referred to in Section 3(b)(2) or
the executive officer referred to in Section 3(b)(3) to the extent that the
Board's powers or authority under this Plan have been delegated to such
Committee or executive officer.
4. Stock Available for Awards.
(a) Number of Common Shares. Subject to adjustment under Section 4(c),
Awards may be made under this Plan for up to 700,000 Common Shares. If any Award
expires or is terminated, surrendered or canceled without having been fully
exercised or is forfeited in whole or in part or results in any Common Shares
not being issued, the unused Common Shares covered by such Award shall again be
available for the grant of Awards under this Plan, subject, however, in the case
of Incentive Stock Options (as hereinafter defined), to any limitation required
under the Code. Common Shares issued under this Plan may consist in whole or in
part of authorized but unissued shares or treasury shares.
(b) Per-Participant Limit. Subject to adjustment under Section 4(c),
for Awards granted after the Common Shares are registered under the Exchange
Act, the maximum number of Common Shares with respect to which an Award may be
granted to any Participant under this Plan shall be 35,000 per calendar year.
The per-participant limit described in this Section 4(b) shall be construed and
applied consistently with Section 162(m) of the Code.
(c) Adjustment to Common Shares. In the event of any stock split, stock
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Common Shares other
than a normal cash dividend, (i) the number and class of securities available
under this Plan, (ii) the number and class of security and exercise price per
share subject to each outstanding Option and (iii) the terms of each other
outstanding stock-based Award, shall be appropriately adjusted by the Company
(or substituted Awards may be made, if applicable) to the extent the Board shall
determine, in good faith, that such an adjustment (or substitution) is necessary
and appropriate. If this Section 4(c) applies and Section 7(e)(1) also applies
to any event, Section 7(e)(1) shall be applicable to such event and this Section
4(c) shall not be applicable.
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<PAGE>
5. Stock Options.
(a) General. The Board may from time to time in its sole discretion
grant to Participants options ("Options") to purchase Common Shares on the terms
and conditions set forth in this Plan and any additional terms and conditions
set forth in an agreement entered into between the Company and the recipient of
Options. The Board shall determine all rights and obligations relating to
Options awarded hereunder including, without limitation, the exercise price of
each Option, any vesting applicable to each Option, the conditions and
limitations applicable to the exercise of each Option (including conditions
relating to applicable securities laws) and whether the Options awarded shall be
"incentive stock options" as defined in Section 422 of the Code ("Incentive
Stock Options") or Options which are not Incentive Stock Options ("NQOs"). Each
Option awarded under this Plan shall entitle the holder thereof the right to
purchase one Common Share.
(b) Incentive Stock Options. Incentive Stock Options shall only be
granted to employees of the Company and shall be subject to and shall be
construed consistently with the requirements of Section 422 of the Code. If the
Board fails to designate any Options awarded hereunder as Incentive Stock
Options or NQOs, such Options shall be deemed to be Incentive Stock Options if
the terms thereof satisfy the requirements for Incentive Stock Options set forth
in the Code. If any Options awarded hereunder fail for any reason to qualify
under the Code as Incentive Stock Options, such Options shall be NQOs for
purposes hereof notwithstanding any designation to the contrary by the Board.
The Company shall have no liability to a Participant or any other party if an
Option (or any part thereof) which is intended to be an Incentive Stock Option
is not an Incentive Stock Option. Notwithstanding anything contained herein to
the contrary, to the extent that the aggregate Fair Market Value (as hereinafter
defined) of Common Shares with respect to which Incentive Stock Options are
exercisable for the first time by a Participant during any calendar year under
all incentive plans of the Company exceeds $100,000, such Options representing
the Fair Market Value of Common Stock in excess of $100,000 shall not be treated
as Incentive Stock Options. As used in this Plan, the term "Fair Market Value"
shall mean, with respect to Common Shares, the fair market value of Common
Shares as determined by the Board in good faith.
(c) Exercise Price. The Board shall establish the exercise price at the
time each Option is granted and specify such price in the Option holder's option
agreement. The exercise price shall not be less than the Fair Market Value of a
Common Share on the date the Option is granted. Notwithstanding the foregoing,
if Incentive Stock Options are granted to a Participant who, at the time of such
grant, owns capital stock representing more than 10% of the voting power of all
classes of capital stock of the Company, the exercise price of such Incentive
Stock Options shall not be less than 110% of the Fair Market Value of the Common
Shares to which they relate on the date of grant.
(d) Duration of Options. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Board may specify in an option
agreement. No Incentive Stock Option may be granted hereunder after the
expiration of the tenth anniversary of the earlier of the date of adoption of
this Plan by the Board or the approval of this Plan by the stockholders of the
Company.
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<PAGE>
(e) Exercise of Option. Options may be exercised only by delivery to
the Company of a written notice of exercise signed by the proper person together
with payment in full as specified in Section 5(f) in an amount equal to the
exercise price of each Option multiplied by the number of Common Shares to be
purchased upon exercise of such Options.
(f) Payment Upon Exercise. Common Shares purchased upon the exercise of
an Option awarded under this Plan shall be paid in the manner set forth in an
Option holder's option agreement or as follows:
(1) in cash or by check, payable to the order of the Company;
(2) to the extent permitted by the Board and explicitly
provided in an option agreement (i) by delivery of an irrevocable and
unconditional undertaking by a creditworthy broker to deliver promptly to the
Company sufficient funds to pay the exercise price, (ii) delivery by the
Participant to the Company of a copy of irrevocable and unconditional
instructions to a creditworthy broker to deliver promptly to the Company cash or
a check sufficient to pay the exercise price, (iii) by delivery of Common Shares
owned by the Participant valued at their Fair Market Value, which Common Shares
were owned by the Participant at least six months prior to such delivery, (iv)
by delivery of a promissory note of the Participant to the Company on terms
satisfactory to the Board or (v) by payment of such other lawful consideration
as the Board may determine; or
(3) any combination of the above permitted forms of payment.
6. Other Stock-Based Awards
The Board shall have the right to grant other Awards based upon or
relating to the Common Shares having such terms and conditions as the Board may
determine. Such Awards include, but are not limited to, the grant of Common
Shares based upon certain conditions, the grant of securities convertible into
Common Shares and the grant of stock appreciation rights.
7. General Provisions Applicable to Awards.
(a) Transferability of Awards. Except as the Board may otherwise
determine or provide in an Award, Awards shall not be sold, assigned,
transferred, pledged or otherwise encumbered by the person to whom they are
granted, either voluntarily or by operation of law, except by will or the laws
of descent and distribution and, during the life of the Participant, shall be
exercisable only by the Participant. References to a Participant, to the extent
relevant in the context, shall include references to authorized transferees.
(b) Documentation. Each Award under this Plan shall be evidenced by a
written instrument in such form as the Board shall determine. Such written
instrument may contain terms and conditions applicable to Awards in addition to
those set forth in this Plan.
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<PAGE>
(c) Board Discretion. Except as otherwise provided by this Plan, each
type of Award may be made alone or in addition or in relation to any other type
of Award. The terms of each type of Award need not be identical and the Board
need not treat Participants uniformly.
(d) Termination of Status. The Board shall set forth in a written
instrument the effect of the disability, death, resignation, retirement,
termination with or without cause or other change in the employment or other
status of a Participant on an Award and the extent to which, and the period
during which, the Participant, the Participant's legal representative,
conservator, guardian or designated beneficiary may exercise rights under the
Award.
(e) Acquisition Events.
(1) Consequences of Acquisition Events.
(A) Immediately prior to the occurrence of an
Acquisition Event (as defined below), the following shall occur:
(i) the exercisability of all Options then
outstanding which are not exercisable in full immediately prior to the
occurrence of the Acquisition Event shall be accelerated so that, immediately
prior to the occurrence of the Acquisition Event, 50% of the Common Shares
covered by such Option which are not then exercisable shall become fully
exercisable in the manner specified in the instrument evidencing the Option; and
(ii) all other stock-based Awards then
outstanding shall be accelerated so that immediately prior to the occurrence of
the Acquisition Event, 50% of the portion of such stock-based Award which is not
then exercisable, realizable or vested shall immediately become exercisable,
realizable or vested in full in the manner specified in the instrument
evidencing such stock-based Award.
(B) In addition to, and not in lieu of, the
provisions of Section 7(e)(1)(A) above, upon the occurrence of an Acquisition
Event, the Board may take one of the following actions with respect to the then
outstanding Options:
(i) provide that all outstanding Options
(whether or not then exercisable) shall be assumed, or equivalent Options shall
be substituted, by the acquiring or succeeding corporation (or an affiliate
thereof); provided that any such Options substituted for Incentive Stock Options
shall satisfy, in the determination of the Board, the requirements of Section
424(a) of the Code;
(ii) if the acquiring or succeeding
corporation is unwilling or unable to provide for the assumption or substitution
of Options in accordance with the preceding clause (i) or the preceding clause
(i) is otherwise inappropriate or inapplicable and, if under the terms of the
documents governing the Acquisition Event, the holders of Common Shares will
receive upon
5
<PAGE>
consummation of the Acquisition Event a cash payment for each Common Share
surrendered pursuant to such Acquisition Event (the "Cash Acquisition Price"),
provide that each outstanding Option (whether or not then exercisable) shall
terminate upon consummation of such Acquisition Event and any holder thereof
shall receive, in exchange therefor, a cash payment equal to the amount (if any)
by which (A) the Cash Acquisition Price multiplied by the number of Common
Shares subject to such outstanding Options (whether or not then exercisable),
exceeds (B) the aggregate exercise price of such Options; provided that the cash
payment with respect to any Option that is not then exercisable may be held by
the Company and distributed to the Participant at such time as such Option, or
such portion of such Option, would have otherwise become exercisable; or
(iii) if the acquiring or succeeding
corporation is unwilling or unable to provide for the assumption or substitution
of Options or for the cash payment of the Options in accordance with the
preceding clauses (i) or (ii), respectively, or the preceding clauses (i) or
(ii) are otherwise inappropriate or inapplicable, provide that all outstanding
Options (whether or not then exercisable) will become exercisable in full as of
a specified time prior to the Acquisition Event and will terminate immediately
upon the consummation of such Acquisition Event, except to the extent exercised
by the Participants between such specified time and the consummation of such
Acquisition Event and provided that the Common Shares issuable upon exercise of
any Option that would not otherwise have been exercisable may be subject to a
right of repurchase in favor of the Company at a price equal to the exercise
price paid by the Participant, which right shall terminate at such time as such
Option, or such portion of such Option, would have otherwise become exercisable,
and which right shall be evidenced by a stock restriction agreement containing
customary terms and conditions as determined by the Board which shall be
executed by the Participant as a condition to the exercise of such Option.
(C) In addition to, and not in lieu of, the
provisions of Sections 7(e)(1)(A) and (B) above, upon the occurrence of an
Acquisition Event, the Board may take any one or more of the following actions
with respect to then outstanding Awards: (i) provide that all then unexercised
Options (whether or not then exercisable) shall become exercisable in full as of
a specified time and (ii) provide that any other stock-based Awards outstanding
(A) shall become exercisable, realizable or vested in full, or shall be free of
all conditions or restrictions, as applicable to each such Award, prior to the
consummation of the Acquisition Event, or (B) if applicable, shall be assumed,
or equivalent Awards shall be substituted, by the acquiring or succeeding
corporation (or an affiliate thereof).
(D) An "Acquisition Event" shall mean: (i) any merger
or consolidation which results in the voting securities of the Company
outstanding immediately prior thereto representing immediately thereafter
(either by remaining outstanding or by being converted into voting securities of
the surviving or acquiring entity) less than 50% of the combined voting power of
the voting securities of the Company or such surviving or acquiring entity
outstanding immediately after such merger or consolidation; (ii) any sale of all
or substantially all of the assets of the Company; (iii) the complete
liquidation of the Company; or (iv) the acquisition of "beneficial ownership"
(as defined in Rule 13d-3 under the Exchange Act) of securities of the Company
6
<PAGE>
representing 50% or more of the combined voting power of the Company's then
outstanding securities (other than through a merger or consolidation or an
acquisition of securities directly from the Company) by any "person," as such
term is used in Sections 13(d) and 14(d) of the Exchange Act other than the
Company, any trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any corporation owned directly or indirectly by
the stockholders of the Company in substantially the same proportion as their
ownership of stock of the Company.
(2) Assumption of Options Upon Certain Events. The Board may
grant Awards under this Plan in substitution for stock and stock-based awards
held by employees of another corporation who become employees of the Company as
a result of a merger or consolidation of the employing corporation with the
Company or the acquisition by the Company of property or stock of the employing
corporation. The substitute Awards shall be granted on such terms and conditions
as the Board considers appropriate.
(f) Withholding. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. The Board may allow Participants to
satisfy such tax obligations in whole or in part in Common Shares, including
Common Shares retained from the Award creating the tax obligation, valued at
their Fair Market Value. The Company may, to the extent permitted by law, deduct
any such tax obligations from any payment of any kind otherwise due to a
Participant.
(g) Amendment of Award. The Board may amend, modify or terminate any
outstanding Award including, but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, or converting an Incentive Stock Option to a NQO, provided that the
Participant's consent to such action shall be required unless the Board
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
(h) Conditions on Delivery of Stock. The Company will not be obligated
to deliver any Common Shares pursuant to this Plan or to remove restrictions
from shares previously delivered under this Plan until (i) all conditions of the
Award have been met or removed to the satisfaction of the Company, (ii) in the
opinion of the Company's counsel, all other legal matters in connection with the
issuance and delivery of such shares have been satisfied, including any
applicable securities laws and any applicable stock exchange or stock market
rules and regulations and (iii) the Participant has executed and delivered to
the Company such representations or agreements as the Company may consider
appropriate or such representations or agreements as the Company may consider
necessary to satisfy the requirements of any applicable laws, rules or
regulations.
(i) Acceleration. The Board may at any time provide that any Options
shall become immediately exercisable in full or in part or that any other
stock-based Awards may become exercisable in full or in part or free of some or
all restrictions or conditions, or otherwise realizable in full or in part, as
the case may be.
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<PAGE>
(j) Reservation of Common Shares. The Company shall at all times during
the term of this Plan reserve and keep available such number of Common Shares as
will be sufficient to satisfy the Company's obligations under this Plan.
8. Miscellaneous.
(a) No Right To Employment or Other Status. No person shall have any
claim or right to be granted an Award hereunder and the grant of an Award shall
not be construed as giving a Participant the right to continued employment or
any other relationship with the Company. The Company expressly reserves the
right at any time to dismiss or otherwise terminate its relationship with a
Participant.
(b) No Rights As Stockholder. Subject to the provisions of the
applicable Award, no Participant or designated beneficiary shall have any rights
as a stockholder with respect to any Common Shares to be distributed with
respect to an Award until becoming the record holder of such shares.
(c) Effective Date and Term of Plan. This Plan shall become effective
on the date on which it is adopted by the Board. No Awards shall be granted
under this Plan after the completion of ten years from the earlier of (i) the
date of adoption of this Plan by the Board or (ii) the date of approval of this
Plan by the Company's stockholders, but Awards previously granted may extend
beyond that date.
(d) Amendment of Plan. The Board may amend, suspend or terminate this
Plan or any portion thereof at any time, but no amendment may, without further
stockholder approval, (a) increase the total number or change the class of
shares which may be purchased under this Plan other than as provided in Section
4(c) and Section 7(e), (b) change the period during which Awards may be granted
under this Plan or (c) change the class of Participants for which Awards may be
granted or exercised; provided that in no event may an outstanding Award be
revoked or altered in any manner without the written consent of such Participant
if such revocation or alteration would materially and adversely affect the
Participant.
(e) Governing Law. The provisions of this Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware without regard to any applicable conflicts of law.
(f) Governmental Regulations. This Plan, and the Award and exercise of
Options hereunder, shall be subject to all applicable rules and regulations of
governmental and other authorities.
(g) Interpretation. As used herein, all pronouns shall include the
masculine, feminine, neuter, singular and plural thereof whenever the context
and facts require such construction. Section headings are for convenience of
reference only and shall not be used in interpreting the provisions of this
Plan.
8
EXHIBIT 10.13b
ALARON.COM CORPORATION
1999 EXECUTIVE STOCK OPTION PLAN
1. Purpose.
The purpose of this 1999 Executive Stock Option Plan (the "Plan") of
Alaron.com Corporation, a Delaware corporation (the "Company"), is to advance
the interests of the Company's stockholders by enhancing the Company's ability
to attract, retain and motivate persons who make (or are expected to make)
important contributions to the Company by providing such persons with equity
ownership opportunities and performance-based incentives and thereby better
aligning the interests of such persons with those of the Company's stockholders.
Except where the context otherwise requires, the term "Company' shall include
any present or future affiliate corporation of the Company as the term
"affiliate" is defined under the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
2. Eligibility.
All of the Company's executive officers and members of its Board of
Directors (the "Board") are eligible to be granted options or other stock-based
awards (each, an "Award") under this Plan. Any person who has been granted an
Award under this Plan shall be deemed a "Participant".
3. Administration, Delegation.
(a) Administration by Board of Directors. This Plan will be construed,
administered and interpreted by the Board. The Board shall have authority to
grant Awards and to adopt, amend and repeal such administrative rules,
guidelines and practices relating to this Plan as it shall deem advisable. The
Board may correct any defect, supply any omission or reconcile any inconsistency
in this Plan or any Award in the manner and to the extent it shall deem
expedient to carry this Plan into effect and it shall be the sole and final
judge of such expediency. All decisions by the Board shall be made in the
Board's sole discretion and shall be final and binding on all persons having or
claiming any interest in this Plan or in any Award. No director or person acting
pursuant to the authority delegated by the Board shall be liable for any action
or determination relating to or under this Plan made in good faith.
(b) Delegation.
(1) Delegation to Executive Officers. To the extent permitted
by applicable law, the Board may delegate to one or more executive officers of
the Company such power other than the power to make Awards under this Plan as
the Board may determine.
<PAGE>
(2) Delegation to Committees. To the extent permitted by
applicable law, the Board may delegate any or all of its powers under this Plan
to one or more committees or subcommittees of the Board (a "Committee"). If and
when the shares of common stock of the Company ("Common Shares") are registered
under the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act"),
the Board shall appoint one such Committee of not less than two members, each
member of which shall be an "outside director" within the meaning of Section
162(m) of the U.S. Internal Revenue Code of 1986, as amended, and any
regulations promulgated thereunder (the "Code"), and a "non-employee director"
as defined in Rule 16b-3 promulgated under the Exchange Act. Such Committee
shall, at a minimum, have the authority to grant Awards to the Company's
executive officers.
(3) Meaning of Board. All references in this Plan to the
"Board" shall mean the Board or a Committee referred to in Section 3(b)(2) or
the executive officer referred to in Section 3(b)(3) to the extent that the
Board's powers or authority under this Plan have been delegated to such
Committee or executive officer.
4. Stock Available for Awards.
(a) Number of Common Shares. Subject to adjustment under Section 4(c),
Awards may be made under this Plan for up to 350,000 Common Shares. If any Award
expires or is terminated, surrendered or canceled without having been fully
exercised or is forfeited in whole or in part or results in any Common Shares
not being issued, the unused Common Shares covered by such Award shall again be
available for the grant of Awards under this Plan, subject, however, in the case
of Incentive Stock Options (as hereinafter defined), to any limitation required
under the Code. Common Shares issued under this Plan may consist in whole or in
part of authorized but unissued shares or treasury shares.
(b) Per-Participant Limit. Subject to adjustment under Section 4(c),
for Awards granted after the Common Shares are registered under the Exchange
Act, the maximum number of Common Shares with respect to which an Award may be
granted to any Participant under this Plan shall be 35,000 per calendar year.
The per-participant limit described in this Section 4(b) shall be construed and
applied consistently with Section 162(m) of the Code.
(c) Adjustment to Common Shares. In the event of any stock split, stock
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Common Shares other
than a normal cash dividend, (i) the number and class of securities available
under this Plan, (ii) the number and class of security and exercise price per
share subject to each outstanding Option and (iii) the terms of each other
outstanding stock-based Award, shall be appropriately adjusted by the Company
(or substituted Awards may be made, if applicable) to the extent the Board shall
determine, in good faith, that such an adjustment (or substitution) is necessary
and appropriate. If this Section 4(c) applies and Section 7(e)(1) also applies
to any event, Section 7(e)(1) shall be applicable to such event and this Section
4(c) shall not be applicable.
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5. Stock Options.
(a) General. The Board may from time to time in its sole discretion
grant to Participants options ("Options") to purchase Common Shares on the terms
and conditions set forth in this Plan and any additional terms and conditions
set forth in an agreement entered into between the Company and the recipient of
Options. The Board shall determine all rights and obligations relating to
Options awarded hereunder including, without limitation, the exercise price of
each Option, any vesting applicable to each Option, the conditions and
limitations applicable to the exercise of each Option (including conditions
relating to applicable securities laws) and whether the Options awarded shall be
"incentive stock options" as defined in Section 422 of the Code ("Incentive
Stock Options") or Options which are not Incentive Stock Options ("NQOs"). Each
Option awarded under this Plan shall entitle the holder thereof the right to
purchase one Common Share.
(b) Incentive Stock Options. Incentive Stock Options shall only be
granted to executive officers of the Company and members of the Board who are
also employees of the Company and shall be subject to and shall be construed
consistently with the requirements of Section 422 of the Code. If the Board
fails to designate any Options awarded hereunder as Incentive Stock Options or
NQOs, such Options shall be deemed to be Incentive Stock Options if the terms
thereof satisfy the requirements for Incentive Stock Options set forth in the
Code. If any Options awarded hereunder fail for any reason to qualify under the
Code as Incentive Stock Options, such Options shall be NQOs for purposes hereof
notwithstanding any designation to the contrary by the Board. The Company shall
have no liability to a Participant or any other party if an Option (or any part
thereof) which is intended to be an Incentive Stock Option is not an Incentive
Stock Option. Notwithstanding anything contained herein to the contrary, to the
extent that the aggregate Fair Market Value (as hereinafter defined) of Common
Shares with respect to which Incentive Stock Options are exercisable for the
first time by a Participant during any calendar year under all incentive plans
of the Company exceeds $100,000, such Options representing the Fair Market Value
of Common Stock in excess of $100,000 shall not be treated as Incentive Stock
Options. As used in this Plan, the term "Fair Market Value" shall mean, with
respect to Common Shares, the fair market value of Common Shares as determined
by the Board in good faith.
(c) Exercise Price. The Board shall establish the exercise price at the
time each Option is granted and specify such price in the Option holder's option
agreement. The exercise price shall not be less than the Fair Market Value of a
Common Share on the date the Option is granted. Notwithstanding the foregoing,
if Incentive Stock Options are granted to a Participant who, at the time of such
grant, owns capital stock representing more than 10% of the voting power of all
classes of capital stock of the Company, the exercise price of such Incentive
Stock Options shall not be less than 110% of the Fair Market Value of the Common
Shares to which they relate on the date of grant.
(d) Duration of Options. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Board may specify in an option
agreement. No Incentive Stock
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Option may be granted hereunder after the expiration of the tenth anniversary of
the earlier of the date of adoption of this Plan by the Board or the approval of
this Plan by the stockholders of the Company.
(e) Exercise of Option. Options may be exercised only by delivery to
the Company of a written notice of exercise signed by the proper person together
with payment in full as specified in Section 5(f) in an amount equal to the
exercise price of each Option multiplied by the number of Common Shares to be
purchased upon exercise of such Options.
(f) Payment Upon Exercise. Common Shares purchased upon the exercise of
an Option awarded under this Plan shall be paid in the manner set forth in an
Option holder's option agreement or as follows:
(1) in cash or by check, payable to the order of the Company;
(2) to the extent permitted by the Board and explicitly
provided in an option agreement (i) by delivery of an irrevocable and
unconditional undertaking by a creditworthy broker to deliver promptly to the
Company sufficient funds to pay the exercise price, (ii) delivery by the
Participant to the Company of a copy of irrevocable and unconditional
instructions to a creditworthy broker to deliver promptly to the Company cash or
a check sufficient to pay the exercise price, (iii) by delivery of Common Shares
owned by the Participant valued at their Fair Market Value, which Common Shares
were owned by the Participant at least six months prior to such delivery, (iv)
by delivery of a promissory note of the Participant to the Company on terms
satisfactory to the Board or (v) by payment of such other lawful consideration
as the Board may determine; or
(3) any combination of the above permitted forms of payment.
6. Other Stock-Based Awards
The Board shall have the right to grant other Awards based upon or
relating to the Common Shares having such terms and conditions as the Board may
determine. Such Awards include, but are not limited to, the grant of Common
Shares based upon certain conditions, the grant of securities convertible into
Common Shares and the grant of stock appreciation rights.
7. General Provisions Applicable to Awards.
(a) Transferability of Awards. Except as the Board may otherwise
determine or provide in an Award, Awards shall not be sold, assigned,
transferred, pledged or otherwise encumbered by the person to whom they are
granted, either voluntarily or by operation of law, except by will or the laws
of descent and distribution and, during the life of the Participant, shall be
exercisable only by the Participant. References to a Participant, to the extent
relevant in the context, shall include references to authorized transferees.
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(b) Documentation. Each Award under this Plan shall be evidenced by a
written instrument in such form as the Board shall determine. Such written
instrument may contain terms and conditions applicable to Awards in addition to
those set forth in this Plan.
(c) Board Discretion. Except as otherwise provided by this Plan, each
type of Award may be made alone or in addition or in relation to any other type
of Award. The terms of each type of Award need not be identical and the Board
need not treat Participants uniformly.
(d) Termination of Status. The Board shall set forth in a written
instrument the effect of the disability, death, resignation, retirement,
termination with or without cause or other change in the employment or other
status of a Participant on an Award and the extent to which, and the period
during which, the Participant, the Participant's legal representative,
conservator, guardian or designated beneficiary may exercise rights under the
Award.
(e) Acquisition Events.
(1) Consequences of Acquisition Events.
(A) Immediately prior to the occurrence of an
Acquisition Event (as defined below), the following shall occur:
(i) the exercisability of all Options then
outstanding which are not exercisable in full immediately prior to the
occurrence of the Acquisition Event shall be accelerated so that, immediately
prior to the occurrence of the Acquisition Event, 50% of the Common Shares
covered by such Option which are not then exercisable shall become fully
exercisable in the manner specified in the instrument evidencing the Option; and
(ii) all other stock-based Awards then
outstanding shall be accelerated so that immediately prior to the occurrence of
the Acquisition Event, 50% of the portion of such stock-based Award which is not
then exercisable, realizable or vested shall immediately become exercisable,
realizable or vested in full in the manner specified in the instrument
evidencing such stock-based Award.
(B) In addition to, and not in lieu of, the
provisions of Section 7(e)(1)(A) above, upon the occurrence of an Acquisition
Event, the Board may take one of the following actions with respect to the then
outstanding Options:
(i) provide that all outstanding Options
(whether or not then exercisable) shall be assumed, or equivalent Options shall
be substituted, by the acquiring or succeeding corporation (or an affiliate
thereof); provided that any such Options substituted for Incentive Stock Options
shall satisfy, in the determination of the Board, the requirements of Section
424(a) of the Code;
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(ii) if the acquiring or succeeding
corporation is unwilling or unable to provide for the assumption or substitution
of Options in accordance with the preceding clause (i) or the preceding clause
(i) is otherwise inappropriate or inapplicable and, if under the terms of the
documents governing the Acquisition Event, the holders of Common Shares will
receive upon consummation of the Acquisition Event a cash payment for each
Common Share surrendered pursuant to such Acquisition Event (the "Cash
Acquisition Price"), provide that each outstanding Option (whether or not then
exercisable) shall terminate upon consummation of such Acquisition Event and any
holder thereof shall receive, in exchange therefor, a cash payment equal to the
amount (if any) by which (A) the Cash Acquisition Price multiplied by the number
of Common Shares subject to such outstanding Options (whether or not then
exercisable), exceeds (B) the aggregate exercise price of such Options; provided
that the cash payment with respect to any Option that is not then exercisable
may be held by the Company and distributed to the Participant at such time as
such Option, or such portion of such Option, would have otherwise become
exercisable; or
(iii) if the acquiring or succeeding
corporation is unwilling or unable to provide for the assumption or substitution
of Options or for the cash payment of the Options in accordance with the
preceding clauses (i) or (ii), respectively, or the preceding clauses (i) or
(ii) are otherwise inappropriate or inapplicable, provide that all outstanding
Options (whether or not then exercisable) will become exercisable in full as of
a specified time prior to the Acquisition Event and will terminate immediately
upon the consummation of such Acquisition Event, except to the extent exercised
by the Participants between such specified time and the consummation of such
Acquisition Event and provided that the Common Shares issuable upon exercise of
any Option that would not otherwise have been exercisable may be subject to a
right of repurchase in favor of the Company at a price equal to the exercise
price paid by the Participant, which right shall terminate at such time as such
Option, or such portion of such Option, would have otherwise become exercisable,
and which right shall be evidenced by a stock restriction agreement containing
customary terms and conditions as determined by the Board which shall be
executed by the Participant as a condition to the exercise of such Option.
(C) In addition to, and not in lieu of, the
provisions of Sections 7(e)(1)(A) and (B) above, upon the occurrence of an
Acquisition Event, the Board may take any one or more of the following actions
with respect to then outstanding Awards: (i) provide that all then unexercised
Options (whether or not then exercisable) shall become exercisable in full as of
a specified time and (ii) provide that any other stock-based Awards outstanding
(A) shall become exercisable, realizable or vested in full, or shall be free of
all conditions or restrictions, as applicable to each such Award, prior to the
consummation of the Acquisition Event, or (B) if applicable, shall be assumed,
or equivalent Awards shall be substituted, by the acquiring or succeeding
corporation (or an affiliate thereof).
(D) An "Acquisition Event" shall mean: (i) any merger
or consolidation which results in the voting securities of the Company
outstanding immediately prior thereto representing immediately thereafter
(either by remaining outstanding or by being converted into voting securities of
the surviving or acquiring entity) less than 50% of the combined voting power
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of the voting securities of the Company or such surviving or acquiring entity
outstanding immediately after such merger or consolidation; (ii) any sale of all
or substantially all of the assets of the Company; (iii) the complete
liquidation of the Company; or (iv) the acquisition of "beneficial ownership"
(as defined in Rule 13d-3 under the Exchange Act) of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities (other than through a merger or consolidation or an
acquisition of securities directly from the Company) by any "person," as such
term is used in Sections 13(d) and 14(d) of the Exchange Act other than the
Company, any trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any corporation owned directly or indirectly by
the stockholders of the Company in substantially the same proportion as their
ownership of stock of the Company.
(2) Assumption of Options Upon Certain Events. The Board may
grant Awards under this Plan in substitution for stock and stock-based awards
held by employees of another corporation who become employees of the Company as
a result of a merger or consolidation of the employing corporation with the
Company or the acquisition by the Company of property or stock of the employing
corporation. The substitute Awards shall be granted on such terms and conditions
as the Board considers appropriate.
(f) Withholding. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. The Board may allow Participants to
satisfy such tax obligations in whole or in part in Common Shares, including
Common Shares retained from the Award creating the tax obligation, valued at
their Fair Market Value. The Company may, to the extent permitted by law, deduct
any such tax obligations from any payment of any kind otherwise due to a
Participant.
(g) Amendment of Award. The Board may amend, modify or terminate any
outstanding Award including, but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, or converting an Incentive Stock Option to a NQO, provided that the
Participant's consent to such action shall be required unless the Board
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
(h) Conditions on Delivery of Stock. The Company will not be obligated
to deliver any Common Shares pursuant to this Plan or to remove restrictions
from shares previously delivered under this Plan until (i) all conditions of the
Award have been met or removed to the satisfaction of the Company, (ii) in the
opinion of the Company's counsel, all other legal matters in connection with the
issuance and delivery of such shares have been satisfied, including any
applicable securities laws and any applicable stock exchange or stock market
rules and regulations and (iii) the Participant has executed and delivered to
the Company such representations or agreements as the Company may consider
appropriate or such representations or agreements as the Company may consider
necessary to satisfy the requirements of any applicable laws, rules or
regulations.
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(i) Acceleration. The Board may at any time provide that any Options
shall become immediately exercisable in full or in part or that any other
stock-based Awards may become exercisable in full or in part or free of some or
all restrictions or conditions, or otherwise realizable in full or in part, as
the case may be.
(j) Reservation of Common Shares. The Company shall at all times during
the term of this Plan reserve and keep available such number of Common Shares as
will be sufficient to satisfy the Company's obligations under this Plan.
8. Miscellaneous.
(a) No Right To Employment or Other Status. No person shall have any
claim or right to be granted an Award hereunder and the grant of an Award shall
not be construed as giving a Participant the right to continued employment or
any other relationship with the Company. The Company expressly reserves the
right at any time to dismiss or otherwise terminate its relationship with a
Participant.
(b) No Rights As Stockholder. Subject to the provisions of the
applicable Award, no Participant or designated beneficiary shall have any rights
as a stockholder with respect to any Common Shares to be distributed with
respect to an Award until becoming the record holder of such shares.
(c) Effective Date and Term of Plan. This Plan shall become effective
on the date on which it is adopted by the Board. No Awards shall be granted
under this Plan after the completion of ten years from the earlier of (i) the
date of adoption of this Plan by the Board or (ii) the date of approval of this
Plan by the Company's stockholders, but Awards previously granted may extend
beyond that date.
(d) Amendment of Plan. The Board may amend, suspend or terminate this
Plan or any portion thereof at any time, but no amendment may, without further
stockholder approval, (a) increase the total number or change the class of
shares which may be purchased under this Plan other than as provided in Section
4(c) and Section 7(e), (b) change the period during which Awards may be granted
under this Plan or (c) change the class of Participants for which Awards may be
granted or exercised; provided that in no event may an outstanding Award be
revoked or altered in any manner without the written consent of such Participant
if such revocation or alteration would materially and adversely affect the
Participant.
(e) Governing Law. The provisions of this Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware without regard to any applicable conflicts of law.
(f) Governmental Regulations. This Plan, and the Award and exercise of
Options hereunder, shall be subject to all applicable rules and regulations of
governmental and other authorities.
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(g) Interpretation. As used herein, all pronouns shall include the
masculine, feminine, neuter, singular and plural thereof whenever the context
and facts require such construction. Section headings are for convenience of
reference only and shall not be used in interpreting the provisions of this
Plan.
9
EXHIBIT 10.14
This Software License Agreement AGREEMENT NO:_____________________
("Agreement") is made between
Rolfe & Nolan (USA) Inc. ("R&N") DATE OF AGREEMENT:________________
an Illinois corporation with its
principal place of business at
120 South Riverside Plaza, Suite 1430
Chicago, Illinois 60606
(312) 559-0250 (general)
(312) 559-9493) (fax)
and
Alaron Trading ("Customer")
an Illinois corporation with its
principal place of business at:
822 W. Washington Blvd.
Chicago, IL 60607
WITNESSESH:
WHEREAS:
1) R&N is the developer of a futures and options industry applications
software solution and, in connection therewith, provides certain
Processing Services for its customers; and
2) The Customer wishes to engage R&N to provide to the Customer certain
Processing Services more fully described on Schedule B attached hereto
and made a part hereof, and R&N desires to provide such Processing
Services to the Customer on the terms and conditions set forth below.
NOW, THEREFORE, the Parties agree as follows:
Section 1. Definitions.
(a) "Confidential Information" means, in the case of R&N (i) the Intellectual
Property, know-how or other material, ideas or concepts relating to or
comprising the Software, including, without limitation, Programs, source code,
object code, Documentation, Enhancements, Releases, Custom Modifications,
specifications, technical manuals, memoranda and advisories,
R&N/ALARON SOFTWARE LICENSE AGREEMENT
<PAGE>
computer instructions, algorithms, routines, flow diagrams, outlines, schedules
and processes, and (ii) information relating to pricing and the other terms and
conditions of this Agreement. In the case of the Customer, "Confidential
Information" means any non-public information relating to the Customer or the
business of the Customer to which R&N has access in the performance of its
obligations under this Agreement.
However, in either case, "Confidential Information" shall not include:
any information known generally to
the public, other than as a result of
unauthorized disclosure by the recipient of
such information, or
any information which the recipient of
information can show by evidence to be
lawfully known by recipient prior to the
time of its disclosure, or
any information that become available to either R&N or the Customer on
a non- confidential basis from a third party, provided such third party is
not prohibited from disclosing such information to the Party.
(b) "Custom Modification" means any modifications or additions to the
Software made by R&N at the request of the Customer.
(c) "Customer Information" shall mean the input data provided by Customer for
processing, the files and processing data therefrom, and any program(s) provided
by the Customer for use in processing of its input data.
(d) "Documentation" means user manuals and all written materials provided by
R&N to the Customer relating specifically to the operation and functionality of
the Software.
(e) "Enhancements" means upgrades, improvements, new versions or Releases and
related materials generally made available, without charge, by R&N to its
customers, which are intended to be used with or which complement existing
Software employed in connection with the provision of the Services hereunder.
(f) "Installation Date" means the date the Software (or any part thereof) is
made available by R&N for use by the Customer.
(g) "Installation Services" means the services supplied by R&N to the
Customer that provide familiarity and training pursuant to the functionality set
forth in the Documentation, including planning for access device installation at
the Customer site, creation of a Software environment for Customer's Processing
Service, and configuring the Software to operate in conjunction with Customer's
requirements, but shall not include any Custom Modifications. The training
services provided by R&N are set forth in Schedule C. Fees for Installation
Services are in addition to the License Fee and are set forth in Schedule G.
(h) "New Software" means any software relapsed generally by R&N after the
date of this Agreement, that in the determination of R&N, incorporates functions
and capabilities not included in the Software, as described in Schedule A.
(i) "Party" means R&N or the Customer, as the case may be, and the "Parties"
means both R&N and the Customer.
(j) "Processing Fees" means the
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processing service fees specified in Schedule
G.
(k) "Processing Service" shall mean the services to be supplied by R&N as
specified in Schedule B.
(l) "Program" or "Programs" means a set of ordered steps or list of
instructions which are capable when incorporated in a machine-readable medium,
in causing a computer to indicate, perform or achieve particular functions,
tasks or results and includes source- code listings in human-readable and
machine readable form, object code in machine readable form, program files, data
files, field and data definitions and relationships, data definition
specifications, data models, program and system logic, interfaces, program
modules, routines, subroutines, algoritluns, program architecture, design
concepts, system designs, program structure, sequence and organization, screen
displays and report layouts.
(m) "Release" means periodic bug-fixes, modifications made to comply with
regulatory requirements and improvements or additions to the existing
functionality of the Software, and generally made available, without charge, by
R&N to its customers.
(n) "Services" means the rendering of timesharing, service bureau facilities
management or similar services by the Customer utilizing the Software (or any
part thereof) to any entity other than the Customer.
(o) "Software" means the executable form of the futures and options industry
applications software solution more fully described on Schedule A hereto,
together with all Custom Modifications, Relapses, New Software and Enhancements
developed or applied by R&N under this Agreement.
(p) "Term" means an initial term of one year from the date on which Service
commences and continuing thereafter for additional successive one-year terms
unless terminated by either Party giving the other not less than six months'
prior written notice to expire at the end of the initial three. year term or at
the end of any subsequent term, as the case may be.
Section 2. Processing Services;
Service Fees.
(a) Subject to the terms and conditions of this Agreement, including, without
limitation, those terms and conditions set forth in the schedules attached
hereto, R&N agrees to provide the Processing Services to the Customer during the
Term of this Agreement.
(b) R&N shall provide the Processing Services in accordance with the
operating conditions set forth in Schedule D and subject to the terms and
conditions of this Agreement. R&N shall perform the Processing Services in
accordance with its responsibilities defined in Schedule E and will use all
reasonable care and skill in relation thereto.
(c) During the Term of this Agreement, the Customer hereby agrees to pay
monthly Service Fees and other charges in the amounts, at the times and in
accordance with the terms set forth in Schedule G attached hereto and made a
part hereof. The Customer shall pay all such fees and charges, in full and
without deduction, except as provided under Section 2(g), within thirty days of
any invoice therefor.
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<PAGE>
(d) Any media, materials or communications line(s) time-sharing supplied by
R&N in addition to the Services shall be charged to the Customer at R&N's
then-prevailing list prices.
(e) The Customer shall pay to R&N interest upon any amounts which are not
paid by the Customer to R&N when due, at the rate of the lesser of (i) one and
one-half percent (1 1/2%) of the unpaid balance per month, or (ii) the highest
rate of interest allowable under applicable law.
(f) The Customer hereby grants R&N a security interest in all personal
property of the Customer on R&N's premises, from time to time, to secure the
obligations of the Customer to R&N, and in connection therewith, authorizes R&N
at its sole discretion to sign on the Customer's behalf and file financing
statements with respect to such personal property to perfect the security
interest granted hereby.
(g) If the Customer disputes in good faith any charge (a "Disputed Charge"),
the Customer shall so notify R&N in writing within five days after receiving the
invoice for, or notification of, such charge. In such event, either Party may
initiate the dispute resolution process under Section 12(b)
(h) The Software used in connection with the provision of the Processing
Services hereunder is and shall be the sole and exclusive property of R&N,
including all applicable rights to the Confidential Information of R&N and to
the Intellectual Property. No right is granted to the Customer for the use of
Software, directly or indirectly. R&N reserves the right to implement all
upgrades, Releases and Enhancements to the Software, or New Software, which R&N
may, from time to time, develop and, in its sole discretion, deem advisable to
apply in connection with the provision of Services hereunder, without the
consent of the Customer.
Section 3. Installation Plan and
Acceptance.
(a) The Customer and R&N have prepared and annexed hereto as Schedule I a
mutually acceptable plan for the provision of Installation Services (the
"Installation Plan"). R&N will provide the Installation Services in accordance
with the Installation Plan. Any further installation, training, software
customization or consultancy services will be provided at the sole discretion of
R&N and will be charged in accordance with R&N's then prevailing standard rates.
All out of pocket expenses incurred by R&N in providing services in connection
with the Installation Plan, including travel and lodging expenses, shall be paid
by the Customer.
(b) The Customer agrees to assign a qualified project leader to the
installation and to assign such other individuals (and resources) on a part-time
or full-time basis to the installation team as required.
(c) The Customer shall have a period of thirty days, beginning on the
Installation Date e "Evaluation Period"), to evaluate the Software. If the
Software is unacceptable to the Customer, for any reason, the Customer may,
prior to the expiration of the Evaluation Period, deliver to R&N a written
request to terminate the License. If such notice is timely delivered to R&N, the
Customer shall cease
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<PAGE>
use of the Software and shall have no further payment obligations to R&N.
Failure to timely deliver a notice of termination under this Section 4(c) shall
be deemed to be acceptance of the system by the Customer for all purposes hereof
Section 4. Software Support Services.
(a) Software support services, as described below ("Support"), will be
provided by R&N to the Customer for the Software Processing Service.
(b) R&N agrees to provide the following Support services:
Provide the Customer with access to R&N representatives responsible for
coordination, resolution, and follow-up of all support issues under the
terms and conditions of this Section.
Provide the Customer with emergency telephone consultation service from
6:00 p.m. (Central Time, U.S.) on Sunday until 5:00 p.m. on Saturday,
excluding holidays, using current R&N procedures for the purpose of
resolving Deficiencies in the Software and resolving operational problems
the Customer may encounter, including assistance in the recovery of systems
and data files.
Use commercially reasonable efforts to make and provide to the Customer
in R&N's sole discretion, without additional charge, such Enhancements to
the Software as R&N deems appropriate to satisfy any requirements of the
industry clearing houses and regulatory agencies, taking into account
technical feasibility and the requirements of R&N's customers generally.
Notify the Customer of Enhancements to and Maintenance Releases and
Releases of the Software that are available, all of which must be accepted
by the Customer without additional charge or fee.
(c) The Customer agrees to:
Provide R&N with reasonable access to the Customer's personnel to
enable R&N to provide the services specified in this Section.
Maintain a documented log of all support calls, available to R&N upon
request. When placing a call to R&N, the Customer will reference all
applicable sections of Documentation that may be relevant.
Document all incidents of Software Deficiencies, attach any pertinent
samples of Documentation and include detailed steps to duplicate the
Deficiencies in the Customer's operating environment.
Section 5. Custom Modifications.
The Customer may request R&N to make Custom Modifications to the Software to
meet the Customer's specific requirements. Upon receipt of such request, R&N
may, in its sole discretion, make such Custom Modifications at a rate to be
agreed upon by the Parties. In the event that the Parties shall fail to
expressly agree upon fees and charges for Custom Modifications, the Customer
shall pay R&N its then-current standard charges for the Custom Modifications.
The following procedures will be followed by the Customer and R&N in relation to
any requested Custom Modifications, without prejudice to R&N's right to payment
of fees and charges for Custom Modifications otherwise made at the
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<PAGE>
request of the Customer
(a) The Customer shall notify R&N in writing, in the form annexed hereto as
Schedule H (the "Customization Request"), of its request for a preliminary
estimate for Custom Modifications. The Customization Request must identify
specifically the functionality requested and the specifications thereof, as well
as the Customers agreement to pay the fee set by R&N for preparing the
preliminary estimate.
(b) In response to the Customization Request, R&N will develop a preliminary
estimate of the cost to perform the Custom Modifications and the additional
costs that may be involved in retrofitting the Custom Modifications with respect
to any new Releases or Enhancements and an initial determination of the
appropriateness of the specifications requested by the Customer. The Customer
will have thirty days after receiving the preliminary estimate to notify R&N
whether to proceed with a detailed estimate and detailed design specifications
for the Custom Modifications.
(c) After receiving the detailed design specifications for the Custom
Modifications, the Customer will notify R&N of any and all changes to the
specifications. R&N will then resubmit the final specifications for the
Customer's written acceptance. Once the Customer accepts the final
specifications, -any further changes requested by the Customer must be approved
by R&N and may result in additional cost.
(d) R&N will design and program the Custom Modifications according to the
final specifications approved by the Customer. R&N and the Customer will agree
on the timetable for the application of the Custom Modifications to the
Services.
(e) The Customer shall pay R&N for preparing the preliminary estimate and the
detailed estimate, developing specifications, programming, and testing the
Custom Modifications in accordance with the charging basis quoted by R&N when
submitting its preliminary estimate as modified in writing upon the mutual
consent of the Parties.
(f) R&N shall not make any Custom Modifications which R&N believes are or may
be unfeasible, illegal or in violation of the proprietary rights of others. R&N
shall not pay any royalty or other fee to the Customer for the use of any
Confidential Information, Intellectual Property, software, ideas or techniques
developed from or relating to Custom Modifications.
Section 6. Customer Information.
(a) Customer shall provide within sufficient time (by the agreed upon
submission time set forth in Schedule D) all Customer Information required by
R&N to enable R&N to perform the Processing Services. In the event the Customer
Information is not submitted by the agreed upon submission time, or is
incomplete, incorrect or not in the form specified by R&N, R&N shall not be
responsible for the delivery time (Processing Service delivery time set forth in
Schedule D).
(b) In the event of late submission of Customer Information and upon the
availability to R&N of complete and correct Customer Information, R&N will
notify Customer of the new Processing Service
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delivery time. Work shall be performed on a "Best Efforts Basis" with an
estimated completion time of two (2) hours after notification of the completion
of submission of Customer Information.
(c) Customer shall be solely responsible for the accuracy an completeness of
Customer Information provided by Customer to R&N pursuant to this Agreement, and
for the correctness of the format. Customer shall verify such data or report
promptly to R&N after receipt thereof, any errors with respect to any data or
report R&N assumes no responsibility for verification. Customer operation
responsibilities are further specified in Schedules E and F.
(d) Upon termination of this Agreement for any reason other than termination
by R&N due to default by Customer, R&N will assist in transferring Customer
Information to the Customer or to another data processing company and retain
said Customer Information for archival purposes for a period of thirty days.
Said assistance shall be limited to that assistance which in R&N's sole judgment
is reasonably under the circumstances. Customer shall pay R&N for staff time
spent in providing such assistance at R&N's then prevailing hourly rates for
machine time, the costs of the media on which Customer Information is stored,
for transportation costs and for any other reasonable related expense.
Section 7. Responsibilities of the
Customer.
The Customer shall be exclusively responsible for the accuracy of the input
data, information and the documentation provided to R&N in connection with the
Services to be provided hereunder and shall:
(a) provide R&N with reasonable access to the Customer's personnel and
facilities to enable R&N to provide the Services.
(b) implement sufficient procedures to satisfy its requirements for security
and accuracy;
(c) convert the Customer's accounting data to the format required by the
Software;
(d) within sufficient time, provide R&N with all Customer information
required by R&N to enable R&N to perform the Service.
Section 8. Releases/New Software
Modules.
(a) R&N will make Releases available to the Customer free of charge (subject
to Section 4(a) and 10(b)) with such Release are made generally available by R&N
to its other customers.
(b) From time to time, R&N may develop New Software modules. The Customer may
acquire a license to use any New Software module by paying R&N its then-current
fees and charges. Once installed, the New Software module will be deemed to be
part of the Software subject to the terms and conditions of this Agreement.
(c) If the Customer requires R&N to install Releases or New Software modules
such services will be subject to charge by R&N at its then-current published
rates.
Section 9. Confidentiality.
(a) Each Party hereto agrees to hold the other Party's Confidential
Information in strict confidence. Neither Party will disclose or
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<PAGE>
otherwise make the other Party's Confidential Information or any part thereof
available to its third party, except to the extent permitted by the terms of
this Agreement. Each Party shall take the reasonable action to satisfy its
obligations under this Agreement with respect to use, copying, modification,
protection and maintaining the confidentiality of the Confidential Information
of the other Party, including the prevention of any unauthorized disclosure by
any of such Party's employees.
(b) Neither Party will remove or permit to be removed from any item included
in the other Party's Confidential Information any proprietary, confidential or
copyright notices, markings or legends placed thereon by such
Party.
(c) Each Party shall assist the other Party in identifying and preventing any
unauthorized use or disclosure of its Confidential Information or any portion
thereof. Without limiting the foregoing, a Party (a "Recipient Party") shall
notify the other Party (the "the Disclosing Party") immediately in the event
that the Recipient Party learns or has reason to believe that any person who has
had access to the Confidential Information of the Disclosing Party, or any
portion thereof, has violated or intends to violate the terms of this Agreement,
and the Recipient Party will cooperate with the Disclosing Party in seeking
injunctive or other equitable relief in the name of the Disclosing Party against
any such person.
(d) Each Party acknowledges that the unauthorized disclosure of any of the
other Party's Confidential Information may give rise to irreparable injury to
the Disclosing Parry, inadequately compensable in damages. Accordingly, each
Party shall be entitled to injunctive relief against the breach or threatened
breach of any of the foregoing undertakings, in addition to any other legal
remedies which may be available, and each Party hereby consents to such
injunctive relief. Nothing herein shall be construed as prohibiting either Party
from pursuing any other remedies available to such Party for such a breach or
threatened breach, including the recovery of monetary damages from the other
Party.
Section 10. Termination; Remedies.
(a) The Customer shall have the right to terminate this Agreement upon thirty
days' prior written notice to R&N upon a material breach by R&N of its
obligations set forth in Sections 3, 4, 9 and I 1, unless R&N cures such breach
within thirty days after the Customer gives written notice of such breach to
R&N.
(b) R&N shall have the right to terminate this Agreement upon thirty days'
prior written notice (unless such breach is curable and is cured by the Customer
within thirty days) to the Customer upon (i) the Customer's failure to pay any
sums due hereunder, (ii) a material breach by the Customer of the Customer's
obligations set forth in Sections 3, 4, 6, 7, 9 and I 1; or (iii) the
termination or cessation of the business of the Customer.
(c) In the event of termination under subsection (b) above, R&N shall be
permitted to, in addition to any other remedies it may have in law or equity:
automatically, and without any further
action by R&N, terminate the Services;
take immediate possession of any
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Confidential Information held by the
Customer, and all copies thereof wherever
located, without notice or demand; and
recover from the Customer the aggregate of all Service Fees, as defined
in Schedule G, that are then due: or will become due during the
then-current Term, all other fees and charges then payable to or earned by
R&N through the date of termination, reasonable attorneys' fees and
expenses incurred in enforcing (including the cost of consulting with an
attorney to determine the scope of the Customer's breaches) any of the
terms and provisions of this Agreement.
(d) Notwithstanding the foregoing, the provisions of Sections 9, 11, 12,
17(b) shall survive the termination of this Agreement.
(e) Upon termination of this Agreement for any reason other than termination
by R&N due to default or breach by the Customer, R&N will assist in transferring
Customer information to the Customer or to another data processing company,
provided, however, that such assistance shall be limited to that assistance
which in R&N's sole discretion is reasonably available. The Customer shall pay
R&N for: (i) staff time expended in the provision of such assistance, at R&N's
then prevailing hourly rates, (ii) machine time, (iii) the cost of the media on
which the Customer's information is stored, (iv) transportation costs, and (v)
all other reasonable expenses incurred by R&N in connection with such
assistance.
Section 11. Warranties and Liability.
(a) R&N warrants that, during the term of this Agreement, the Services will
be conducted with reasonable care and skill.
(b) The warranty set forth above shall not extend to Deficiencies contained
in the Software caused by any of the following: (I) alterations, modifications
or revisions to or of the Software performed by a party other than R&N; (ii)
negligence in the operation or use of the; (iii) operation of the Software not
in accordance with the Documentation; and (iv) an act of God or any factor
beyond R&N's reasonable control.
(c) THE WARRANTY STATED ABOVE IS IN LIEU OF AND R&N HEREBY DISCLAIMS ALL
OTHER WARRANTIES EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, THE IMPLIED
WARRANTY OF MERCHANTABILITY AND IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE, WARRANTIES ARISING BY STATUTE OR OTHERWISE IN LAW, OR FROM A COURSE OF
DEALING OR USAGE OF TRADE.
(d) IN NO EVENT SHALL R&N BE LIABLE FOR LOST PROFITS, LOSS OF GOODWILL, LOSS
OR ALTERATION OF CUSTOMER DATA, FAILURE TO REALIZE EXPECTED SAVINGS, INABILITY
TO USE ANY COMPUTER PROGRAMS, REGULATORY PENALTIES, OR FOR ANY COMMERCIAL,
ECONOMIC, SPECIAL, INDIRECT, INCIDENTAL, EXEMPLARY OR CONSEQUENTIAL DAMAGE EVEN
IF R& N HAS BEEN ADVISED OF OR FORESEES A POSSIBILITY OF, ANY OF THESE DAMAGES
OCCURRING. R&N'S MAXIMUM LIABILITY TO THE CUSTOMER FOR ANY AND ALL BREACHES OF
THIS AGREEMENT
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SHALL IN NO EVENT EXCEED THE LESSER OF THE AGGREGATE OF THE FEES AND CHARGES
ACTUALLY PAID BY THE CUSTOMER TO R&N, HEREUNDER WITHIN THE TWELVE MONTH PERIOD
IMMEDIATELY PRECEDING THE CUSTOMER'S NOTIFICATION TO R&N OF SUCH BREACH OR
DEFAULT, OR $1,000,000.
Section 12. Recruitment.
Each Party agrees not to retain, hire or contract with in any capacity
whatsoever any employee of the other Party for a period of six months following
the earlier of the termination of that person's employment with the other Party
or the termination of this Agreement.
Section 13. Survival.
The obligations and agreements of the Customer and R&N contained in
Sections 5, 7, 8, and 12(b) shall survive the termination of this Agreement for
whatever reason.
Section 14. Events Beyond Control of
Parties.
Notwithstanding any provision to the contrary contained herein, the failure or
delay in performance by either Party shall be excused to the extent it is caused
by an event beyond such Party's reasonable control provided the Party prevented
from or delayed in rendering performance notifies the other Party and in detail
of the commencement and need of such a cause, and provided further that such
Party uses its best efforts to render performance in a timely manner. The
obligation of both Parties to perform under this Agreement shall be suspended
during such event for a maximum period of sixty days. Section 15. Taxes.
(a) In addition to any other payments required to be paid by the Customer,
the Customer shall pay all tariffs, import duties, license and registration
fees, sales, use, rental, transfer or other taxes, whether federal, state or
local, however designated, and all other assessments which are levied or imposed
by reason of the Services to be provided hereunder, excluding, however, income
taxes which may be levied against R&N. The Customer shall reimburse R&N for the
amount of any such tariffs, import duties and taxes paid or advanced by R&N as a
result of the provision of Services hereunder.
(b) If any withholding taxes are applicable in respect of mounts payable, the
Customer shall remit the applicable amount to the relevant taxing authorities
and shall furnish to R&N information regarding such remittance in sufficient
detail to enable R&N to substantiate any claim for a foreign tax credit.
Section 16. Miscellaneous.
(a) Notices. Any notices or other communications required or permitted
hereunder shall be in writing and shall be given by personal delivery or by
United States certified mail return receipt requested, postage prepaid,
addressed to the location stated above or to such other address as either Party
may designate by notice to the other Party. All notices shall be deemed
effective upon the earlier of receipt, seven business days after such notice is
postmarked, or, if delivered personally, upon the date of delivery.
(b) Governing Law: Dispute Resolution.
This Agreement shall be governed by
and construed in accordance with the laws of
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<PAGE>
the State of Illinois, without regard to the conflict of laws principles
thereof.
At the written request of a Party, each Party will appoint a
knowledgeable, responsible representative to meet and negotiate in good faith to
resolve any dispute arising under this Agreement. The Parties intend that these
negotiations be conducted by non-lawyer, business representatives. The location,
format, frequency, duration and conclusion of these discussions shall be left to
the discretion of the representatives. Upon agreement, the representatives may
utilize other alternative dispute resolution procedures such as mediation to
assist in the negotiations. Discussions and correspondence among the
representatives for purposes of these negotiations shall be treated as
confidential information developed for purposes of settlement, exempt from
discovery and production, which shall not be admissible in the arbitration
described below or in any lawsuit without the concurrence of all Parties.
Documents identified in or provided with such communications, which are not
prepared for purposes of the negotiations, are not so exempted and may, if
otherwise admissible, be admitted in evidence in the arbitration or lawsuit.
If the negotiations do not resolve the dispute within sixty days of
the initial written request, or if neither Party makes such a request within
sixty days of the dispute, the dispute shall be submitted to binding arbitration
by a single arbitrator pursuant to the Commercial Arbitration Rules of the
American Arbitration Association. A Party may demand such arbitration in
accordance with the procedure set out in those rules. Discovery shall be
controlled by the arbitrator and shall be permitted to the extent set out in
this Section. Each Party may submit in writing to a Party, and that Party shall
so respond. Each Party is also entitled to take the oral deposition of one
individual of another Party. Additional discovery may be permitted upon mutual
agreement of the Parties. The arbitration shall be held in Chicago, Illinois.
The arbitrator shall control the scheduling so as to process the matter
expeditiously. The Parties may submit written briefs. The arbitrator shall rule
on the dispute by issuing a written opinion within thirty days after the close
of hearings. The times specified in this Section may be extended upon mutual
agreement of the Parties or by the arbitrator upon a showing of good cause.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction.
Each Party shall bear its own costs of these procedures. A Party
seeking discovery shall reimburse the responding Party the costs of production
of the documents (to include search time and reproduction costs). The Parties
shall equally split the fees of the arbitration and the arbitrator.
(c) Strict Compliance. The failure by either party to insist upon the strict
performance of any covenant, agreement, term or condition of this Agreement, or
to exercise any right or remedy consequent upon a breach thereof, shall not
constitute a waiver of any such breach or any subsequent breach of such
covenant, agreement, term or condition. The waiver of any breach shall not
affect or alter this Agreement, but each and every covenant, agreement, term and
condition of this Agreement shall continue in Ml force and
11
<PAGE>
effect with respect to any other then existing or subsequent breach thereof.
(d) Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which shall constitute but one
and the same instrument.
(e) Amendments. Neither this Agreement nor any term or provision hereof may
be changed, waived, discharged or terminated, except upon the written consent of
all Parties.
(f) Captions. The captions to this Agree ment are for convenience of
reference only and in no way define, limit or describe the scope or intent of
this Agreement or any part hereof, nor in any way affect this Agreement or any
part hereof.
(g) Assignment. This Agreement may not be assigned by the Customer without
the prior written consent of R&N, which R&N may withhold in its sole discretion.
Any attempt by the Customer to assign, transfer or sublicense any of the
Software or any of the rights, duties or obligations under this Agreement in
violation of this Agreement shall be null and void and of no force or effect.
(h) Severability. If any provisions of this Agreement shall for any reason be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision hereof, and this Agreement shall be construed as
if such invalid or unenforceable provisions were omitted.
(i) Schedules. The Schedules annexed hereto are incorporated by reference and
made a part hereof.
(j) Successors and Assigns. This Agreement shall inure to the benefit of and
be binding upon the Parties hereof, and their respective heirs, executors,
administrators, successors and permitted assigns.
(k)Entire Agreement. This Agreement, together with all Schedules hereto and
together with any amending correspondence which is executed on behalf of both
Parties, constitutes the entire agreement between the Parties hereto with
respect to the subject matter thereof.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Rolfe & Nolan (USA) Inc. Alaron Trading
By: By:
Name: Name:
Title: Title:
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SCHEDULE A
RANorder SOFTWARE DESCRIPTION
Maintenance Functions:
The data maintenance functions of RANORDER have been designed to support and
facilitate the use of RANORDER in an on-line environment. Data maintenance is
generally supported via two processes: static data table maintenance and dynamic
table updating. Static data table maintenance involves the establishment and
support of information regarding non-dynamic data, including:
Commodity Masters for Futures & Options (North American Exchanges)
Currency Master and Exchange Master, Symbol Master File
Interface and Printer Definition Tables, Margin Rate Tables
Security Administration Tables
Dynamic data table maintenance involves the ongoing update of transaction
related information, including:
Market Price Data, Customer Account Information
Customer Positions, Customer Orders and Fills
Order Entry:
This set of functions is designed to process customer orders through the system
direct to the exchange floor (printer or terminal device) or to an exchange
based order routing system (when available). Users entering an order have the
facility for viewing customers resting and filled orders; margin requirements,
and marked-to-the-market for both established positions/filled orders and
working orders. In addition, the order entry application includes data
validation functions for many of the data variables required in order entry.
Order Routing:
The order routing facility automates the process of trade submission to an
exchange floor or exchange interface for order routing. Each commodity may be
routed to a specific device (printer or interface) on the exchange floor,
thereby allowing multiple devices on the same exchange floor. Each order is
tagged with the identification of the terminal and person that entered the
order. This allows the filled order to be routed back to that person through the
fill routing subsystem. The printer support software is designed to detect
printer failures and take immediate action depending on the type of failure. The
recovery actions include switching all
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printing from one printer to a designated backup printer automatically.
Fill Reporting:
The fill reporting facility provides functionality that allows floor personnel
to input/report filled order information. System terminals, located on the
exchange floor, or exchange devices (i.e. TOPS terminals) may be utilized to
enter fill information directly into the customer's account. This subsystem
includes features which minimize the amount of keying, handling unusual
conditions such as split fills and corrections, and routing a hard copy of the
fill information back to the trade originator. Fill reporting functions include
direct to terminal notification, fax transmission, e-mail transmission and
automated voice response.
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SCHEDULE A
RANorder SOFTWARE DESCRIPTION
(continued)
Marked to the Market:
The system interfaces with a market price feed in order to receive intra-day
price quotes. The quotes may be applied to the positions in any account thereby
providing a summary of the account's current value. Current value calculations
include assessment of risk for existing positions as well as resting orders.
Reporting:
The reporting facility provides functionality that allows system user to
generate a variety of management information reports. Reporting functionality
includes reports on: Orders, Positions, Margins, Account Equity, Open Positions
and Account Summary.
Market Quote Display:
The market quote display functionality may be utilized as an independent quote
system. Different display formats for quotes are available and include:
quick-quote by instrument, category by commodity grouping, and unique by user
preference. Market price data is accepted from Future Sources.
Time and Sale Data:
The time and sale facility will capture and store two or more days of time and
sales information as supplied by the market price vendor. Each tic received is
time stamped and logged as a tic, bid, ask, or range (as supported by the market
price vendor). Inquiries may be made by a specific time bracket or by price
rate.
News Display:
The new display facility provides functionality for capturing and delivering
market related or internal news. The system contains one thousand pages which
may be setup and changed at a user's discretion.
System Security Support:
Security support facilities include: unique user D), unique non-displayed
password, user functionality access authorization, automatic terminal sip-off
with inactivity, account access restrictions by sales-code, and unique access
code for restricted account access.
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SCHEDULE B
RANorder PROCESSING SERVICES
Maintenance of the following files:
Commodity Masters for Futures & Options (North American Exchanges)
Currency Master and Exchange Master
Screen & Report Titles Master and Instrument Type Master
RANorder Base Screen Menu
Processing of the RANorder Start-of-Day job stream which includes: Retrieval of
Customer account information Retrieval of Customer position information Loading
of Customer account information Loading of Customer position information
Initiation of Daily Start-Up Procedure:
Printers
TOPS Interface
Access Devices
Processing of Transaction Activity
Intra-day Filled Transaction Submission to Back-Office
Processing of Transaction Data File (if applicable)
End-of-Day Transaction Submission to Back-Office
Monitor & Reprint Jobs (if applicable)
Monitor System Functions
Utilization & System Performance
Networking
Price Feed
Initiation of Daily Shut-Down Procedure:
Printers
TOPS Interface
Access Devices
Access to Internet RANorder Site
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Hosting of Internet Server
Provision of HTML front-end screens for order entry, account status and
statements
Administer System Security
Configuration Planning for Client Access Devices
Upgrades of RANORDER application software and Upgrades of IBM Operating System
Software
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SCHEDULE C
Training Services Description
RANorder Systems Administration System Configuration Daily Procedures Remote
System Access Data File & System Maintenance Customer Account Maintenance
Customer Order Maintenance Customer Position Maintenance Sign-on Data File
Maintenance Market News Data File Maintenance Historical Price Database
Maintenance Location Routing Maintenance Printer Routing Maintenance Printer
Test System Sign-on Message Maintenance Commodity Code Maintenance
Miscellaneous System Functions
Broadcast Message Facility
Background Job File Maintenance
Background Job Submission
Back-office Data Entry
Cash File Maintenance
Phone Number File Maintenance
RANorder Functionality
Account Inquiry/Order Entry
Order Entry - Without Account Positions
Order Entry - with Account Positions
Display Account Positions
Order Check for account
Cancel Order
Cancel/Replace Order
Reprint and Order
Update Customer Messages
Customer Account Master Inquiry
Check Unreported Fills
Open Order Check-out
Print Account Positions
Rolodex Maintenance
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SCHEDULE C
Training Services Description
(continued)
Quick Quote & Sales (Optional Service) Quick Quote Personal Quote Page Category
Quote Time & Sales by Time Time & Sales by Price Personal Quote Page Set-Up
Historical Price Inquiry Market News Report Generation Reports on Orders Reports
on Positions Margin Reports Account Equity Report Inquiry Open Positions Inquiry
Account Summary Inquiry Managed Account Functions Managed Account File
Maintenance Display/Report Non-Distributed Fills Fill Distribution Report
RANorder Training Session Description One end-user training session Up to 10
end-users Customer may video tape session One Systems administration training
session
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SCHEDULE D
RANORDER Processing Services
Operating Conditions
Operating Conditions
R&N RANorder Service Bureau operating conditions are listed below.
R&N RANorder Service Bureau will accept orders twenty-four hours a day.
Operational staff for the RANorder Service Bureau will be available from 6:00 am
to 6:00 p.m. (Central Standard Time on CME/CBT trading days) Monday through
Friday. Support telephone consultation services will be available from 6:00 p.m.
(Central Time, U.S.) on Sunday until 5:00 p.m: on Saturday, excluding holidays,
using current R&N procedures for the purpose of resolving Deficiencies in the
Software and resolving operational problems the Customer may encounter,
including assistance in the recovery of systems and data files.
Access to the R&N RANorder Service Bureau processing service outside of the
service hours stated must be approved by R&N RANorder Service Bureau operational
staff.
R&N RANorder Service Bureau will, under normal conditions and given Customer's
submission of Customer Information by 6:00 am CST (submission time), process the
Customer's Information beginning at 6:00 am CST or earlier when possible. In the
event of a unforeseen delay, R&N RANorder Service will notify Customer and make
"best efforts" to begin order processing by no later than 7:00 am CST.
RANORDER documentation will be provided as follows:
1 RANORDER User Guide
1 RANORDER Reports Guide
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SCHEDULE E
RANORDER Processing Services
Responsibilities
R&N RANorder Service Bureau Respo0nsiblites:
R&N will provide the central processing hardware, software and equipment for the
RANorder Service Bureau. All other hardware, communications equipment or
supplies are the responsibility of the customer.
R&N RANorder Service Bureau data center will provide the Customer with floor
space, electrical power, and operations support necessary to provide the
processing services as specified in Schedule B.
R&N will provide a workstation at the R&N RANorder Service Bureau operations
center for R&N RANorder Service Bureau operations staff to process the
Customer's data. An alternate R&N Service Bureau system at the R&N Service
Bureau data center will be available as a backup should there be a hardware
problem on the primary production system, provided Customer executes a separate
Disaster Recovery agreement.
R&N will monitor network communications and equipment. R&N will coordinate
problem resolution with Customer for Customer owned network and communications
equipment. R&N will facilitate resolution of communication line issues.
R&N will administer security functions for the system based upon Customer
prepared and submitted User and Password Set-up Requests. R&N will maintain,
update and modify all required maintenance files.
Rolfe & Nolan's Software Support Services consists of a support facility that
will be the first point of contact for all support requirements. Such
requirements are categorized into Level I, Level II and Technical Support. A
central number is utilized for all support services: 312-559- 9086.
General functionality queries and system problems will be reported to the Level
I support facility7. All queries will be electronically monitored and referred
to the appropriate support area for follow through until resolution is obtained.
Support staff will attend most issues regarding system usage, however if any
problem, which results in a delay to data entry or general system operations,
cannot be resolved, the support staff will notify either Level II or Technical
Support as appropriate.
Level II support is an advanced point of contact for problems associated with
processing activities of the RANorder system. Level II support will generally
respond to issues related to the ability of the system to continue processing,
networking issues and software faults.
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SCHEDULE E
RANORDER Processing Services
Responsibilities
(continued)
Customer Responsibilities:
Communications lines and hardware, networking equipment, printers and access
devices are the responsibility of the client.
Customer will be responsible for preparing and submitting required account and
position files on a daily basis before 6:00 am CST. Files will be compliance
with R&N standard RANorder File Specification Format.
Customer will designate a System Administrative, User Liaison and User Trainer
to facilitate the operations of the RANorder system. Customer will channel
RANorder support inquiries through Designated System Administrator and/or User
Liaison to R&N support facilities.
Customer will coordinate, secure and maintain, at its own expense, an order
routing interface facility (TOPS)for use with the RANorder system. Customer will
acquire, as its own expense, a market data feed from Futures Source.
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SCHEDULE F
RANorder Processing Service
Client Operations Responsibilities
The operational responsibilities of a R&N RANORDER Service Bureau Customer
include, but are not limited to, the following functions:
Maintenance of all master files that are not maintained by R&N.
Creation and submission of daily account and position files from Customer's
back-office system.
Entry of all order, order maintenance and order fills.
Generation and printing of all system reports.
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SCHEDULE G
Processing, Installation, and Miscellaneous Fees
1. Processing Service Fees
The RANorder service bureau processing price schedule is based on two
components: a minimum monthly charge which is base don the number of
accounts maintained on the system, and a volume charge associated with
the actual number of contracts processed by the system. The actual
monthly fee is the greater of the minimum monthly charge or the volume
based charges. The processing fee schedules for these charges are
detailed below:
Minimum Monthly Charge
Number of Accounts Minimum Monthly Charge
Up to 2,000 $ 3,000
Up to 4,000 $ 4,000
Up to 6,000 $ 5,000
Over 6,000 $ 6,000
Volume Activity Charges
Number of Contracts Monthly Activity Charge
0 to 20,000 $ 3,500
20,001 to 30,000 $ 4,500
30,001 to 40,000 $ 5,000
40,001 to 50,000 $ 5,500
50,001 to 70,000 $ 6,500
70,001 to 90,000 $ 7,300
Number of Accounts
Highest number of accounts downloaded to the system during the month
Number of Contracts
Actual number of filled contracts(half-turns) filled or entered into
the system during the month
2. Fee Schedule at Renewal
No less than three months prior to the last date upon which the
Customer may provide notice of termination of this Agreement, R&N shall
provide the Customer with a revised Processing Fee Schedule applicable
to the next renewal term, if any. Such revised Processing Fee Schedule
may be increased by R&N up to R&N's then-prevailing price as set forth
on its published price lists however any such increase (if applicable)
will be limited to 25% of then current Processing Fees as set forth
herein.
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SCHEDULE G
Processing, Installation, and Miscellaneous Fees
(continued)
3. Installation Fee
There will be a non-refundable initial installation fee for the
processing service and Software described in Schedule A and B. The fee
will be $10,000.00 and encompasses project planning, R&N project
management, installation support, configuration set-up and system
training. Custom Modifications and expenses related to the
implementation of any future modules or hardware upgrades require
payment of additional fees and will be billed separately.
4. Payment of Processing Fees
The Processing and Installation Fees for the initial Term shall be
payable in accordance with the following schedule:
(a) the Installation Fee shall be payable upon execution of this
Agreement;
(b) Processing Fees shall be payable monthly based upon the actual
usage incurred during the prior month
5. Additional Services
This Agreement excludes the provision of futures and option market
prices and SPAN arrays (if required). A monthly fee will be assessed
for the prices and SPAN arrays associated with each individual
exchange. Additional services which may also be required, but not
exclusively limited to, include Disaster Recovery Service and Real Time
Price Feed, and shall require payment of additional fees and will be
billed separately.
All communication line costs are the responsibility of the Customer.
Any charges as a result of using third-party vendors to perform
processing services for the Customer will be the responsibility of the
Customer.
Customer will utilize time-share Internet communications lines and will
be allocated (on a percent utilization of capacity basis) a portion of
the total line cost. The minimum monthly fee will be $500.
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SCHEDULE H
CUSTOMIZATION REQUEST
Date:
Requested Functionality:
Specifications:
Programs Affected:
The Customer agrees to pay to R&N a preliminary estimate fee in
the amount of _______. The charges estimated for the
above-requested modifications are ____________.
The Customer
By:
Name:
Title:
27
<PAGE>
SCHEDULE I
Installation Plan
(See Attached Project Plan)
28
EXHIBIT 10.15
This Service Bureau Operation Agreement AGREEMENT NO:____________________
("Agreement") is made between
Rolfe & Nolan (USA) Inc. ("R&N") DATE OF AGREEMENT:_______________
an Illinois corporation with its
principal place of business at
120 South Riverside Plaza, Suite 1430
Chicago, Illinois 60606
(312) 559-0250 (general)
(312) 559-9493) (fax)
and
Alaron Trading ("Customer")
an Illinois corporation with its
principal place of business at:
822 W. Washington Blvd.
Chicago, IL 60607
WITNESSESH:
WHEREAS:
R&N is the developer of a futures and options industry applications
software solution and, in connection therewith, provides certain
Processing Services for its customers; and
The Customer wishes to engage R&N to provide to the Customer certain
Processing Services more fully described on Schedule B attached hereto
and made a part hereof, and R&N desires to provide such Processing
Services to the Customer on the terms and conditions set forth below.
NOW, THEREFORE, the Parties agree as follows:
1. DEFINITIONS.
(a) "Confidential Information" means, in the case of R&N (i) the
Intellectual Property, know-how or other material, ideas or concepts relating to
or comprising the Software, including, without limitation, Programs, source
code, object code, Documentation, Enhancements, Releases, Custom Modifications,
specifications, technical manuals, memoranda and advisories, computer
instructions, algorithms, routines, flow diagrams, outlines, schedules and
processes, and (ii) information relating to pricing and the other terms and
conditions of this Agreement. In the case of the Customer, "Confidential
Information" means any non-public information relating to the Customer or the
business of the Customer to which R&N has access in the performance of its
obligations under this Agreement.
<PAGE>
However, in either case, "Confidential Information" shall not include:
any information known
generally to the public, other than as a
result of unauthorized disclosure by
the recipient of such information, or
any information which the
recipient of information can show by
evidence to be lawfully known by
such recipient prior to the time of its
disclosure, or
any information that becomes available to either R&N or the
Customer on a non-confidential basis from a third party, provided such
third party is not prohibited from disclosing such information to the
Party.
(b) "Custom Modification" means any modifications or additions to the
Software made by R&N at the request of the Customer.
(c) "Customer Information" shall mean the input data provided by
Customer for processing, the files and processing data therefrom, and any
program(s) provided by the Customer for use in processing of its input data.
(d) "Documentation" means user manuals and all written materials
provided by R&N to the Customer relating specifically to the operation and
functionality of the Software.
(e) "Enhancements" means upgrades, improvements, new versions or
Releases and related materials generally made available, without charge, by R&N
to its customers, which are intended to be used with or which complement
existing Software employed in connection with the provision of the Services
hereunder.
(f) "Installation Date" means the date the Software (or any part
thereof) is made available by R&N for use by the Customer.
(g) "Installation Services" means the services supplied by R&N to the
Customer that functionally set forth in the Documentation, including planning
for access device installation at the Customer site, creation of a Software
environment for Customer's Processing Service, and configuring the Software to
operate in conjunction with Customer's requirements, but shall not include any
Custom Modifications. The training services provided by R&N are set forth in
Schedule C. Fees for Installation Services are in addition to the Processing
Fees and are set forth in Schedule G.
(h) "Intellectual Property" means rights to: (i) inventions, (ii) all
grants or patents or patents for inventions, including reissue thereof, (iii)
all patent applications, (iv) copyrights, (v) all copyright applications, and
(vi) Confidential Information.
(i) "New Software" means any software released generally by R&N after
the date of this Agreement that, in the determination of R&N, incorporates
functions and capabilities not included in the Software, as described in
Schedule A.
<PAGE>
(j) "Party" means R&N or the Customer, as the case may be, and
"Parties" means both R&N and the Customer.
(k) "Processing Fees' means the processing service fees specified in
Schedule G.
(l) "Processing Service" shall mean the services to be supplied by R&N
as specified in Schedule B.
(m) "Program" or "Programs" means a set of ordered steps or list of
instructions which are capable when incorporated in a machine-readable medium,
in causing a computer to indicate, perform or achieve particular functions,
tasks or results and includes source-code listings in human- readable and
machine readable form, object code in machine readable form, program files, data
files, field and data definitions and relationships, data definition
specifications, data models, program and system logic, interfaces, program
modules, routines, subroutines, algorithms, program architecture, design
concepts, system designs, program structure, sequence and organization, screen
displays and reports layouts.
(n) "Release' means periodic bug- fixes, modifications made to comply
with regulatory requirements and improvements or additions to the existing
functionality of the Software, and generally made available, without charge, by
R&N to its customers.
(o) [MISSING FROM DRAFT]
(p) "Services" means the rendering of timesharing, service bureau
facilities management or similar services by the Customer utilizing the Software
(or any part thereof) to any entity other than the Customer.
(q) "Software" means the executable from of the futures and options
industry applications software solution more fully described on Schedule A
hereto, together with all Custom Modifications, Releases, New Software and
Enhancements developed or applied by R&N under this Agreement.
(r) "Term" means an initial term of three years from the date on which
Service commences and continuing thereafter for additional successive three-year
terms unless terminated by either Party giving the other not less than six
months' prior written notice to expire at the end of the initial three-year term
or at the end of any subsequent term, as the case may be.
2. PROCESSING SERVICES; SERVICE FEES
(a) Subject to the terms and conditions of this Agreement, including,
without limitation, those terms and conditions set forth in the schedules
attached hereto, R&N agrees to provide the Processing Service to the Customer
during the Term of this Agreement.
(b) Work shall be performed by R&N on a best efforts basis with an
estimated completion time of ten hours after notification of last trade entry.
(c) During the Term of this Agreement, the Customer hereby agrees to
pay monthly Services Fees and other charges in the amounts, at the times and in
accordance with the terms set forth in Schedule G attached hereto and made a
part hereof. The
<PAGE>
Customer shall pay all such fees and charges, in full and without deduction,
except as provided under Section 2(g), within thirty days of any invoice
therefor.
(d) Any media or materials supplied by R&N in addition to the Services
shall be charged to the Customer at R&N's then-prevailing list prices.
(e) The Customer shall pay to R&N interest upon any amounts which are
not paid by the Customer to R&N when due, at the rate of the lessor of (i) one
and one-half percent (1 1/2%) of the unpaid balance per month, or (ii) the
highest rate of interest allowable under applicable law.
(f) The Customer hereby grants R&N a security interest in all personal
property of the Customer on R&N's premises, from time to time, to secure the
obligations of the Customer to R&N, and in connection therewith, authorizes R&N
at its sole discretion to sign on the Customer's behalf and file financing
statements with respect to such personal property to perfect the security
interest granted hereby.
(g) If the Customer disputes in good faith any charge (a "Disputed
Charge"), the Customer shall so notify R&N in writing within five days after
receiving the invoice for, or notification of, such charge. In such event,
either Party may initiate the dispute resolution process under Section 12(b).
(h) The Software used in connection with the provision of the
Processing Services hereunder is and shall be the sole and exclusive property of
R&N, including all applicable rights to the Confidential Information of R&N and
to the Intellectual Property. No right is granted to the Customer for the use of
Software, directly or indirectly. R&N reserves the right to implement all
upgrades, Releases and Enhancements to the Software, or New Software, which R&N
may, from time to time, develop and, in its sole discretion, deem, advisable to
apply in connection with the provision of Services hereunder, without the
consent of the Customer.
3. INSTALLATION PLAN AND ACCEPTANCE.
(a) The Customer and R&N have prepared and annexed hereto as Schedule I
a mutually acceptable plan for the provision of Installation Services (the
"Installation Plan"). R&N will Provide the Installation Services in accordance
with the Installation Plan. Any further installation, training, software
customization or consultancy services will be provided at the sole discretion of
R&N and will be charged in accordance with R&N's then prevailing standard rates.
All out of pocket expenses incurred by R&N in providing services in connection
with the Installation Plan, including travel and lodging expenses, shall be paid
by the Customer.
(b) The Customer agrees to assign a qualified project leader to the
installation and to assign such other individuals (and resources) on a part-time
or full-time basis to the installation team as required.
4. SOFTWARE SUPPORT SERVICES.
(a) Software support services, as described below ("Support"), will be
provided
<PAGE>
by R&N to the Customer for the Software Processing Service.
(b) R&N agrees to provide the following Support services:
Provide the Customer with access to R&N representatives
responsible for coordination, resolution, and follow-up of all support
issues under the terms and conditions of this Section.
Provide the Customer with emergency telephone consultation
service from 6:00 p.m. (Central Time, U.S.) on Sunday until 5:00 p.m.
on Saturday, excluding holidays, using current R&N procedures for the
purpose of resolving Deficiencies in the Software and resolving
operational problems the Customer may encounter, including assistance
in the recovery of systems and data files.
Use commercially reasonable efforts to make and provide to the
Customer, in R&N's sole discretion, without additional charge, such
Enhancements to the Software as R&N deems appropriate to satisfy any
mandatory requirements of the applicable industry clearing houses and
regulatory agencies, taking into account technical feasibility and the
requirements of R&N's customers generally.
Notify the customer of Enhancements to and Maintenance
Releases and Releases of the Software that are available, all of which
must be accepted by the Customer without additional charge of fee.
(c) The Customer agrees to:
Provide R&N with reasonable access to the Customer's personnel
to enable R&N to provide the services specified in this Section.
Maintain a documented log of all support calls, available to
R&N upon request. When placing a call to R&N, the Customer will
reference all applicable sections of Documentation that may be
relevant.
Document all incidents of Software Deficiencies, attach any
pertinent samples of Documentation and include detailed steps to
duplicate the Deficiencies in the Customer's
operating environment.
5. CUSTOM MODIFICATIONS.
The Customer may request R&N to make Custom Modifications to the Software to
meet the Customer's specific requirements. Upon receipt of such request, R&N
may, in its sole discretion, make such Custom Modifications at a rate to be
agreed upon by the Parties. In the event that the Parties shall fail to
expressly agree upon fees and charges for Custom Modifications, the Customer
shall pay R&N its then-current standard charges for the Custom Modifications.
The following procedures will be followed by the Customer and R&N in relation to
any requested Custom Modifications, without prejudice to R&N's right to payment
of fees and charges for Custom Modifications otherwise made at the request of
the Customer:
<PAGE>
(a) The Customer shall notify R&N in writing, in the form annexed
hereto as Schedule H (the "Customization Request"), of its request for a
preliminary estimate for Custom Modifications. The Customization Request must
identify specifically the functionality requested and the specifications
thereof, as well as the Customer's agreement to pay the fee set by R&N for
preparing the preliminary estimate.
(b) In response to the Customization Request, R&N will develop a
preliminary estimate of the cost to perform the Custom Modifications and the
additional costs that may be involved in retro-fitting the Custom Modifications
with respect to any new Releases or Enhancements and an initial determination of
the appropriateness of the specifications requested by the Customer. The
Customer will have thirty days after receiving the preliminary estate to notify
R&N whether to proceed with a detailed estimate and detailed design
specifications for the Custom Modifications.
(c) After receiving the detailed design specifications for the Custom
Modifications, the Customer will notify R&N of any and all changes to the
specifications. R&N will then resubmit the final specifications for the
Customer's written acceptance. Once the Customer accepts the final
specifications, any further changes requested by the Customer must be approved
by R&N and may result in additional cost.
(d) R&N will design and program the Custom Modifications according to
the final specifications approved by the Customer. R&N and the Customer will
agree on the timetable for the application of the Custom Modifications to the
Services.
(e) The Customer shall pay R&N for preparing the preliminary estimate
and the detailed estimate, developing specifications, programming, and testing
the Custom Modifications in accordance with the charging basis quoted by R&N
when submitting its preliminary estimate as modified in writing upon the mutual
consent of the Parties.
(f) R&N shall not make any Custom Modifications which R&N believes are
or may be unfeasible, illegal or in violation of the proprietary rights of
others. R&N shall not pay any royalty or other fee to the Customer for the use
of any Confidential Information, Intellectual Property, software, ideas or
techniques developed from or relating to Custom Modifications.
6. CUSTOMER INFORMATION.
(a) Customer shall provide within sufficient time (by the agreed upon
submission time set forth in Schedule D) all Customer Information required by
R&N to enable R&N to perform the Processing Services. In the event the Customer
Information is not submitted by the agreed upon submission time, or is
incomplete, incorrect or not in the form specified by R&N, R&N shall not be
responsible for the delivery time (Processing Service delivery time set forth in
Schedule D).
(b) In the event of late submission of Customer Information and upon
the availability to R&N of complete and correct Customer Information, R&N will
notify Customer of the new Processing Service delivery time. Work shall be
performed on a
<PAGE>
"Best Efforts Basis" with an estimated completion time of ten (10) hours after
notification of last trade entry. Upon delivery to Customer of its completed
processing work, Customer shall assume risk of loss, and R&N shall replace any
lost damaged portion at Customer's expense.
(c) Customer shall be solely responsible for the accuracy and
completeness of Customer Information provided by Customer to R&N pursuant to
this Agreement, and for the correctness of the format. Customer shall verify
such data or report promptly to R&N after receipt thereof, any errors with
respect to any data or report. R&N assumes no responsibility for verification.
Customer operation responsibilities are further specified in Schedules E and F.
(d) Upon termination of this Agreement for any reason other than
termination by R&N due to default by Customer, R&N will assist in transferring
Customer Information to the Customer or to another data processing company and
retain said Customer Information for archival purposes for a period of thirty
days. Said assistance shall be limited to that assistance which in R&N's sole
judgment is reasonably under the circumstances. Customer shall pay R&N for staff
time spent in providing such assistance at R&N's then prevailing hourly rates
for machine time, the costs of the media on which Customer Information is
stored, for transportation costs and for any other reasonable related expense.
7. RESPONSIBILITIES OF THE CUSTOMER.
The Customer shall be exclusively responsible for the accuracy of the input
data, information and documentation provided to R&N in connection with the
Services to be provided hereunder and shall:
(a) provide R&N with reasonable access to the Customer's personnel and
facilities to enable R&N to provide the Services.
(b) implement sufficient
procedures to satisfy its requirements for
security and accuracy;
(c) convert the Customer's
accounting data to the format required by the
Software;
(d) within sufficient time, provide R&N with all Customer information
required by R&N to enable R&N to perform the Services. In the event that the
information is not delivered by the agreed upon delivery time, or is incomplete,
incorrect or not in the form specified by R&N, R&N shall not be responsible for
meeting agreed upon delivery times, which delivery times shall be automatically,
commensurately delayed. promptly following the availability to R&N of complete
and correct Customer information, R&N will notify the Customer of the new
delivery time. Upon delivery to the Customer of its completed processing work,
the Customer shall assume risk of loss and R&N shall replace and lost or damaged
portion of the completed processing work at the Customer's expense, to the
extent R&N retains such information.
8. RELEASES/NEW SOFTWARE MODULES.
(a) R&N will make Releases available to the Customer free of charge
<PAGE>
(subject to Section 4(a) and 10(b)) when such Releases are made generally
available by R&N to its other customers.
(b) From time to time, R&N may develop New Software modules. The
Customer may acquire a license to use any New Software Module by paying R&N its
then-current fees and charges. Once installed, the New Software module will be
deemed to be part of the Software subject to the terms and conditions of this
Agreement.
(c) If the Customer requires R&N to install Releases or New Software
modules such services will be subject to charge by R&N at its then-current
published rates.
9. CONFIDENTIALITY.
(a) Each Party hereto agrees to hold the other Party's confidential
Information in strict confidence. Neither Party will disclose or otherwise make
the other Party's Confidential Information or any part thereof available to any
third party, except to the extent permitted by the terms of this Agreement. Each
Party shall take reasonable action to satisfy its obligations under this
Agreement with respect to use, copying, modification, protection and maintaining
the confidentiality of the Confidential Information of the other Party,
including the prevention of any unauthorized disclosure by any of such Party's
employees.
(b) Neither Party will remove or permit to be removed from any item
included in the other Party's Confidential Information any proprietary,
confidential or copyright notices, markings or legends placed thereon
by such Party.
(c) Each Party shall assist the other Party in identifying and
preventing any unauthorized use or disclosure of its Confidential Information or
any portion thereof. Without limiting the foregoing, a Party (a "Recipient
Party") shall notify the other Party (the "Disclosing Party") immediately in the
event that the Recipient Party learns or has reason to believe that any person
who has had access to the confidential Information of the Disclosing Party, or
any portion thereof, has violated or intends to violate the terms of this
Agreement, and the Recipient Party will cooperate with the Disclosing Party in
seeking injunctive or other equitable relief in the name of the Disclosing Party
against any such person.
(d) Each Party acknowledges that the unauthorized disclosure of any of
the other Party's Confidential Information or any material, ideas or concepts
relating to such Confidential Information may give rise to irreparable injury to
the Disclosing Party, inadequately compensable in damages. Accordingly, each
Party shall be entitled to injunctive relief against the breach or threatened
breach of any of the foregoing undertakings, in addition to any other legal
remedies which may be available. and each Party hereby consents to such
injunctive relief. Nothing herein shall be construed as prohibiting either Party
from pursuing any other remedies available to such Party for such a breach or
threatened breach, including the recovery of monetary damages from the other
Party.
10. TERMINATION; REMEDIES.
Subject to the provisions of Section 11(d):
(a) The Customer shall have the
<PAGE>
right to terminate this Agreement upon thirty days' prior written notice to R&N
upon a material breach by R&N of its obligations set forth in Sections 3, 4, 9
and 11, unless R&N cures such breach within thirty days after the Customer gives
written notice of such breach of R&N.
(b) R&N shall have the right to terminate this Agreement upon thirty
days' prior written notice (unless such breach is curable and is cured by the
Customer within thirty days) to the Customer upon (i) the Customer's failure to
pay any sums due hereunder, (ii) a material breach by the Customer of the
Customer's obligations set forth in Sections 3, 4, 7, 9, and 11; or (iii) the
termination or cessation of the business of the Customer.
(c) In the event of termination under subsection (b) above, R&N shall
be permitted to, in addition to any other remedies it may have in law or equity:
automatically, and without any
further action by R&N, terminate the
Services;
take immediate possession of any Confidential Information held
by the Customer, and all copies thereof wherever located, without
notice or demand; and
recover from the Customer the aggregate of all Service Fees,
as defined in Schedule G, that are then due, or will become due during
the then-current Term, all other fees and charges then payable to or
earned by R&N through the date of termination, reasonable attorney's
fees and expenses incurred in enforcing (including the cost of
consulting with an attorney to determine the scope of the Customer's
breaches) any of the terms and provisions of this Agreement.
(d) Notwithstanding the foregoing, the provisions of Sections 5, 7, 8
and 12(b) shall survive the termination of this Agreement.
(e) Upon termination of this Agreement for any reason other than
termination by R&N due to default or breach by the Customer, R&N will assist in
transferring Customer information to the Customer or to another data processing
company, provided, however, that such assistance shall be limited to that
assistance which in R&N's sole discretion is reasonably available. The Customer
shall pay R&N for: (i) staff time expended in the provision of such assistance,
at R&N's then-prevailing hourly rates, (ii) machining time, (iii) the cost of
the media on which the Customer's information is stored, (iv) transportation
costs, and (v) all other reasonable expenses incurred by R&N in connection with
such assistance.
11. WARRANTIES AND LIABILITY.
(a) R&N warrants that, during the term of this Agreement, the Services
will be conducted with reasonable care and skill.
(b) The warranty set forth above shall not extend to Deficiencies
contained in the Software caused by any of the following: (i) alterations,
modifications or revisions to or of the Software performed by a party other
<PAGE>
than R&N; (ii) negligence in the operation or use of the; (iii) operation of the
Software not in accordance with the Documentation; and (iv) an act of God or any
factor beyond R&N's reasonable control.
(c) THE WARRANTY STATED ABOVE IS IN LIEU OF AND R&N HEREBY DISCLAIMS
ALL OTHER WARRANTIES EXPRESSED OR IMPLIED, INCLUDING WITHOUT LIMITATION, THE
IMPLIED WARRANTY OF MERCHANTABILITY AND IMPLIED WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE, WARRANTIES ARISING BY STATUTE OR OTHERWISE IN LAW, OR FROM A
COURSE OF DEALING OR USAGE OF TRADE.
(d) IN NO EVENT SHALL R&N BE LIABLE FOR LOST PROFITS, LOSS OF GOODWILL,
LOSS OR ALTERATION OF CUSTOMER DATA, FAILURE TO REALIZE EXPECTED SAVINGS,
INABILITY TO USE ANY COMPUTER PROGRAMS, REGULATORY PENALTIES, OR FOR ANY
COMMERCIAL ECONOMIC, SPECIAL, INDIRECT, INCIDENTAL, EXEMPLARY OR CONSEQUENTIAL
DAMAGE EVEN IF R&N HAS BEEN ADVISED OF OR FORESEES A POSSIBILITY OF, ANY OF
THESE DAMAGES OCCURRING. R&N'S MAXIMUM LIABILITY TO THE CUSTOMER FOR ANY AND ALL
BREACHES OF THIS AGREEMENT SHALL IN NO EVENT EXCEED THE LESSER OF THE AGGREGATE
OF THE FEES AND CHARGES ACTUALLY PAID BY THE CUSTOMER TO R&N, HEREUNDER WITHIN
THE TWELVE- MONTH PERIOD IMMEDIATELY PRECEDING THE CUSTOMER'S NOTIFICATION TO
R&N OF SUCH BREACH OR DEFAULT, OR $1,000,000.
12. INTELLECTUAL PROPERTY INDEMNITY.
(a) R&N shall indemnify and hold the Customer harmless from liability
for any action brought against the Customer to the extent that such action is
based on a claim that the Software use within the scope of this Agreement
infringes any United States Intellectual Property.
(b) The right of Indemnification as set forth herein is subject to all
of the following: (i) the Customer shall provide R&N with prompt written notice
of the action; (ii) R&N shall select legal counsel to defend, compromise or
settle the action in the sole discretion of R&N; (iii) the Customer shall
provide R&N with all available information known to the Customer, assistance,
authority, and cooperation to enable R&N to defend, compromise, or settle the
action, and (iv) if the use of the Software becomes, or in R&N's opinion is
likely to become, the subject of a claim of infringement, the Customer shall
permit R&N, at R&N's option and expense, either to procure the right for the
Customer to continue to use the Software or to replace or modify the Software so
that it becomes non- infringing and retains substantially the same functionality
as that described in the Documentation.
(c) R&N shall have no liability for any claim of Intellectual Property
infringement rights of third parties based on modification of the Software by
the Customer or any third party, or the use of or
<PAGE>
combination of the Software by the Customer or any third party with programs or
software or any parts thereof not furnished to the Customer by R&N. The
provisions of this Section 14 state the entire scope of the liability of R&N
with respect to infringement of the Intellectual Property, and the Customer
hereby expressly waives any other such liabilities.
13. RECRUITMENT.
Each Party agrees not to retain, hire or contract with in any capacity
whatsoever any employee of the other Party for a period of twelve months
following the earlier of the termination of that person's employment with the
other Party or the termination of this Agreement.
14. SURVIVAL.
The obligations and agreements of the Customer and R&N contained in
Sections 5, 7, 8, and 12(b) shall survive the termination of this Agreement for
whatever reason. 15. EVENTS BEYOND CONTROL OF PARTIES.
Notwithstanding any provision to the contrary contained herein, the
failure or delay in performance by either Party shall be excused to the extent
it is caused by an event beyond such Party's reasonable control provided the
Party prevented from or delayed in rendering performance notifies the other
Party and in detail of the commencement and need of such a cause, and provided
further that such Party uses it best efforts to render performance in a timely
manner. The obligation of both Parties to perform under this Agreement shall be
suspended during such event for a maximum period of sixty days. 16. TAXES.
(a) In addition to any other payments required to be paid by the
Customer, the Customer shall pay all tariffs, import duties, license and
registration fees, sales, use, rental, transfer or other taxes, whether federal,
state or local, however designated, and all other assessments which are levied
or imposed by reason of the Services to be provided hereunder, excluding,
however, income taxes which may be levied against R&N. The Customer shall
reimburse R&N for the amount of any such tariffs, import duties and taxes paid
or advanced by R&N as a result of the provision of Services hereunder.
(b) If any withholding taxes are applicable in respect of amounts
payable, the Customer shall remit the applicable amount to the relevant taxing
authorities and shall furnish to R&N information regarding such remittance in
sufficient detail to enable R&N to substantiate any claim for a foreign tax
credit.
17. MISCELLANEOUS.
(a) Notices. Any notices or other communications required or permitted
hereunder shall be in writing and shall be given by personal delivery or by
United States certified mail, return receipt requested, postage prepaid,
addressed to the location stated above or to such other address as either Party
may designate by notice to the other Party. All notices shall be deemed
effective upon the earlier of receipt, seven business days after such notice is
postmarked, or, if delivered personally, upon the date of
<PAGE>
delivery.
(b) Governing Law; Dispute Resolution. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York, without
regard to the conflict of laws principles
thereof.
At the written request of a Party, each Party will appoint a
knowledgeable, responsible representative to meet and negotiate in good faith to
resolve any dispute arising under this Agreement. The Parties intend that these
negotiations be conducted by non-lawyer, business representatives. The location,
format, frequency, duration and conclusion of these discussions shall be left to
the discretion of the representatives. Upon agreement, the representatives may
utilize other alternative dispute resolution procedures such as mediation to
assist in the negotiations. Discussions and correspondence among the
representatives for purposes of these negotiations shall be treated as
confidential information developed for purposes of settlement, exempt from
discovery and production, which shall not be admissible in the arbitration
described below or in any lawsuit without the concurrence of all Parties.
Documents identified in or provided with such communications, which are not
prepared for purposes of the negotiations, are not sot prepared for purposes of
the negotiations, are not so exempted and may, if otherwise admissible, be
admitted in evidence in the arbitration or lawsuit.
If the negotiations do not resolve the dispute within sixty days of the
initial written request, or if neither Party makes such a request within sixty
days of the dispute, the dispute shall be submitted to binding arbitration by a
single arbitrator pursuant to the Commercial Arbitration Rules of the American
Arbitration Association. A Party may demand such arbitration in accordance with
the procedures set out in those rules. Discovery shall be controlled by the
arbitrator and shall be permitted to the extent set out in this Section. Each
Party may submit in writing to a Party, and that Party shall so respond. Each
Party is also entitled to take the oral deposition of one individual of another
Party. Additional discovery may be permitted upon mutual agreement of the
Parties. The arbitration shall be held in Chicago, Illinois. The arbitrator
shall control the scheduling so as to process the matter expeditiously. The
Parties may submit written briefs. The arbitrator shall rule on the dispute by
issuing a written opinion within thirty days after the close of hearings. The
times specified in this Section may be extended upon mutual agreement of the
Parties of by the arbitrator upon a showing of good cause. Judgment upon the
award rendered by the arbitrator may be entered in any court having
jurisdiction.
Each Party shall bear its own costs of these procedures. A Party
seeking discovery shall reimburse the responding Party the costs of production
of documents (to include search time and reproduction costs). The Parties shall
equally split the fees of the arbitration and the arbitrator.
(c) Strict Compliance. The failure by either Party to insist upon the
strict performance of any covenant, agreement, term or condition of this
Agreement, or to exercise any right or remedy consequent upon a breach thereof,
shall not constitute a waiver of any such breach or any subsequent breach of
such covenant, agreement, term or condition. The
<PAGE>
waiver of any breach shall not affect or alter this Agreement, but each and
every covenant, agreement, term and condition of this Agreement shall continue
in full force and effect with respect to any other then existing or subsequent
breach thereof.
(d) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which shall
constitute but one and the same instrument.
(e) Amendments. Neither this Agreement nor any term or provision hereof
may be changed, waived, discharged or terminated, except upon the written
consent of all Parties.
(f) Captions. The captions to this Agreement are for convenience of
reference only and in no way define, limit or describe the scope or intent of
this Agreement or any part hereof, nor in any way affect this Agreement or any
part hereof.
(g) Assignment. This Agreement may not be assigned by the Customer
without the prior written consent of R&N, which R&N may withhold in its sole
discretion. Any attempt by the Customer to assign, transfer or sublicense any of
the Software or any of the rights, duties or obligations under this Agreement in
violation of this Agreement shall be null and void and of no force or effect.
(h) Severability. If any provisions of this Agreement shall for any
reason be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereof, and this Agreement
shall be construed as if such invalid or unenforceable provisions were omitted.
(i) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the Parties hereof, and their respective heirs,
executors, administrators, successors and permitted assigns.
(j) Schedules. The Schedules annexed hereto are incorporated by
reference and made a part hereof:
(k) Entire Agreement. This Agreement, together with all Schedules
hereto and together with any amending correspondence which is executed on behalf
of both Parties, constitutes the entire agreement between the Parties hereto
with respect to the subject matter thereof.
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
Rolfe & Nolan (USA) Inc. Alaron Trading
By:________________________________ By:_____________________________
Name:______________________________ Name:___________________________
Title:_____________________________ Title:__________________________
<PAGE>
SCHEDULE A
RISC SOFTWARE DESCRIPTION
Data Entry Base:
Non-clearing Trade - Full form Ability for User to Define Trade entry
screens Bust/Make-up/Leave Entry & Correction P&S, Commission
Adjustment & Correction Journaling Trade Correction Cash Entry &
Correction Settlement Price Update Worksheet On-line Help Multiple line
trade entry w/duplication
Master File Update:
Commodity Master & Settlement Price
Commodity Master file
All futures world-wide
All world-wide options on futures
Exchange Table for 99 exchanges
Contra Account Table
Settlement Price Master File
Account Master File
8-digit account number 99 currency subledgers Account G/L numbers
segregated/non-segregated
Option Strike File
put/call strike price
expiration date
Multiple Firm Number Table
reports header controls
Calendar
Run-date control
Actual valid trading dates
Future valid trading dates
Valid trading/business date per currency
Automatic generation of last trading
dates/expiration dates etc.
Automatic IPL & session dates Master file defaulting Account -
salesman - location - firm Commodity - exchange
Collateral
Collateral master file
Collateral rate detail file
Automatic Offsetting of positions prioritized for:
Day trades
Overnight trades, spreads
Special makeups bust/leave open Automatic Commissioning:
Unlimited tables
Day/overnight/spread
Opening/half turn/round turn
Formulas by: Commodity/membership/exchange/group
account/salesman/location/firm/global
Reports Base:
Preliminary Listings:
Trades by user
Trades by Commodity Number
Trades by Salesman/Account
Trades by Exchange
Cash & Adjustment Entries
Day Trade Journals in Account sequence Busts & Make-ups Exercises,
Assignments & Expirations Report P&S Recap by Commodity Settlement
Prices Needed Report Delivery Month Position Report Open Position
Report - Detail & Summary P/L Report - Monthly & Yearly Deleted Account
Purge & List - Year End Ledger Recap and Summary Account Statements:
Combined Confirmation, P&S & Open Positions
Cash & Adjustments
Account Balances
Monthly Activity Statement & Open Position Statement
Confirmation messages
Alternate confirmation name/address
Programs & Documentation:
<PAGE>
Object code for all programs, and files RISC User's manual On-line
documentation library using the HELP key
Additional Functions:
Supplementary reports:
Preliminary Listing of trades by selected exchange
Day Trade Journal in Price Sequence
Optional Statements:
Duplicate Statements, Daily & Monthly
Statement messages by firm, branch, A/E, or account
Securities on Deposit for margin tracking: Entry & correction
Preliminary listing of entries Collateral listings of entries
T-bills conversion to cash on maturity
Collateral on account equity report & client statements Interest
Pay/Collect on account Equity Automatic Reversal accounting for P&S and
Busts
A/E Trader reporting:
P/L recap by A/E Trader--daily
P/L & commission recap by A/E Trader--monthly
Commission summary by A/E Trader--monthly Margins:
DAR SPAN) Margining Customer Equity & Margin Status Report Futures
outright and inter-month spreads Inter-commodity, crush spreads with
ratios Options margined at net-short-premium Inter-crop year spreads
Omnibus accounts margined gross Horizontal spreads and Crush spreads
Futures to futures spreads Straddles and Conversions Covered
purchases and writes Vertical spreads and Reverse conversions Mixed
spreads and Butterfly spreads Condor spreads and Box spreads
Margin call reports:
Margin Request Slips
Margin Call & Debit Equity Listing
Margin Call Reduction & Deletions Report
Cross Account Margining for Grouped Accounts
Branch transmissions:
Condensed Equity & Margin status
Preliminary Listing
Capital Computations - FCM Capital Reports:
Capital Requirements List - Month End
Concentration Reports - Weekly
CFTC & Exchange regulatory reporting:
CFTC '01 Report Preparation
<PAGE>
SCHEDULE B
RISC PROCESSING SERVICES
Maintenance of the following files:
Commodity Masters for Futures & Options
Currency Master and Exchange Master
Regulation Code Master and System Calendar Master
Screen & Report Titles Master and Instrument Type Master Opposite
Broker & Opposite Firm Masters for CME & CBOT exchanges Speculative
Limits and Reportable Levels Master files RISC Base Menu and RJS files
Processing of the RISC End of Day job stream which includes:
Spooling of all end of day reports, including customer statements.
These will be held in the spool file, and Customer will be responsible
for releasing and printing.
Creation of a microfiche tape, if service selected
Processing of the RISC Beginning of Day job stream which includes: Preparation
of files for the next business day Starting of file journaling and the
prelim journal job
Creation and Transmission of the following files, if necessary: CFTC 01
reportable file (daily) and CME 25 & Over reportable file (daily)
Equity Wire statements (daily)
Processing of the RISC Month End job stream which includes:
Spooling of all end of day reports, including customer statements.
These will be held in the spool file, and Customer will be responsible
for releasing and printing.
Creation of a microfiche tape, if service selected
Backup of Client's data files as follows:
Daily, before end of day processing with a 5 day rotation Daily, after
end of day processing with a 5 day rotation Monthly, before month end
processing with a 12 month rotation
Processing of the RISC Year End job stream which includes: Printing of all Tefra
year end reports Delivery of yearly reports to Customer's office
Creation of IRS 1099 tape, if necessary Upgrades of RISC application
software and Upgrades of IBM Operating System Software
<PAGE>
SCHEDULE C
Training Services Description
<PAGE>
SCHEDULE D
RISC Processing Services Schedule
R&N Service Bureau operating conditions are listed below.
R&N Service Bureau Service Hours will be from 7:00 am to 9:00 pm Central
Standard Tim on CME/CBT trading days.
Access to the R&N Service Bureau processing service outside of the service hours
stated must be approved by R&N Service Bureau operations.
R&N Service Bureau will, under normal conditions and given Customer's submission
of Customer Information by 7:00 pm CST (submission time), process the Customer's
daily transactions beginning at 9:00 pm CST or earlier when possible. Processing
Service overnight information and reports will generally be delivered by 6:00 am
CST (delivery time). In the event of a unforeseen delay, R&N Service Bureau will
notify Customer and make "best efforts" to achieve a delivery time no later than
8:00 am CST.
RISC documentation will be provided as follows:
1 RISC User Guide - Volumes 2A and 2B
1 RISC Training Manual
1 RISC Reports Guide
<PAGE>
SCHEDULE E
RISC Processing Services
R&N Service Bureau Responsibilities:
The hardware, equipment and supplies provided by R&N Service Bureau are listed
below. Any other hardware, equipment or supplies not listed will be the
responsibility of the customer.
R&N Service Bureau data center will provide the Customer with floor space,
electrical power, and operations support necessary to provide the processing
services as specified in Schedule B.
R&N will provide a printer at the R&N Service Bureau data center for printing
Customer's batch processing reports. R&N will provide a workstation at the R&N
Service Bureau data center for R7N Service Bureau operations and staff to
process the Customer's data. An alternate R&N Service Bureau System at the R&N
Service Bureau data center will be available as a backup should there be a
hardware problem on the primary production system, Provided Customer executes a
separate Disaster Recovery agreement.
As a daily print report alternative, R&N Service Bureau will use one part, green
bar printer paper for printing batch processing reports and three part statement
forms for daily and monthly statements. Customer agrees to reimburse R&N Service
Bureau for the actual cost plus 20% of all paper that R&N Service Bureau uses to
print the Customer's reports.
R&N will assist Customer personnel in starting sufficient parallel operation.
Customer is responsible for continuation of parallel operations, and insuring
that data and information is accurate.
R&N Service Bureau will provide support for non-standard requests, provided that
Customer agree to pay for such requests on a time and materials basis, and the
request is approved by R&N.
Customer Responsibilities:
The hardware, equipment and supplies that are the responsibility of the client
are listed below. Other items may be necessary to satisfy the client's
processing needs.
Leased (or Dial-up) telephone lines as follows: Between Customer's back office
and R&N Service Bureau data center Between R&N Service Bureau data center and
exchange cleared, if necessary Backup dial lines for fall back should a leased
line fail
Modems with dial backup for the leased telephone lines as follows: Two 28,800
baud modems for the back office leased line.
An IBM 5394 or equivalent remote controller for each of the back office's leased
lines.
Any workstations and printers necessary for the Customer's back office daily
processing functions. R&N suggests at least 2 workstations and a 600 line per
minute printer at each back office location.
Customer will provide any preprinted or custom forms for use with the RISC
Software application.
Unless the print report alternative, as stated in Schedule E is requested, the
Customer will print all reports at the Customer location on a Customer-owned
printer. Customer is responsible for maintaining an adequate supply of stock
forms in each office location to accommodate processing and printing
requirements.
<PAGE>
SCHEDULE F
Processing Service - Client Operations Responsibilities
The operational responsibilities of a R&N RISC Service Bureau Customer include,
but are not limited to, the following functions:
Maintenance of all master files that are not maintained by R&N. This includes,
but is not limited to, the following files:
Account, Salesman, Location, Firm and Company master files Commission,
fee and interest rates and their usage Carrying Broker, Margin Grouping
and Omnibus relationship files Confirm Message Text and Compliance
Document master files Prelim master and item files Transmission and
Print Routing master files Span scale up files Floor Broker master
Entry of daily transactions which include:
Trade entry and correction Cash and adjustment entry and correction
Collateral entry and correction Special makeups and P&S reinstates
Deliveries, exercise and assignments
Generation and printing of the following reports:
Intra-day prelims of trades, cash, etc.
Interest calculation report and posting
Generation and transmission of the required exchange files
<PAGE>
SCHEDULE G
<TABLE>
<CAPTION>
Processing, Installation, and Miscellaneous Fees
1. Processing Service Fees
Activity Processing Fees
<S> <C>
Transactions $ 0.075 each
Positions $0.03 each
Daily Customer Statements: $ included
Monthly Customer Statements: $ included
TIF Base and 1 (one) TIF Facility $ included
CFTC Reporting $ included
Large Trader Reporting $ included
SPAN and Settlement Prices (US Markets only) $ 500.00 per month
RANrec (1 methods) $ included
Functional Facilities Fees
Clearing Interfaces (CBT, CME, NY, Montreal etc.) $400.00 per month
Realtime Price Inquiry Module (excludes market price feed) $700.00 per
month
Canadian Regulatory Reporting $300.00 per month
General Ledger Interface $250.00 per month
Trade Import Base Module (TIF) $300.00 per month
Trade Import Facility $200.00 per month
Trade Export Base Module (TEF) $300.00 per month
Trade Export Facility $200.00 per month
Data Export Base Module $300.00 per month
Data Export Facility $300.00 per month
Large Trader Reporting and Transmission $200.00 per month
Japanese Market Requirements $550.00 per month
Flex Options $550.00 per month
Foreign Exchange $550.00 per month
Additional Services Fees
One Communications Port $150.00 per month
Speedscan File Export & Disk Archiving
(Monthly Reports/Files) $.05 per page
(one time set-up charge $1200)
Equity Wire Transmission Services per minute charge
Settlement Prices $100.00 per exchange
<PAGE>
SPAN Files $100.00 per exchange
RANrec (3 methods) $250.00 per month
RANwindows $300.00 per month
Disaster Recovery Services Based on users reqmts
Customization Services Standard R&N
Additional User Training time & material rates
Consulting Services time & material rates
Hardware and Communications Billed at cost
2. Minimum Monthly Charge
For Activity Processing and Required Facilities $4,000.00
</TABLE>
3. Fee Schedule at Renewal
No less than three months prior to the last date upon which the
Customer may provide notice of termination of this Agreement, R&N shall
provide the Customer with a revised Processing Fee Schedule applicable
to the next renewal term, if any. Such revised Processing Fee Schedule
may be increased by R&N up to R&N's then-prevailing price as set forth
on its published price lists.
4. Installation Fee
There will be an initial installation fee for the processing service
and Software described in Schedule A and B. The fee will be $15,000 and
encompass project planning, R&N project management, installation
support, conversion activities and system training). Custom
Modifications and expenses related to the implementation of any future
modules or hardware upgrades require payment of additional fees and
will be billed separately.
Payment of Processing Fees
The Processing and Installation Fees for the initial Term shall be
payable in accordance with the following schedule:
the Installation Fee shall be payable upon execution of this Agreement;
Processing Fees shall be payable monthly based upon the actual usage
incurred during the
prior month
Additional Services
This Agreement excludes the provision of settlement prices and SPAN
arrays. A monthly fee will be assessed for the prices and SPAN arrays
associated with each individual exchange. Additional services which may
also be required, but not exclusively limited to, include Disaster
Recovery Service and Real Time Price Feed, and shall require payment of
additional fees and will be billed separately.
All communication line costs are the rsponsibility of the Customer.
This includes, but is not limited to, Easylink and Graphnet
transmission charges.
Any charges as a result of using third-party vendors to perform
processing services for the Customer will be the responsibility of the
Customer. This includes, but is not limited to, such services as
creating microfiche and delivering statements to customers
electronically.
<PAGE>
SCHEDULE H
CUSTOMIZATION REQUEST
Date:
Requested Functionality:
Specifications:
Programs Affected:
The Customer agrees to pay to R&N a preliminary estimate fee in the amount of
___________.
The charges estimated for the above-requested modifications are _______________.
The Customer
By:___________________________
Name:
Title:
<PAGE>
SCHEDULE I
Installation Plan
EXHIBIT 10.16
ALARON TRADING CORPORATION
GUARANTEED INTRODUCING BROKER AGREEMENT
This Guaranteed Introducing Broker Agreement (the "Agreement") is made and
entered into as of this _________ day of _________________, 199___ by and
between Alaron Trading Corporation ("Alaron"), an Illinois Corporation, and
______________________________________, a/an _____________________________
corporation/partnership/sole proprietorship ("IB").
RECITALS:
A. IB desires to introduce accounts ("Accounts") on behalf of its clients to
Alaron on a fully disclosed basis and to obtain from Alaron services relating to
transactions in commodities, contracts for the future delivery of commodities,
and options thereon (collectively referred to as "futures contracts") for the
Accounts.
B. Alaron is registered under the Commodity Exchange Act, as amended (the "Act")
with the Commodity Futures Trading Commission ("CFTC") as a Futures Commission
Merchant and is a member of National Futures Association ("NFA").
Now Therefore, for and in consideration of the promises and mutual agreements
set forth herein, the parties agree as follows:
1. Services Provided By Alaron With Respect To Accounts
(a) Alaron shall maintain the Accounts on a fully disclosed basis in accordance
with the applicable laws and rules of the CFTC and other self-regulatory
organizations of which it is a member. Alaron reserves the right to refuse to
carry any Account for any or no reason.
(b) Alaron will receive and place orders for the Accounts in accordance to
instructions transmitted by IB, but only insofar as such orders are transmitted
by IB to Alaron. Alaron may, but shall not be obligated to, place orders
received directly from a Customer. Alaron reserves the right to refuse to accept
new orders for Accounts and to require all trades be only for the liquidation of
open futures contracts carried by Alaron for IB's Accounts.
(c) Alaron will prepare and transmit to the Customer reports of execution,
margin calls, monthly statements, and other such documents as may be required by
the CFTC or any self-regulatory organization or contract market. Alaron will
provide for IB copies of such statements transmitted to Customers.
(d) Alaron will hold cash, securities, and other property received from or on
behalf of Customers in segregation in accordance with the Act and the
regulations of the CFTC. Alaron shall not be obligated to pay interest on such
cash and securities held for Customers.
(e) Alaron will perform all cashiering functions for the Accounts including,
without limitation, receipt and delivery of warehouse receipts or commodities,
making and receiving payments for futures contract transactions and
transmissions of margin calls.
(f) Alaron will maintain all original Account related documents and agreements,
it being understood that copies of all such documents shall be maintained by IB.
All account forms shall be deemed to be property of Alaron and will not
<PAGE>
be assigned to IB unless agreed to in writing.
(g) Alaron will use its best effort to provide in a timely manner to IB a daily
account status report that includes trade confirmations, open positions, account
balances, commission charges, margin call information, and account equity totals
for IB's Customers.
2. Services Not Performed By Alaron
Alaron will not perform any of the following services or functions:
(a) Preparation of IB's general accounting and payroll records, financial
statements, or regulatory reports.
(b) Payment of IB's general business expenses, except as incurred on IB's behalf
under this agreement.
(c) Payment of commissions to IB's Associated Persons
(d) Verification of information or instructions provided to Alaron by IB or by
Customers. IB acknowledges that Alaron shall be entitled to rely upon such
information or instructions which Alaron believes to be correct and bona fide.
(e) Alaron will not be required to make any investigations into the facts
surrounding any transactions that it may have with IB or that IB may have with
its customers or other persons, nor will Alaron be responsible for compliance by
IB with any laws, rules or regulations which may be applicable to IB.
3. Obligations of Introducing Broker
(a) IB shall have the responsibility for diligently supervising the opening of
Accounts, for the entry of orders in Accounts, and for assuring that
transactions and orders in the Accounts are in accordance with all applicable
laws and the rules of the CFTC, any contract market or self-regulatory
organization and Alaron. IB will maintain compliance and supervisory procedures
which are adequate to assure compliance by IB and its associated persons and
employees with all laws and regulations and self-regulatory organization rules
to which IB is subject. Without limiting the generality of the foregoing, such
compliance and supervisory procedures shall cover opening, approving and
monitoring of Accounts, including review of all types of Accounts and orders;
supervision of all trading advice and recommendations provided to customers;
screening and registration of Associated Persons as required by the CFTC and
applicable self-regulatory organizations; listing of branch office(s), if any,
and registration of branch office managers as required by the CFTC and
applicable self-regulatory organizations; on-site inspections of branch
office(s) as required by the CFTC and applicable self-regulatory organizations;
performing self-audits of IB and its branch office(s) as required by the CFTC
and applicable self-regulatory organizations; and supervision of special
Accounts such as discretionary accounts, commodity pool accounts (both exempt
and non-exempt), option accounts, employee accounts, and accounts for employees
or officer of futures commission merchants, other introducing brokers,
securities firms, self-regulatory organizations and other financial
institutions.
(b) IB shall learn all essential facts relative to each Account and to every
Customer. Each new Account created for a Customer will be approved in writing by
a principal of the IB.
(c) Prior to the opening of any Account, IB agrees to cause all Customers to
execute appropriate customer documents on such forms as shall be provided by
Alaron to IB. IB will furnish Alaron with all necessary and pertinent
information and account agreements with respect to each Account. Without
limiting the generality of the foregoing, IB agrees to furnish Alaron with; (1)
the name, age, address, current estimated annual income & net worth, principal
occupation or business of the beneficial owner of the Account, the previous
investments and futures trading experience of the beneficial owner of the
Account, the name and address of any other person guaranteeing an Account or
exercising any trading control with respect thereto, or who is otherwise
responsible for directing the trading in the Account, and the name and address
of any other person directly or indirectly having any interest in an Account and
if options are traded, the names of the appropriate CFTC occupational code; (2)
a signed copy of all written agreements with respect to an Account; (3) a copy
of all account cards or records relating to the opening and maintenance of each
Account; (4) a signed copy of a customer account agreement and such other
agreements as may be prescribed by
<PAGE>
Alaron with respect to each Account; (5) a signed copy of any guarantee of any
Account; (6) a signed copy of any power-of-attorney with respect to any Account;
(7) evidence of the authority of the person or persons authorized to transact
business for any Account of the genuineness of all certificates and other
documents pertaining to the Account, all in such form as may be prescribed by
Alaron; (8) a signed acknowledgment of receipt of each risk disclosure
statements or disclosure document required by CFTC regulations; and (9) such
other information as may be required by the Securities and Exchange Commission
("SEC"), the CFTC, a contract market or self-regulatory organization, or Alaron.
IB further agrees that it will not use any document or agreement in connection
with the opening or maintenance of an Account that has not been supplied or
approved by Alaron.
(d) Alaron may from time to time establish margin requirements that exceed the
minimum requirements established by various contract markets or exchanges, the
clearing organizations affiliated herewith, or such other governmental authority
empowered to establish margin requirements. Both Alaron and IB will agree that
they will require that customers deposit the higher of the margin requirements
determined by either of the various contract markets or exchanges, the clearing
organizations affiliated herewith, or such other governmental authority, or
Alaron. IB will promptly communicate to its Customer any margin calls initiated
by Alaron and use its best efforts to ensure prompt payment of margin
requirements. IB will apprise its Customers of the risks of trading futures
contracts and of changes of Alaron margin policies.
(e) IB will abide by procedures and regulations established by the CFTC, NFA,
any self-regulatory organization, and Alaron with respect to the transmission of
orders. Without limiting the generality of the foregoing, IB agrees not to
accept or transmit an order from a Customer unless immediately upon receipt
thereof, a written, pre-numbered record of such order is prepared, including the
Account identification and other number, and IB records on such order by
time-stamp the date and time (to the nearest minute) the order is received, when
it is transmitted to Alaron, when it is confirmed by Alaron, when it is
confirmed to the Customer, and, if an order is an option order, disclosure of
all premiums, costs, fees, and other charges, if any, associated with the option
order.
(f) IB agrees that it will not accept or hold in its name any money, securities,
or property (or extend credit in lieu thereof) to margin, guarantee or secure
any trades, contracts or positions effected or carried in any Account. All such
money , securities and property shall be received on behalf of Alaron and in
Alaron's name and shall be immediately transmitted to Alaron or, at the election
and direction of Alaron, deposited in such bank account or accounts designated
by Alaron.
(g) IB will be responsible for determining the authenticity, accuracy, and
genuineness of all orders, instructions, certificates, papers and signatures
received with respect to an account.
(h) IB will be responsible for handling all customer inquiries and complaints
relating to the Accounts and shall notify Alaron and receive Alaron's
cooperation with respect to inquiries and complaints. IB shall (1) maintain a
log of all complaints from Customers (whether oral or written) concerning the
handling of their Accounts which shall include (a) the date the complaint was
received; (b) the Associated Person who services the Account; (c) a general
description of the matter complained of, and (d) the action taken, if any, by IB
in regard to complaint; (2) report to Alaron all written of oral complaints
within twenty-four (24) hours from receipt or notice of the complaint. Such
report shall be documented on the Customer Complaint forms supplied to IB from
Alaron. All completed Customer Complaint forms shall be maintained in IB's files
for a period of at least five (5) years from the date of the complaint. (3) IB
will immediately report and forward to Alaron within twenty-four (24) hours any
notice of any action, claim or proceeding against or involving IB. IB will make
available to Alaron, for inspection and review all Customer Complaints on file,
at Alaron's request.
(i) IB shall screen, register and maintain or cause to be maintained in full
force and effect pursuant to Section 4k of the Act and applicable regulations of
the CFTC the registration of any natural person employed by or associated with
it as an "associated person" (as the term is interpreted by the CFTC) and IB
agrees that it shall no allow any natural person employed by or associated with
it to serve as an associated person unless such person is currently and validly
registered as an associated person and is an associate member of NFA. IB shall
diligently supervise the activities of its associated persons.
(j) Subject to Alaron's prior approval, IB may establish a branch office
supervised by an on-site branch office manager and which meets the requirements
of the CFTC and any self-regulatory organization.
(k) IB shall routinely perform on-site inspections of each branch office to
ensure that records are maintained in accordance with all appropriate laws,
rules and regulations and to ensure compliance by each branch office, the
designated branch office manager and all associated persons and employees
located within such branch office with all
<PAGE>
appropriate laws, rules and regulations.
(l) IB shall not permit any of its associated persons or any other persons to
exercise any discretionary authority with respect to any transaction in an
Account unless its associated person has been continuously registered for two
years and it has obtained (in a form approved by Alaron) a signed copy of the
power-of-attorney authorization, or other document by which such power is given
and a signed copy of such further documents as Alaron, a contract market, or any
other self-regulatory organization shall require. IB shall diligently supervise
an Account over which discretionary authority is granted and shall maintain a
written record that such supervision was performed. IB shall be responsible for
maintaining compliance with NFA Bylaw 1101 for all Customers and Accounts which
IB introduces to Alaron.
(m) IB shall perform self-audits of its main office and shall require every
branch office manager to perform branch self-audits as required by the CFTC and
any self-regulatory organization.
(n) IB shall not guarantee any Customer against loss or a margin call in an
Account or in respect of any transaction affected with or for such Customer. Any
debit incurred in a Customer Account shall be paid for from funds withheld from
commissions payable to IB.
(o) IB shall assure that each Customer complies with all applicable position
limits established by the CFTC or a contract market and shall not permit any
transaction to be effected in an Account in violation of such limits. IB shall
promptly report to Alaron any Customer who exceeds any applicable limit.
(p) IB shall make no report or statement (whether orally or in writing) to any
Customer with respect to any transaction, position, or other matter relating to
a Customer's Account that is not in conformity with statements, reports, and
information furnished by Alaron pursuant to this agreement.
(q) It shall be the sole obligation of the IB to check-out with Alaron each
day's business in the afternoon for accuracy and completeness. Concurrence
between IB and Alaron will be binding, except that Alaron shall have the right
to amend, add, or cancel any trade before the opening of the next succeeding
business day if floor and clearing house clearance reports properly support such
action. Any such amendment, addition, addition or cancellation will be reported
to IB prior to the opening on such succeeding business day. IB agrees that its
failure to respond immediately shall be deemed an acceptance of the change.
Notwithstanding the foregoing, a price change may be reported at any time, and
it must be accepted by IB.
(r) IB shall promptly report to Alaron any special calls for information made
upon its Customers by the CFTC or any contract market or self-regulatory
organization and shall refrain from soliciting or accepting any orders for any
Customer who is in violation of such special calls.
(s) IB shall not carry any proprietary Account (as that term is defined by the
CFTC respecting introduced brokers) or accounts in foreign futures contracts,
nor shall IB permit any of its associated persons to solicit or accept orders
for such accounts.
(t) IB will assure that all activity with respect to the solicitation and
acceptance of orders for options traded on any contract market is in compliance
with all applicable laws and rules of the CFTC and any other contract market or
self-regulatory organization.
(u) IB shall not issue any advertisement, market letter, or sales literature
without the prior written consent of Alaron. IB shall at all times maintain
compliance with CFTC, NFA, any self-regulatory organization, or Alaron's
policies concerning advertising, promotional material and communications with
the public.
4. Disclosure to Customers
IB will be responsible for informing its Customers of the nature of the
relationship between Alaron and the IB. Alaron may transmit to each Customer for
whom IB opens an Account an IB disclosure statement. IB and its associated
persons and employees will not make any representations to Customers regarding
Alaron that are inconsistent with such disclosure statement.
5. Access to Information; Financial Reports
(a) IB will make available its books and reports to reasonable inspection at all
times by duly authorized representatives of Alaron or any contract market or
clearing corporation through which trades for Customers are executed or cleared.
<PAGE>
(b) IB will provide to Alaron, in a timely manner, financial statements and
interim financial information as Alaron may reasonably request.
(c) IB will, upon request, provide Alaron with any information in IB's
possession with respect to any Customer.
(d) Subject to Section 1(g), IB shall keep and maintain all records and shall
file all required reports and notices pursuant to applicable laws, rules and
regulations.
(e) IB shall submit to Alaron copies of all registration documents filed with
NFA, including, but not limited to, CFTC Forms 7-R, 8-R, 8-T, 3-R and each
annual 7-R update in a timely manner.
(f) IB shall submit to Alaron copies of all main and branch office self-audit
checklists in a timely manner.
6. Communications Facilities and Systems
In conjunction with services provided by Alaron with respect to IB, Customers,
and Accounts under this agreement, Alaron, in it sole discretion and judgment,
may utilize and make available to IB, Customers, and Accounts, directly or
indirectly, in whole or in part, certain voice and/or data communications
facilities and systems, including, but not limited to, computer, electronic and
satellite-based communications facilities and systems, such as GLOBEX or ACCESS,
hereinafter collectively referred to as "Systems."
7. Confidentiality
(a) Alaron will exercise reasonable care to prevent access to information
regarding IB or Customers by unauthorized persons and will keep confidential any
information it has concerning the business of IB. Notwithstanding the foregoing,
Alaron shall be held harmless for complying with any request for information, or
documents by the CFTC, SEC, any contract market or other self-regulatory
organization, or any court order or other legal process which Alaron believes to
be valid and effective.
(b) IB will keep confidential any information it acquires regarding Alaron and
its business pursuant to its relationship with Alaron. IB shall be held harmless
for complying with any request for information or documents by the CFTC, SEC,
any contract market or other self-regulatory organization, or any court order or
other legal process which IB believes to be valid and effective.
8. Indemnification
(a) IB will fully indemnify, protect and hold harmless Alaron, its officers,
shareholders, employees and agents and each person, if any, controlling Alaron,
from and against all manner of claims, demands, proceedings, suits or actions
(whether in law or in equity) and liabilities, losses expenses and costs
(including attorney's fees) relating to (1) Alaron's compliance with any
instruction or order received from any Customer or IB with respect to any
Account, (2) IB or any Customer's failure to meet any initial or maintenance
margin call or to pay any amount due to Alaron, (3) IB's failure to perform its
obligations hereunder or under any other agreement with Alaron, (4) any
Customer's institution of a claim, suit, action, arbitration or other proceeding
against Alaron for any reason or the CFTC or any other governmental or
self-regulatory organization's institution of a claim, suit, action, or other
proceeding against Alaron relating to this Agreement or any Account or Customer,
(5) any omissions, inaccuracies, delays in transmission, delivery, receipt or
execution of futures orders or other reports due to malfunctions of Systems or
other causes, or (6) any damage, loss, liability, expense or cost (including
attorney's fees) arising from, pursuant to, or in fulfillment of, Alaron's
obligations under its Guarantee Agreement with IB; provided, however, that
Alaron shall not be entitled to indemnity in any such matter if Alaron is found
to have acted with gross negligence in the performance of its services under
this agreement.
(b) Alaron shall have the exclusive right to defend, settle or compromise any
claim or demand instituted by a Customer or other third party in any judicial,
administrative, regulatory, or self-regulatory or other proceeding against
Alaron or against Alaron and IB arising out of or in respect to any Customer
account or performance by IB or IB's duties hereunder regardless of whether (1)
any such claim or demand gives or may give rise to a right of indemnification
from IB to Alaron hereunder or (2) Alaron has exercised its right to offset
pursuant to paragraph (d) below. IB hereby waives any and all rights IB may have
independently to defend, settle or compromise any such of the foregoing claims
or demands and agrees to cooperate to the best of its ability with Alaron with
respect thereto, but Alaron may, in its sole discretions, authorize and require
IB to defend, settle or compromise any such claim or defend as it deems to be
appropriate at the cost, expense and liability of the IB.
<PAGE>
(c) Alaron shall have the exclusive right to commence and maintain any action
pursuant to the Act, the rules and regulations of the CFTC, NFA or any other
regulatory or self-regulatory organizations, against any Customer or other third
party for any claim or demand which Alaron, or Alaron and IB jointly, may have
at any time arising out of or in respect to any Customer account or the
performance by IB of IB's duties hereunder ("Claim"), regardless of whether (1)
any such claim gives or may give rise to a right of indemnification from IB to
Alaron, or (2) Alaron has exercised its right of offset pursuant to paragraph
(d) below. IB hereby waives any and all rights IB may have independently to
assert, settle or compromise any such action on respect to such Claims and
agrees to cooperate to the best of IB's ability with Alaron with respect to the
bringing, enforcement and collection of any such Claims, but Alaron may, in its
sole discretion, authorize and require IB to commence and maintain such actions
in respect of any such claim it deems to be appropriate at IB's cost and
expense; provided, however, Alaron may not assert its rights under this section
if IB has paid to Alaron the full amount of any Claim, or has otherwise provided
for the payment of such claim in a manner acceptable to Alaron.
(d) IB shall deposit with Alaron such amounts as Alaron shall reasonably require
from time to time ("Security Deposit") to insure performance by IB of its
obligations hereunder. During and after the term of this Agreement, if Alaron
determines, in its sole discretion, that it is entitled to payment for amounts
due hereunder or under any Personal Guarantee, including but not limited to such
amounts as Alaron may determine are due under Section 8 hereof, Alaron may
deduct all such amounts from the Security Deposit or any other amounts held for
IB's benefit or due and owing IB hereunder. Following termination of this
Agreement and after deducting such amounts as Alaron deems appropriate in
accordance with the foregoing, Alaron shall return the balance of the Security
Deposit, including all interest earned thereon, to IB. Alaron shall be entitled
to collect any amount owed to it hereunder by means which shall include but not
be limited to charging any house account or any proprietary account of IB or
offsetting any amount owed to IB by Alaron. Alaron is authorized to transfer,
use, apply, sell, rehypothecate or draw upon as the case may be, all or any
portion of the funds, securities, or property in any house account owed to it
under this agreement. IB further agrees that, if any person or entity has
instituted a claim, suit, action, arbitration or other proceeding, or has
threatened to do , against Alaron which reasonably could expose Alaron to any
potential liability, loss, cost, or expense which is the obligation of the IB or
hereunder, Alaron is authorized to withhold a reasonable amount under the
circumstances of any such claim from any amounts owed to IB or from any other
funds, securities, or other property owned by IB on deposit with Alaron.
Provided, however, Alaron shall not be authorized to withhold any amount from
other funds, securities, or other property owned by IB on deposit with Alaron
except to the extent the amount owed or owing to Alaron hereunder exceeds the
amount owed or owing to IB by Alaron.
9. Compensation
IB shall have the sole right to establish reasonable commissions to be paid by
Customers and Alaron shall collect all commissions paid on transactions executed
for Customers. Alaron will pay all such commissions, less appropriate
deductions, as mutually agreed to between Alaron and IB.
10. Exclusive Services
Except as expressly permitted by Alaron, during the term of this Agreement, IB
may not utilize the services of any futures commission merchant other than
Alaron to effect transactions in futures contracts for Customers and for the
account of IB or its principal(s). IB shall have all such orders for Customers,
IB or its principal(s) executed only on a fully disclosed basis through Alaron,
unless Alaron shall have consented in writing to the use of another futures
commission merchant.
11. Representations and Warranties
(a) IB represents and warrants as follows:
(1) IB is now, and during the term of this Agreement will remain, duly
registered as an Introducing Broker with the CFTC and is now, and during the
term of this Agreement will remain, a member in good standing of the NFA.
(2) IB has all requisite authority, whether arising under applicable federal or
state laws and regulations or the rules and regulations of any contract market
or other self-regulatory organization to which IB is subject, to enter into this
Agreement and to retain the services of Alaron in accordance with the terms
hereof.
(3) IB is now, and during the term of the Agreement will remain, in compliance
with all the applicable requirements of the CFTC and each contract market or
other self-regulatory organization of which it is a member.
<PAGE>
(b) Alaron represents and warrants as follows:
(1) Alaron is now, and during the term of this Agreement will remain a member in
good standing of the NFA and is now, and during the term of this Agreement will
remain, duly registered as a futures commission merchant with the CFTC.
(2) Alaron has all requisite authority, whether arising under applicable federal
or state laws and rules and regulations or the rules and regulations of any
contract market or other self-regulatory organization to which IB is subject, to
enter into this Agreement
12. Termination
(a) This Agreement is binding and shall remain in effect for a minimum of 12
months. Thereafter, this agreement may be terminated by either party without
cause upon thirty (30) days written notice. The Guarantee Agreement of Alaron
relating to IB may be terminated at any time for such good cause as shall be
determined in the sole judgment of Alaron
(b) Notwithstanding paragraph (a) above, this Agreement may be terminated
immediately by either party if any representations or warranties cease to be
true or if any duties, responsibilities or obligations are not duly performed
during the term hereof. Should either party choose not to exercise its right to
terminate this Agreement when such right is first available, such action shall
not be deemed a waiver of such right if available on a subsequent occasion and
the non-terminating party's legal or equitable remedies for any breach of this
Agreement will remain in full force and effect.
(c) Upon termination of this Agreement, IB shall promptly make arrangements to
transfer the Accounts to another futures commission merchant. The
indemnification obligations of the IB under Section 8 shall survive any
termination of this Agreement.
13. Reserves
ATC shall have the right but not the obligation to require each GIB to establish
a reserve to satisfy the obligations set forth in this agreement at any time
during the life of this agreement. The reserve shall consist of either an
initial deposit, a fixed amount per trade, a percentage of commissions, or some
combination of all three.
14. Notices
For the purposes of delivery of any notice hereunder, the address of Alaron and
IB, respectively, shall be set forth below. Either party may change its address
for notice purposes by giving written notice of the new address to the other
party.
15. Miscellaneous
(a) This Agreement shall be governed by the laws of the State of Illinois. All
disputes, claims, actions, or proceedings arising directly or indirectly from or
in connection with this Agreement shall be litigated only in courts whose situs
is within the State of Illinois and IB hereby unconditionally submits to the
jurisdiction of the United States District Court of the Northern District of
Illinois, Eastern Division, appoints and designates Alaron as IB's duly
authorized agent for service of legal process, waives any right to jury trial,
and waives any right to transfer or change the venue of any litigation of other
formal action brought against IB by Alaron.
(b) As provided herein, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns. No
assignment by IB of this Agreement shall be valid unless Alaron shall have
consented to such assignment in writing. Alaron may assign its rights under this
Agreement and such assignment shall not require the consent of the IB. IB hereby
agrees and acknowledges that any assignment of this Agreement by Alaron shall
include, in all respects, the assignment of all other agreements between IB and
Alaron. No amendment to this Agreement shall be valid unless the other party
consents to such amendment in writing. Neither this Agreement nor the
performance of the services by Alaron hereunder shall be construed to create a
joint venture, partnership, or agency relationship between Alaron or IB.
(c) IB acknowledges and agrees that all conversations between IB and Alaron may
be recorded and that such recordings may not carry a tone indicating that a
conversation is being recorded. IB irrevocably consents to such recording and
waives any right to object to use by Alaron of any such recording in any
proceeding or as Alaron may
<PAGE>
otherwise deem appropriate.
(d) This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original but all of which together shall constitute one
instrument.
(e) If any part, term or provision of this Agreement is held to be illegal or in
conflict with the law of any state or any other law, the validity of the
remaining portions or provisions shall not be affected, and the rights and the
obligations of the parties shall be construed and enforced as if this Agreement
did not contain the particular part, term or provision held to be invalid.
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be
executed by their duly authorized representatives as of the day and year set
forth above.
INTRODUCING BROKER FUTURES COMMISSION MERCHANT
___________________________ Alaron Trading Corporation
(Firm Name)
By: ________________________ ___________________________________
(Signature) Steven A. Greenberg, President
822 W. Washington Blvd.
___________________________ Chicago, IL 60607
(Print Name)
___________________________
(Address)
___________________________
<PAGE>
PERSONAL GUARANTEE
In order to induce Alaron Trading Corporation (?Alaron?) to enter into the
Guaranteed Introducing Broker Agreement (the ?Agreement?), to which this
guarantee is attached, with ___________________________ (?IB?), and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned hereby, jointly and severally in the case of
multiple guarantors, personally and unconditionally guarantees the prompt, full
and complete performance of any and all covenants and agreements of IB to Alaron
and the payment of any and all indebtedness , damages, costs and expenses
(including attorney?s fees) owed to or which may become due to Alaron by IB of
any and all indebtedness , damages, costs and expenses (including attorney?s
fees) arising out of or relating to the business of the IB.
This guarantee shall remain in full force and effect until the termination of
the Agreement; provided, however, that the undersigned shall not be released
from his obligations hereunder so long as any claim of Alaron against IB which
arises out of, or relates to, directly or indirectly, the Agreement, is not
settled to the satisfaction of Alaron or discharged in full.
The undersigned hereby expressly waives (a) notice of acceptance of this
guarantee by Alaron, (b) notice of any default or non-performance of IB under
Agreement, ? notice of any modification to the Agreement, or extension of time
granted to IB, (d) notice of any assignment by Alaron of the Agreement, (e)
notice by Alaron of acceptance of an assignment of the Agreement by IB, and (f)
all defenses, offsets and counter claims which the undersigned may at any time
have to any claim of Alaron against IB. The undersigned expressly acknowledges
that assignment, amendment or modification of the Agreement or the renewal,
extension, forbearance in collection or forgiveness, of any indebtedness of IB
or the release, modification, extension or any other change with respect to any
other guarantor of the obligations hereunder or related obligations shall not in
any manner release, affect or impair his liability under this guarantee. The
undersigned further agrees that no invalidity of the Agreement, shall affect or
impair his liability under this guarantee.
Alaron may, in its discretion, proceed against the undersigned, jointly and
severally in the case of multiple guarantors, to collect any obligation covered
by this guarantee without first proceeding against IB. Upon five day?s written
notice by Alaron, the undersigned shall pay any and all indebtedness, damages,
costs and expenses due Alaron by IB and shall perform any and all duties and
obligations of IB by Alaron.
This guarantee shall be construed pursuant to the laws of the State of Illinois,
shall inure to the benefit of Alaron, its successors and assigns, and shall be
binding on the undersigned, his heirs and assigns.
Any notice to be given to the undersigned may be sent to the address provided
below, and all communications so sent, whether by mail, telegraph, messenger or
otherwise, shall be deemed duly given to the undersigned personally, whether or
not actually received. Notices sent by mail shall be deemed duly given on the
business day immediately following the date of mailing.
All disputes, claims, actions or proceedings arising directly or indirectly from
or in connection with this guarantee shall be liquidated at the direction of
Alaron, only in courts whose situs is within the State of Illinois, and the
undersigned hereby submits to the jurisdiction of the courts of the State of
Illinois and the jurisdiction of the United States District Court of the
Northern District of Illinois, Eastern Division, appoints and designates Alaron
(or any other party whom Alaron may from time to time hereinafter designate) as
the undersigned?s true and lawful attorney-in-fact and duly authorized agent for
service of legal process, and agrees that service of such process upon such
other party shall constitute personal service of such process upon the
undersigned; provided that Alaron or such other party shall, within five days
after receipt of any such process, forward the same by registered or certified
mail to the address provided below. The undersigned waives any right which he
may have to transfer or change the venue of any litigation or formal action
brought against the undersigned by Alaron and any right to a jury trial. All
pronouns shall be deemed to refer to the masculine or feminine, as the identity
of the person may require, and the singular shall import the plural in the
context of this guarantee.
- --------------------------------- ----------------------------------
(Principal of IB, Individually, (Principal of IB, Individually,
as Guarantor) as Guarantor)
(Signature) (Signature)
- --------------------------------- -----------------------------------
(Please Print Name) (Please Print Name)
- --------------------------------- -----------------------------------
(Address) (Address)
- --------------------------------- -----------------------------------
<PAGE>
CFTC FORM 1-FR-IB (PART B)
In consideration for the introduction of commodity customer, option customer,
foreign futures customer and foreign options customer accounts by
_______________________________________________, an introducing broker, to
Alaron Trading Corporation, a futures commission merchant registered with the
Commission as such, and in satisfaction of the adjusted net capital requirements
with which the introducing broker otherwise would have to comply pursuant to
Commission Regulation 1.17, 17 C.F.R. 1.17, the futures commission merchant
guarantees performance by the introducing broker of, and shall be jointly and
severally liable for, all obligations of the introducing broker under the
Commodity Exchange Act, as it may be amended from time to time, and the rules,
regulations and orders which have been or may be promulgated thereunder with
respect to the solicitation of and transactions involving all commodity
customer, option customer, foreign futures customer and foreign options customer
accounts of the introducing broker entered into on or after the effective date
of this agreement. This guarantee agreement shall be enforceable regardless of
the subsequent incorporation, merger, consolidation of either the futures
commission merchant or the introducing broker, or any change in the composition,
nature, personnel or location of the futures commission merchant or the
introducing broker. For purposes of this agreement only, the futures commission
merchant shall be deemed to be the agent of the introducing broker upon whom
process may be served in any action or proceeding against the introducing broker
under the Commodity Exchange Act and the rules, regulations, and orders
promulgated thereunder. The futures commission merchant acknowledges that at the
time of the execution of this guarantee agreement there are not any conditions
precedent, concurrent or subsequent affecting, impairing or modifying in any
manner the obligations of the futures commission merchant hereunder, or the
immediate taking effect of this agreement as the entire agreement of the futures
commission merchant with respect to guaranteeing the introducing broker?s
obligations as set forth herein to the Commission and to the introducing
broker?s commodity customers, option customers, foreign futures customers and
foreign options customers under the Commodity Exchange Act. If this guarantee
agreement is filed in connection with an application for initial registration as
an introducing broker, this agreement shall be effective as of the date
registration is granted to the introducing broker. If this guarantee agreement
is filed other than in connection with an application for initial registration
as an introducing broker, it shall be effective as of the date agreed to by the
futures commission merchant and the introducing broker as set forth below. This
guarantee agreement is binding and is and shall remain in full force and effect
unless terminated in accordance with the rules, regulations or orders
promulgated by the Commission with respect to such terminations. Termination of
this agreement will not effect the liability of the futures commission merchant
with respect to obligations of the introducing broker incurred on or before the
date this agreement is terminated.
Dated: _______________________ Dated: _____________________________
_____________________________ Alaron Trading Corporation
(Introducing Broker) 822 Washington Blvd.
Chicago, IL 60607
_____________________________
(Address)
_____________________________
_____________________________
By: __________________________ By: _____________________________
___ Chief Financial Officer ___ Chief Executive Officer
___ Chief Executive Officer ___ Chief Financial Officer
___ Sole Proprietor ___ President
___ General Partner ___ Vice-President
Effective Date: ______________________
<PAGE>
PERSONAL GUARANTEE
This guarantee shall be construed pursuant to the laws of the State of Illinois,
shall inure to the benefit of Alaron, its successors and assigns, and shall be
binding on the undersigned, his heirs and assigns.
Any notice to be given to the undersigned may be sent to the address provided
below, and all communications so sent, whether by mail, telegraph, messenger or
otherwise, shall be deemed duly given to the undersigned personally, whether or
not actually received. Notices sent by mail shall be deemed duly given on the
business day immediately following the date of mailing.
All disputes, claims, actions or proceedings arising directly or indirectly from
or in connection with this guarantee shall be liquidated at the direction of
Alaron, only in courts whose situs is within the State of Illinois, and the
undersigned hereby submits to the jurisdiction of the courts of the State of
Illinois and the jurisdiction of the United States District Court of the
Northern District of Illinois, Eastern Division, appoints and designates Alaron
(or any other party whom Alaron may from time to time hereinafter designate) as
the undersigned?s true and lawful attorney-in-fact and duly authorized agent for
service of legal process, and agrees that service of such process upon such
other party shall constitute personal service of such process upon the
undersigned; provided that Alaron or such other party shall, within five days
after receipt of any such process, forward the same by registered or certified
mail to the address provided below. The undersigned waives any right which he
may have to transfer or change the venue of any litigation or formal action
brought against the undersigned by Alaron and any right to a jury trial. All
pronouns shall be deemed to refer to the masculine or feminine, as the identity
of the person may require, and the singular shall import the plural in the
context of this guarantee.
Introducing Broker, as Guarantor by: _____________________________________
(Authorized Signature)
_____________________________________
(Print Name)
_____________________________________
(Address)
Corporate Principal of Introducing Broker, as Guarantor: _______________________
(Authorized Signature)
________________________________
(Print Name)
(Corporate Name) _____________________________________
_____________________________________
(Address)
_____________________________________
EXHIBIT 10.17a
CASH SUBORDINATED LOAN AGREEMENT
This Cash Subordinated Loan Agreement (the "Agreement") is effective as
of the 8th day of September, 1997 by and between Joel W. Greenberg (the
"Lender") and Alaron Trading Corporation (the "Borrower"), who mutually agree as
follows:
1. (a) The term "Designated Self-Regulatory
Organization" or DSRO" shall mean the Exchange(s)
and/or other Self-Regulatory Organizations which is
(are) a party to the Joint Audit Agreement and which
has (have) been designated by the Joint Audit
Committee as the Borrower's DSRO. The Borrower's DSRO
is subject to change from time to time at the Joint
Audit Committee's discretion.
(b) The term "Commission" shall mean the Commodity
Futures Trading Commission.
(c) The term "Capital Requirement" shall mean the rules,
regulations, and requirements of the Designated
Self-Regulatory Organization which were adopted
pursuant to CFTC Regulations 1.17 and 1.52.
(d) The term "CFTC Regulations" shall mean the Commodity
Futures Trading Commission's Minimum Financial
Regulations.
(e) The term "Adjusted Net Capital" shall mean adjusted
net capital as defined in Commodity Futures Trading
Commission Regulation
1.17(c)(5).
(f) The term "Subordination Agreement" shall mean either
a subordinated loan agreement or a secured demand
note agreement, as these terms are defined in
Commodity Futures Trading Commission Regulation
1.17(h)(1).
2. Lender hereby agrees to lend the sum of One Million Dollars
($1,000,000) to Borrower, and Borrower agrees to borrow the said sum from Lender
upon the terms and conditions set forth herein.
3. Subject to the terms and conditions hereinafter set forth, the
Borrower will repay the principal amount due plus interest thereon from the date
hereof to the Maturity
<PAGE>
Date at the rate of thirteen percent (13%) per annum (the "Indebtedness") on
September 8, 1998 (the "Maturity Date").
4. The Lender hereby subordinates any right to receive any payment with
respect to this Agreement, together with accrued interest or compensation, to
the prior payment or provision for payment in full of all claims of all present
and future creditors of the Borrower arising out of any matter occurring prior
to the Maturity Date, except for claims which are the subject of subordination
agreements which rank on the same priority as or are junior to the claim of the
Lender under this Agreement.
5. The proceeds of this Agreement shall be used and dealt with by the
Borrower as part of its capital and shall be subject to the risks of its
business.
6. The Borrower shall have the right to deposit any cash proceeds of
this Agreement in an account or accounts in its own name in any bank or trust
company.
7. Borrower, at its option, but not at the option of Lender, may make a
payment of all or any portion of the Indebtedness prior to the scheduled
Maturity Date (hereinafter referred to as a "Prepayment"). No prepayment may be
made before the expiration of one year from the date this Agreement becomes
effective, unless it is a Special Prepayment made pursuant to paragraph 8
hereof. No Prepayment shall be made if, after giving effect thereto (and to all
payments of payment obligations under any other Subordination Agreements then
outstanding, the maturity or accelerated maturities of which are scheduled to
fall due within six months after the date such Prepayment is to occur pursuant
to this provision, or on or prior to the date on which the payment obligation
with respect to such Prepayment is scheduled to mature disregarding this
provision, whichever date is earlier) without reference to any projected profit
or loss of the Borrower, the Adjusted Net Capital of the Borrower is less than
the amount required by CFTC Regulation 1.17(h)(2)(vii)(A) or, if the Borrower is
a securities broker or dealer, the amount of net capital specified in Rule
15c3-1d(b)(7) of the Regulations of the Securities and Exchange Commission [17
C.F.R. 240.15c3-d(b)(7)], if it is greater.
8. Borrower, at its option, but not at the option of Lender, may make a
payment of all or any portion of the Indebtedness prior to the scheduled
Maturity Date (hereinafter referred to as a "Special Prepayment") if the written
consent of the Designated Self-Regulatory Organization is first obtained.
Provided, however, that no Special Prepayment shall be made if:
(a) After giving effect thereto (and to all payments of
payment obligations under any other Subordination
Agreements then outstanding, the maturities or
accelerated maturities of which are
<PAGE>
scheduled to fall due within six months after the
date such Special Prepayment is to occur pursuant to
this provision or on or prior to the date on which
the payment obligation in respect to such Special
Prepayment is scheduled to mature disregarding this
provision, whichever date is earlier) without
reference to any projected profit or loss of the
Borrower, the Adjusted Net Capital of the Borrower is
less than the amount required by CFTC Regulation
1.17(h)(2)(vii)(B) or, if the Borrower is a
securities broker or dealer, the amount of net
capital specified in Rule 15c3-d(c)(5)(ii) of the
regulations of the Securities and Exchange Commission
[17 C.F.R. 240. 15c3-1d(c)(5)(ii)], if it is greater;
or
(b) Pretax losses during the latest three month period
were greater than 15% of current excess Adjusted Net
Capital.
9. (a) The payment obligation of the Borrower in respect
to this Agreement shall be suspended and shall not
mature if, after giving effect to payment of such
payment obligation (and to all payments of payment
obligations of the Borrower under any other
Subordination Agreements then outstanding which are
scheduled to mature on or before such payment
obligation), the Adjusted Net Capital of the Borrower
would be less than the amount required by CFTC
Regulation 1.17(h)(2)(viii) or, if the Borrower is a
securities broker or dealer, the amount of net
capital specified in Rule 15c3- 1d(b)(8)(i) of the
Regulations of the Securities and Exchange Commission
[17 C.F.R. 240.15c3-1d(b)(8)(i)], if it is greater.
Provided that, if the payment obligation of the
Borrower hereunder does not mature and is suspended
as a result of the requirements of this paragraph for
a period of not less than six months, the Borrower
shall then commence the rapid and orderly liquidation
of its entire business, but the right of Lender to
receive payment, together with accrued interest or
compensation, shall remain subordinate as required by
the provisions of this Agreement.
(b) In the event the Borrower is required to commence a
rapid and orderly liquidation, as permitted in
paragraph 9(a), the date on which the liquidation
commences shall be the maturity date for any
Subordination Agreement of the Borrower then
outstanding, but the rights of the respective lenders
to receive payment, together with accrued interest or
compensation, shall remain subordinate as required by
the provisions of such agreements.
<PAGE>
10. Subject to the provisions of paragraph 9 of this Agreement, Lender
may, upon prior written notice to the Borrower and the Designated
Self-Regulatory Organization and, if required, the Commission, given not earlier
than six months after the effective date of this Agreement, accelerate the date
on which the payment obligation of the Borrower, together with accrued interest
or compensation, is scheduled to mature to a date not earlier than six months
after giving of such notice, but the rights of the Lender to receive payment
together with accrued interest or compensation, shall remain subordinate as
required by the provisions of this Agreement.
11. Notwithstanding the provisions of paragraph 9 of this Agreement,
the payment obligation of the Borrower with respect to this Agreement, together
with accrued interest and compensation, shall mature in the event of any
receivership, insolvency, liquidation pursuant to the Securities Investor
Protection Act of 1970 or otherwise, bankruptcy, assignment for the benefit of
creditors, reorganization whether or not pursuant to the bankruptcy laws, or any
other marshaling of the assets and liabilities of the Borrower, but the right of
the Lender to receive payment, together with accrued interest or compensation,
shall remain subordinate as required by the provisions of this Agreement.
12. The Borrower shall immediately notify the Designated
Self-Regulatory Organization and the Commission if, after giving effect to all
payments of payment obligations under Subordination Agreements then outstanding
which are due or mature within the following six months without reference to any
projected profit or loss of the Borrower, its Adjusted Net Capital would be less
than the amount required by CFTC Regulation 1.17(h)(3)(ii) or, if Borrower is a
securities broker or dealer, the amount of net capital specified in Rule
15c3-1d(c)(Z) of the Regulations of the Securities and Exchange Commission [17
C.F.R. 240.15c-1d(c)(Z)], if it is greater.
13. Neither this Agreement nor any note or other instrument made
hereunder is entered into in reliance upon the standing of the Borrower as a
member organization of any commodity exchange or securities exchange or upon any
such exchange's surveillance of the Borrower or its capital position. The Lender
is not relying upon any such exchange to provide any information concerning or
relating to the Borrower. No such exchange has a responsibility to disclose to
the Lender any information concerning or relating to the Borrower which it may
have now or at any future time. Neither any such exchange nor any officer or
employee of any such exchange shall be liable to the Lender with respect to this
Agreement, the Indebtedness, the repayment thereof, any interest or compensation
thereon or any damages resulting from the breach of this Agreement. Neither the
Designated Self-Regulatory Organization nor the Commission is a guarantor of
this Agreement.
<PAGE>
14. This Agreement shall be binding upon the Lender and the Borrower
and their respective heirs, executors, administrators, successors and assigns.
15. Any note or other written instrument evidencing the Indebtedness
shall bear on its face an appropriate legend stating that such note or
instrument is issued subject to the provisions of this Agreement, which shall be
adequately referred to and incorporated by reference herein.
16. This Agreement shall not be subject to cancellation by either
party, no payment shall be made with respect thereto and this Agreement shall
not be terminated, rescinded or modified by mutual consent or otherwise if the
effect thereof would be inconsistent with the Capital Requirements or, if
applicable, the CFTC Regulations.
17. This Agreement supersedes all prior agreements of the parties with
respect to the Indebtedness.
IN WITNESS WHEREOF, the parties have set their hands this 8th day of
September, 1997.
/s/ Steven Greenberg 9/8/97
- ------------------------------------- ------
Borrower - Alaron Trading Corporation
/s/ Joel W. Greenberg 9/8/97
- ------------------------------------- ------
Lender - Joel W. Greenberg Date
<PAGE>
FIRST AMENDMENT TO
CASH SUBORDINATED LOAN AGREEMENT
DATED SEPTEMBER 8, 1997
BY AND BETWEEN
JOEL W. GREENBERG, LENDER
AND
ALARON TRADING CORPORATION, BORROWER
This document amends the Cash Subordinated Loan Agreement effective as
of the 8th day of September, 1997 by and between Joel W. Greenberg (the
"Lender") and Alaron Trading Corporation (the "Borrower") on the 28th day of
August, 1998. The parties hereto mutually agree as follows:
RECITALS
WHEREAS, Lender loaned Borrower sum of One Million & No/100 dollars
($1,000,000.00) pursuant to the terms and conditions of the Cash Subordinated
Loan Agreement dated September 8, 1997 entered into between the parties.
WHEREAS, subject to the terms and conditions set forth in the September
8, 1997 Cash Subordinated Loan Agreement, Borrower agreed to repay the principal
amount plus interest thereon from September 8, 1997, to the Maturity Date at the
rate of Thirteen (13) percent per annum on September 8, 1998 (the "Maturity
Date").
WHEREAS, the parties desire to amend said Maturity Date (September 8,
1997) to September 8, 1999, extending said Date an additional year.
NOW THEREFORE, the parties agree as follows:
AGREEMENT
1) That Borrower agrees to repay to Lender the principal amount of One Million &
No/100 Dollars ($1,000,000.00) plus interest thereon at the rate of Thirteen
(13) percent per annum on September 8, 1999.
2) This Agreement amends only paragraph three (3) of the prior agreement dated
September 8, 197 relating to the Maturity Date. The remainder of the terms of
the prior agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have set their hands this 13th day of
August, 1998.
/s/ Steven Greenberg 8/13/98
- ------------------------------------- ------
Borrower - Alaron Trading Corporation
/s/ Joel W. Greenberg 8/13/98
- ------------------------------------- ------
Lender - Joel W. Greenberg Date
<PAGE>
SUBORDINATION AGREEMENT
INFORMATION STATEMENT
Name and Address of Lender: Joel W. Greenberg
-----------------------------
822 West Washington Boulevard
-----------------------------
Chicago, Illinois 60607
-----------------------------
Business relationship of lender to clearing member:
X Officer Partner Stockholder Other(explain)
- ------- ------- ------ -------
Did the clearing member carry funds or securities for the lender at or about the
time the proposed subordination agreement was filed?
Yes No X
------- -------
EXHIBIT 10.17b
CASH SUBORDINATED LOAN AGREEMENT
This Cash Subordinated Loan Agreement (the "Agreement") is effective as
of the 16th day of February, 1999 by and between Joel W. Greenberg (the
"Lender") and Alaron Trading Corporation (the "Borrower"), who mutually agree as
follows:
1. (a) The term "Designated Self-Regulatory
Organization" or DSRO" shall mean the Exchange(s)
and/or other Self-Regulatory Organizations which is
(are) a party to the Joint Audit Agreement and which
has (have) been designated by the Joint Audit
Committee as the Borrower's DSRO. The Borrower's DSRO
is subject to change from time to time at the Joint
Audit Committee's discretion.
(b) The term "Commission" shall mean the Commodity
Futures Trading Commission.
(c) The term "Capital Requirement" shall mean the rules,
regulations, and requirements of the Designated
Self-Regulatory Organization which were adopted
pursuant to CFTC Regulations 1.17 and 1.52.
(d) The term "CFTC Regulations" shall mean the Commodity
Futures Trading Commission's Minimum Financial
Regulations.
(e) The term "Adjusted Net Capital" shall mean adjusted
net capital as defined in Commodity Futures Trading
Commission Regulation
1.17(c)(5).
(f) The term "Subordination Agreement" shall mean either
a subordinated loan agreement or a secured demand
note agreement, as these terms are defined in
Commodity Futures Trading Commission Regulation
1.17(h)(1).
2. Lender hereby agrees to lend the sum of One Hundred Thousand Dollars
($100,000) to Borrower, and Borrower agrees to borrow the said sum from Lender
upon the terms and conditions set forth herein.
3. Subject to the terms and conditions hereinafter set forth, the
Borrower will repay the principal amount due plus interest thereon from the date
hereof to the Maturity
<PAGE>
Date at the rate of thirteen percent (13%) per annum (the "Indebtedness") on
February 16, 2000 (the "Maturity Date").
4. The Lender hereby subordinates any right to receive any payment with
respect to this Agreement, together with accrued interest or compensation, to
the prior payment or provision for payment in full of all claims of all present
and future creditors of the Borrower arising out of any matter occurring prior
to the Maturity Date, except for claims which are the subject of subordination
agreements which rank on the same priority as or are junior to the claim of the
Lender under this Agreement.
5. The proceeds of this Agreement shall be used and dealt with by the
Borrower as part of its capital and shall be subject to the risks of its
business.
6. The Borrower shall have the right to deposit any cash proceeds of
this Agreement in an account or accounts in its own name in any bank or trust
company.
7. Borrower, at its option, but not at the option of Lender, may make a
payment of all or any portion of the Indebtedness prior to the scheduled
Maturity Date (hereinafter referred to as a "Prepayment"). No prepayment may be
made before the expiration of one year from the date this Agreement becomes
effective, unless it is a Special Prepayment made pursuant to paragraph 8
hereof. No Prepayment shall be made if, after giving effect thereto (and to all
payments of payment obligations under any other Subordination Agreements then
outstanding, the maturity or accelerated maturities of which are scheduled to
fall due within six months after the date such Prepayment is to occur pursuant
to this provision, or on or prior to the date on which the payment obligation
with respect to such Prepayment is scheduled to mature disregarding this
provision, whichever date is earlier) without reference to any projected profit
or loss of the Borrower, the Adjusted Net Capital of the Borrower is less than
the amount required by CFTC Regulation 1.17(h)(2)(vii)(A) or, if the Borrower is
a securities broker or dealer, the amount of net capital specified in Rule
15c3-1d(b)(7) of the Regulations of the Securities and Exchange Commission [17
C.F.R. 240.15c3-d(b)(7)], if it is greater.
8. Borrower, at its option, but not at the option of Lender, may make a
payment of all or any portion of the Indebtedness prior to the scheduled
Maturity Date (hereinafter referred to as a "Special Prepayment") if the written
consent of the Designated Self-Regulatory Organization is first obtained.
Provided, however, that no Special Prepayment shall be made if:
(a) After giving effect thereto (and to all payments of
payment obligations under any other Subordination
Agreements then outstanding, the maturities or
accelerated maturities of which are
<PAGE>
scheduled to fall due within six months after the
date such Special Prepayment is to occur pursuant to
this provision or on or prior to the date on which
the payment obligation in respect to such Special
Prepayment is scheduled to mature disregarding this
provision, whichever date is earlier) without
reference to any projected profit or loss of the
Borrower, the Adjusted Net Capital of the Borrower is
less than the amount required by CFTC Regulation
1.17(h)(2)(vii)(B) or, if the Borrower is a
securities broker or dealer, the amount of net
capital specified in Rule 15c3-d(c)(5)(ii) of the
regulations of the Securities and Exchange Commission
[17 C.F.R. 240. 15c3-1d(c)(5)(ii)], if it is greater;
or
(b) Pretax losses during the latest three month period
were greater than 15% of current excess Adjusted Net
Capital.
9. (a) The payment obligation of the Borrower in respect
to this Agreement shall be suspended and shall not
mature if, after giving effect to payment of such
payment obligation (and to all payments of payment
obligations of the Borrower under any other
Subordination Agreements then outstanding which are
scheduled to mature on or before such payment
obligation), the Adjusted Net Capital of the Borrower
would be less than the amount required by CFTC
Regulation 1.17(h)(2)(viii) or, if the Borrower is a
securities broker or dealer, the amount of net
capital specified in Rule 15c3- 1d(b)(8)(i) of the
Regulations of the Securities and Exchange Commission
[17 C.F.R. 240.15c3-1d(b)(8)(i)], if it is greater.
Provided that, if the payment obligation of the
Borrower hereunder does not mature and is suspended
as a result of the requirements of this paragraph for
a period of not less than six months, the Borrower
shall then commence the rapid and orderly liquidation
of its entire business, but the right of Lender to
receive payment, together with accrued interest or
compensation, shall remain subordinate as required by
the provisions of this Agreement.
(b) In the event the Borrower is required to commence a
rapid and orderly liquidation, as permitted in
paragraph 9(a), the date on which the liquidation
commences shall be the maturity date for any
Subordination Agreement of the Borrower then
outstanding, but the rights of the respective lenders
to receive payment, together with accrued interest or
compensation, shall remain subordinate as required by
the provisions of such agreements.
<PAGE>
10. Subject to the provisions of paragraph 9 of this Agreement, Lender
may, upon prior written notice to the Borrower and the Designated
Self-Regulatory Organization and, if required, the Commission, given not earlier
than six months after the effective date of this Agreement, accelerate the date
on which the payment obligation of the Borrower, together with accrued interest
or compensation, is scheduled to mature to a date not earlier than six months
after giving of such notice, but the rights of the Lender to receive payment
together with accrued interest or compensation, shall remain subordinate as
required by the provisions of this Agreement.
11. Notwithstanding the provisions of paragraph 9 of this Agreement,
the payment obligation of the Borrower with respect to this Agreement, together
with accrued interest and compensation, shall mature in the event of any
receivership, insolvency, liquidation pursuant to the Securities Investor
Protection Act of 1970 or otherwise, bankruptcy, assignment for the benefit of
creditors, reorganization whether or not pursuant to the bankruptcy laws, or any
other marshaling of the assets and liabilities of the Borrower, but the right of
the Lender to receive payment, together with accrued interest or compensation,
shall remain subordinate as required by the provisions of this Agreement.
12. The Borrower shall immediately notify the Designated
Self-Regulatory Organization and the Commission if, after giving effect to all
payments of payment obligations under Subordination Agreements then outstanding
which are due or mature within the following six months without reference to any
projected profit or loss of the Borrower, its Adjusted Net Capital would be less
than the amount required by CFTC Regulation 1.17(h)(3)(ii) or, if Borrower is a
securities broker or dealer, the amount of net capital specified in Rule
15c3-1d(c)(Z) of the Regulations of the Securities and Exchange Commission [17
C.F.R. 240.15c-1d(c)(Z)], if it is greater.
13. Neither this Agreement nor any note or other instrument made
hereunder is entered into in reliance upon the standing of the Borrower as a
member organization of any commodity exchange or securities exchange or upon any
such exchange's surveillance of the Borrower or its capital position. The Lender
is not relying upon any such exchange to provide any information concerning or
relating to the Borrower. No such exchange has a responsibility to disclose to
the Lender any information concerning or relating to the Borrower which it may
have now or at any future time. Neither any such exchange nor any officer or
employee of any such exchange shall be liable to the Lender with respect to this
Agreement, the Indebtedness, the repayment thereof, any interest or compensation
thereon or any damages resulting from the breach of this Agreement. Neither the
Designated Self-Regulatory Organization nor the Commission is a guarantor of
this Agreement.
<PAGE>
14. This Agreement shall be binding upon the Lender and the Borrower
and their respective heirs, executors, administrators, successors and assigns.
15. Any note or other written instrument evidencing the Indebtedness
shall bear on its face an appropriate legend stating that such note or
instrument is issued subject to the provisions of this Agreement, which shall be
adequately referred to and incorporated by reference herein.
16. This Agreement shall not be subject to cancellation by either
party, no payment shall be made with respect thereto and this Agreement shall
not be terminated, rescinded or modified by mutual consent or otherwise if the
effect thereof would be inconsistent with the Capital Requirements or, if
applicable, the CFTC Regulations.
17. This Agreement supersedes all prior agreements of the parties with
respect to the Indebtedness.
IN WITNESS WHEREOF, the parties have set their hands this 16th day of
February, 1999.
/s/ Steven Greenberg 2/16/99
- ------------------------------------- -------
Borrower - Alaron Trading Corporation
/s/ Joel W. Greenberg 2/16/99
- ------------------------------------- -------
Lender - Joel W. Greenberg Date
<PAGE>
INFORMATION STATEMENT
Name and Address of Lender: Joel W. Greenberg
822 West Washington Boulevard
Chicago, Illinois 60607
Business relationship of lender to clearing member:
Officer Partner X Stockholder Other(explain)
- ------ ------- -------- --------
Did the clearing member carry funds or securities for the lender at or about the
time the proposed subordination agreement was filed?
Yes No X
-------- --------\
EXHIBIT 10.18
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT is made and entered into as of the 16th
day of February, 1999 by and between Robert Stein (the "Seller") and Alaron.com
Corporation, a Delaware corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, Seller is the owner of 1,000 shares of common stock, no par
value, of Limitup.com Inc., an Illinois corporation (the "Company"), which
shares constitute all of the issued and outstanding shares of capital stock of
the Company (the "Company Stock"); and
WHEREAS, Seller desires to sell 650 shares (the "Purchased Shares") of
the Company Stock to Purchaser and Purchaser desires to purchase the Purchased
Shares from Seller, all upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Sale of Purchased Shares. On the Closing Date (as defined below),
Seller agrees to sell, transfer and assign to Purchaser and Purchaser agrees to
purchase from Seller the Purchased Shares.
2. Purchase Price. In consideration of and in exchange for the
Purchased Shares, on the Closing Date, the Purchaser shall issue to Seller
22,500 shares of the common stock, $.01 par value, of Purchaser (the "Purchase
Price"). Such shares shall be issued without regard to any subsequent stock
split or stock dividend effected by the Purchaser on its common stock.
3. Payment and Delivery. On the Closing Date, Purchaser shall deliver
to Seller the Purchase Price and Seller shall deliver to Purchaser a stock
certificate and an assignment separate from certificate endorsed to Purchaser
representing the Purchased Shares.
4. Closing Date. The closing of the purchase and sale of the Purchased
Shares shall occur on immediately subsequent to the closing of the public
offering by the Purchaser, as set forth in Paragraph 8(e) hereof (the "Closing
Date"), at the offices of Horwood Marcus & Berk Chartered, 333 W. Wacker Drive,
Suite 2800, Chicago, Illinois, or at such other place as the Seller and
Purchaser shall mutually agree upon.
5 Representations and Warranties of Seller. Seller represents and
warrants to Purchaser that as of the date hereof and the Closing Date (i) Seller
has full right, power and authority to sell the Purchased Shares to Purchaser,
(ii) the Purchased Shares are free of all liens, claims, restrictions and
encumbrances, (iii) the Purchased Shares have been validly issued, are fully
paid and are non-assessable, (iv) the operations of the Company have been and
are being conducted in compliance with all laws, ordinances, codes, rules, and
regulations applicable to the Company and its operations and properties, (v) the
Company retains in good standing all permits, consents, licenses and other
authorizations of governmental authorities which are necessary for the lawful
operation of the Company's business and (vi) the Company owns all right, title
and interest in and to all intellectual
<PAGE>
property used by the Company in the operation of its business, including,
without limitation, all rights to the name "Limitup.com", free and clear of all
liens and encumbrances, and such intellectual property of the Company is not
subject to any license, royalty or other agreement.
6. Acknowledgment of Seller. Seller represents and acknowledges that
Purchaser has supplied Seller with all financial records, documents and other
such information as requested by Seller with respect to the operations of the
Purchaser as Seller has requested. Seller is fully familiar with the business,
financial condition and prospects of Purchaser and has made an independent
evaluation that the Purchase Price is fair and equitable. Seller has had the
opportunity to discuss this Agreement and the transactions set forth herein with
such advisors as Seller has deemed appropriate.
7. Indemnification. Seller hereby agrees to indemnify and hold harmless
Purchaser, its affiliates, shareholders, officers, directors, employees,
successors and assigns against all claims, losses, demands, liabilities, suits,
judgments, damages, costs and expenses, including reasonable attorneys' fees,
which result from, arise out of or based upon any act, event, occurrence,
omission or other circumstance involving Seller or the Purchased Shares prior to
the Closing Date, including, without limitation, the breach of any covenant,
representation or warranty of Seller contained herein or any document delivered
pursuant hereto.
8. Conditions Precedent to Obligations of Purchaser. The obligations of
Purchaser under this Agreement are subject to the satisfaction or waiver by
Purchaser of the following conditions precedent on or before the Closing Date:
(a) the representations and warranties of Seller contained herein shall have
been accurate, true and correct on and as of the date of this Agreement and on
the Closing Date; (b) Seller shall have performed and complied with all of his
covenants, obligations and agreements contained in this Agreement to be
performed and complied with by him on or prior to the Closing Date; (c)
Purchaser shall not have discovered any facts during its investigation or review
of the Company which would negatively impact upon the operations, assets,
liabilities, results of operations, cash flows, condition (financial or
otherwise), prospects of, or other matters relating to, the Company; (d) no
action or proceeding by any governmental authority or other person or entity
shall have been instituted or threatened which (i) might have a material adverse
effect on the business or property of the Company or (ii) could enjoin, restrain
or prohibit, or could result in substantial damages in respect of, any provision
of this Agreement or the consummation of the transactions contemplated hereby or
any integration of any operations of the Company with those of Purchaser; and
(e) Purchaser shall have successfully completed an initial public offering of
its common stock and received the proceeds resulting from such offering.
9. Further Assurances. Purchaser and Seller shall execute and deliver
all such other instruments and take all such other actions as each other may
reasonably request from time to time in order to effectuate the purposes of this
Agreement.
.
2
<PAGE>
10. Miscellaneous
10.1 Entire Agreement. This Agreement, and all documents to be
delivered pursuant hereto, constitutes the entire agreement of the parties with
respect to the transactions contemplated hereby, and there are no other prior or
contemporaneous written or oral agreements, undertakings, provisions,
warranties, letters of intent or covenants not contained or expressly
incorporated herein. This Agreement may not be altered, modified, amended or
terminated except in writing signed by all of the parties.
10.2 Survival of Covenants, Warranties and Representations. All
representations, warranties and acknowledgments shall survive the closing of the
transactions contemplated hereby.
10.3 Binding Agreement. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and assigns.
10.4 Prior Negotiations. All prior negotiations and agreements among
the parties hereto are superseded by this Agreement and there are no
representations, warranties, understandings, covenants or agreements other than
those expressly set forth herein, or contained in any instruments contemplated
by this Agreement, except as modified in writing concurrently herewith or
subsequent hereto.
10.5 Governing Law; Venue. The validity, construction and
interpretation of this Agreement shall be governed by the laws of the State of
Illinois. The parties hereto irrevocably agree that all actions or proceedings
in any way, manner or respect, arising out of or from or related to this
Agreement shall be litigated only in courts having situs in Cook County,
Chicago, Illinois. Each party hereby consents and submits to personal
jurisdiction in the State of Illinois and waives any right such party may have
to transfer the venue of any such action or proceeding.
10.6 Litigation Costs and Expenses. In the event of institution of
legal proceedings in connection with this Agreement or any transactions
contemplated herein, the party prevailing therein shall be entitled to recover
the reasonable costs and expenses incurred in connection therewith, including
without limitation, reasonable attorneys' and paralegals' fees.
10.7 Severability. The various terms, provisions and covenants herein
contained shall be deemed to be separable and severable and the invalidity and
unenforceability of any of them shall in no manner affect or impair the validity
or enforceability of the remainder thereof.
10.8 Assignment. Purchaser and Seller shall not assign their rights
hereunder without the prior written consent of the other party hereto.
10.9 Waiver. The waiver by any party hereto of any breach, default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall not be deemed to extend to any prior or subsequent
breach, default, misrepresentation or breach of warranty or covenant hereunder
and shall not affect in any way any rights arising by virtue of any such prior
or subsequent occurrence.
3
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
on the date first above written.
SELLER:
_________________________________
Robert Stein
PURCHASER:
Alaron.com Corporation
By:______________________________
Steven Greenberg, President
4
EXHIBIT 10.19
- --------------------------------------------------------------------------------
REGULATION S CERTIFICATION
- --------------------------------------------------------------------------------
Alaron.com Corporation
(A Delaware Corporation)
Alaron.com Corporation
822 West Washington Street
Chicago, Illinois 60607 U.S.A.
Ladies and Gentlemen:
The undersigned is a purchaser of _________________ shares of Common
Stock of Alaron.com Corporation (the "Common Stock" or "Securities") through
Prime Asset Management AG (the "Distributor") in the private offer of Securities
made by the Company to the Distributor. In connection therewith, and in
compliance with the requirements of Regulation S (Rule 901 through Rule 905 and
Preliminary Notes thereto) ("Regulation S") promulgated by the U.S. Securities
and Exchange Commission ("SEC") under the U.S. Securities Act of 1933, as
amended (the "Act"), the undersigned hereby certifies and acknowledges to you as
follows:
1. The undersigned is not a U.S. person (as that term is defined in
Regulation S) and is not acquiring the Securities for the account or benefit of
any U.S. person or is a U.S. person who purchased Securities in a transaction
that did not require registration under the Act;
2. The undersigned agrees to resell such Securities only in accordance
with the provisions of Regulation S, pursuant to a registration under the Act,
or pursuant to an available exemption from registration; and agrees not to
engage in hedging transactions with regard to such Securities unless in
compliance with the Act;
3. The Securities to be issued to the undersigned will contain a legend
to the effect that transfer is prohibited except in accordance with the
provisions of Regulation S, pursuant to registration under the Act, or pursuant
to an available exemption from registration, and that hedging transactions
involving the Securities may not be conducted unless in compliance with the Act;
4. The Company may refuse to register any transfer of the Securities
not made in accordance with the provisions of Regulation S, pursuant to
registration under the Act or pursuant to an available exemption from
registration;
<PAGE>
5. The Distributor has provided the undersigned with a copy of its
Purchaser's Subscription and Acknowledgment in connection with the purchase of
Securities by the undersigned from the Distributor confirming and notifying the
undersigned that the undersigned is subject to the same restrictions on offers
and sales of the Securities that apply to the Distributor;
6. The undersigned adopts, and is in full compliance with, all of the
applicable representations and warranties of the Distributor in its Purchaser's
Subscription and Acknowledgment as if they were representations and warranties
of the undersigned and the survival thereof, and further acknowledges receipt of
all restrictive notices contained therein; and
7. The receipt of this duly executed Regulation S Certification is a
condition precedent to the Company's acceptance of the undersigned's purchase of
Securities and the issuance of certificates, with the appropriate restrictive
legends affixed, to the undersigned, against payment therefor, in accordance
with the Purchaser's Subscription and Acknowledgment.
IN WITNESS WHEREOF, the undersigned has executed this Regulation S
Certification as of the ______ day of ____________________________, 1999.
PURCHASER:
Name:___________________________________
By:_____________________________________
(Print Name and Title)
Address:________________________________
Mailing Address:________________________
Business Telephone Number:______________
Business Fax Number:____________________
Business Registration Number:___________
(if applicable)
RECEIPT OF CERTIFICATION ACKNOWLEDGED:
Alaron.com Corporation
By:______________________________
Steven A. Greenberg, President
Date:______________________, 1999
2
EXHIBIT 10.20
- --------------------------------------------------------------------------------
PURCHASER'S SUBSCRIPTION AND ACKNOWLEDGMENT
- --------------------------------------------------------------------------------
Alaron.com Corporation
(A Delaware Corporation)
Alaron.com Corporation
822 West Washington Street
Chicago, Illinois 60607 U.S.A.
Ladies and Gentlemen:
1. Placement. Pursuant to the private offer made by Alaron.com
Corporation (the "Company") to sell to the undersigned (the "undersigned") up to
1,100,000 shares of Common Stock of the Company, $.01 par value (the "Common
Stock" or "Securities"), at an aggregate price of up to U.S.$7,425,000, the
undersigned hereby tenders this Subscription and Acknowledgment together with a
check, or funds by wire transfer as instructed by the Company, in the amount of
U.S.$ for
shares of the Securities. The undersigned shall further so tender an
executed counterpart hereof together with payment for each additional number of
shares of the Securities purchased in increments of no less than U.S.$1,000,000
(other than the last purchase) until the aggregate price of U.S.$7,425,000 has
been paid.
2. Representations and Warranties of Undersigned. The undersigned
hereby represents and warrants to, and covenants with, the Company as follows:
(i) The undersigned has had access to the Company's documents,
including its draft Form SB-2 Registration Statement intended to be filed
shortly with the U.S. Securities and Exchange Commission ("SEC"), and has
reviewed it, including but not limited to the various risks described therein,
and those other documents the undersigned has deemed relevant. The undersigned
has also been furnished with such other materials or literature concerning the
Company as the undersigned has reasonably requested;
(ii) The undersigned has had a reasonable opportunity to ask questions
of and receive answers from the Company and its officers, directors and key
personnel concerning
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the Company and the offering by it of the Securities, and all such questions, if
any, have been answered to the full satisfaction of the undersigned;
(iii) The undersigned has such knowledge and expertise in financial and
business matters that the undersigned is capable of evaluating the merits and
risks involved in an investment in the Securities which are a highly speculative
investment involving a high degree of risk and, the undersigned understands and
acknowledges that the undersigned could lose its entire investment;
(iv) The undersigned understands that the Company has determined that
exemption from the registration provisions of the Securities Act of 1933, as
amended (the "Act"), and applicable state securities laws which are based upon
non-public offerings and offerings to non-U.S. citizens or residents are
applicable to the offer and sale of the Securities to the undersigned, is based,
in part, upon the representations, warranties and agreements made by the
undersigned herein; including, but not limited to, that the undersigned is not a
U.S. person (as defined in Regulation S) and is not acquiring the Securities for
the account or benefit of any U.S. person or is a U.S. person who purchased
Securities in a transaction that did not require registration under the Act;
(v) No representations or warranties have been made to the undersigned
by the Company or any agent, employee or affiliate of the Company and in
entering into this transaction the undersigned is not relying upon any
information, other than that contained in the Company's documents, including but
not limited to its draft Registration Statement and the draft, non-final
financial statements contained therein, and the results of independent
investigation by the undersigned;
(vi) The undersigned understands that (a) the Securities have not been
registered under the Act or the securities laws of any state, based upon
exemptions from such registration requirements for non-public offerings pursuant
to Sections 4(2), 4(6), 3(b), Regulation D and Regulation S under the Act and
applicable state laws; (b) the Securities are and will be "restricted
securities," as said term is defined in Rule 144 of the Rules and Regulations
promulgated under the Act; (c) the Securities may not be re-sold or otherwise
transferred unless they have been first registered under the Act and all
applicable state securities laws, or unless exemptions from such registration
provisions are available with respect to said resale or transfer; (d) the
Company is under no obligation to register the Securities under the Act or any
state securities laws, or to take any action to make any exemption from any such
registration provisions available; (e) the certificates for the Securities will
bear legends to the effect that the transfer of the Securities represented
thereby are subject to the provisions hereof; and (f) stop transfer instructions
will be placed on the records of the Company or with the transfer agent for the
Securities;
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(vii) Either (a) the undersigned is acquiring the Securities solely for
the account of the undersigned, for investment purposes only, and not with a
view towards the resale or distribution thereof, or (b) the undersigned is
acting as a Distributor (as that term is defined in Rule 902 of Regulation S
promulgated by the SEC under the Act, with respect to the Securities;
(viii) Either (x) the undersigned will not sell or otherwise transfer
any of the Securities being purchased, or any interest therein, unless and until
(a) said Securities shall have first been registered under the Act and all
applicable state securities laws; or (b) the undersigned shall have first
delivered to the Company a written opinion of counsel (which counsel and opinion
(in form and substance) shall be reasonably satisfactory to the Company), to the
effect that the proposed sale or transfer is exempt from the registration
provisions of the Act and all applicable state securities laws, or (y) the
undersigned, acting as a Distributor, will make offers or sales of the
Securities in full compliance with all applicable requirements of SEC Regulation
S as currently in effect, including, but not limited to, that no directed
selling efforts will be made in the United States, that offerings of the
Securities would not be made to any U.S. persons or for the account or benefit
of a U.S. person, that such offers and sales are made only to "accredited
investors" as that term is defined in SEC Rule 501 (described below), and that
the undersigned provides the Company at the time of purchase with a written
certification of the purchaser of the Securities (other than the Distributor)
that it is not a U.S. person and is not acquiring the Securities for the account
or benefit of any U.S. person, or is a U.S. person who purchased Securities in
the transaction that did not require registration under the Act, and that such
purchaser agrees to resell such Securities only in accordance with the
provisions of Regulation S, pursuant to registration under the Act, or pursuant
to an available exemption from registration (and agrees not to engage in hedging
transactions with regard to such Securities unless in compliance with the Act);
(ix) The undersigned has full power and authority to execute and
deliver this Subscription and Acknowledgment and to perform the obligations of
the undersigned hereunder; and this Subscription and Acknowledgment is a legally
binding obligation of the undersigned in accordance with its terms;
(x) The undersigned is under no legal disability to contract as herein
contemplated and this Subscription Agreement has been duly authorized and
executed by appropriate action of the undersigned as required under law and is
fully binding on the undersigned.
(xi) The undersigned is an "accredited investor" as that term is
defined in paragraph (a) of Rule 501 under the Securities Act of 1933, as
amended, as follows:
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"Accredited Investor" shall mean any person who comes within any of the
following categories, or who the issuer reasonably believes comes
within any of the following categories, at the time of the sale of the
securities to that person:
1. Any bank as defined in Section 3(a)(2) of the Act, or any
savings and loan association or other institution as defined
in Section 3(a)(5)(A) of the Act, whether acting in its
individual or fiduciary capacity; any broker or dealer
registered pursuant to Section 15 of the Securities Exchange
Act of 1934; any insurance company as defined in Section 2(13)
of the Act; any investment company registered under the
Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of that Act; any Small
Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958; any plan established
and maintained by a state, it political subdivisions, or any
agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan
has total assets in excess of U.S.$5,000,000; any employee
benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974 if the investment decision is made
by a plan fiduciary, as defined in Section 3(21) of such Act,
which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the
employee benefit plan has total assets in excess of
U.S.$5,000,000 or, if a self-directed plan, with investment
decisions made solely by persons that are accredited
investors;
2. Any private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
3. Any organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar
business trust, or partnership not formed for the specific
purpose of acquiring the securities offered, with total assets
in excess of U.S.$5,000,000;
4. Any director, executive officer, or general partner of the
issuer of the securities being offered or sold, or any
director, executive officer, or general partner of a general
partner of that issuer;
5. Any natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his purchase
exceeds U.S.$1,000,000;
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6. Any natural person who had an individual income in excess of
U.S.$200,000 in each of the two most recent years of joint
income with that person's spouse in excess of U.S.$300,000 in
each of those years and has a reasonable expectation of
reaching the same income level in the current year;
7. Any trust, with total assets in excess of U.S.$5,000,000, not
formed for the specific purpose of acquiring the securities
offered, whose purchase is directed by a sophisticated person
as described in Rule 506(b)(2)(ii); and
8. Any entity in which all of the equity owners are accredited
investors."
(xii) The undersigned further represents that the information presented
herein is complete and accurate as of the date indicated and agrees to notify
the Company immediately of any change in any such information that occurs prior
to any sale of Securities to the undersigned.
The information presented below is confidential and is provided to the
Company on the condition that it will not be disclosed or divulged to any person
or entity, except such parties as the Company deems appropriate to establish the
availability of an exemption from registration of the interests under the
Federal and state securities laws.
Please print or type. All items must be fully completed. Attach
additional sheets if necessary. If the answer to any item is "None" or "Not
Applicable," please so state.
a. Full Name: _______________________________________
b. Address: _______________________________________
Mailing Address: _________________________________
Business Telephone Number: _______________________
Business Fax Number: _____________________________
(xiii) The undersigned has carefully reviewed the jurisdictional
notices listed below and agrees to abide by any restrictions contained therein
applicable to the undersigned:
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JURISDICTIONAL NOTICES
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATES AND ARE
BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO
BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE FEDERAL SECURITIES
REPORTS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES ARE BEING OFFERED ONLY TO ACCREDITED INVESTORS WHO OR WHICH
ARE NON-U.S. PERSONS, WHO DO NOT REQUIRE IMMEDIATE LIQUIDITY FOR THIS INVESTMENT
AND MAY NOT BE RE-OFFERED OR RESOLD DIRECTLY OR INDIRECTLY TO ANY UNITED STATES
PERSON EXCEPT AS SET FORTH HEREIN.
THE COMPANY HAS NOT MADE AND WILL NOT MAKE ANY ATTEMPT TO COMPLY WITH
THE LAWS OR REGULATIONS OF ANY NON-U.S. JURISDICTION AND MAKES NO REPRESENTATION
WHATSOEVER AS TO THE APPLICABILITY OR REQUIREMENTS OF ANY SUCH LAW OR
REGULATION, IF ANY, TO THE OFFER OR SALE OF THE SECURITIES HEREUNDER.
ANY CERTIFICATES EVIDENCING THE SECURITIES WHICH ARE ISSUED OR SOLD
WILL BEAR SUBSTANTIALLY THE FOLLOWING LEGEND:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), HAVE BEEN SOLD IN A TRANSACTION UNDER REGULATION S PROMULGATED
THEREUNDER, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
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TRANSFERRED IN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR BENEFIT OF
U.S. PERSONS UNLESS THE SECURITIES ARE REGISTERED UNDER THE SECURITIES
ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT IS AVAILABLE. IT IS THE RESPONSIBILITY OF ANY INVESTOR
PURCHASING THESE SECURITIES TO SATISFY ITSELF AS TO FULL OBSERVANCE OF
THE LAWS OF ANY RELEVANT JURISDICTION OUTSIDE THE UNITED STATES IN
CONNECTION WITH ANY SUCH PURCHASE, INCLUDING OBTAINING ANY REQUIRED
GOVERNMENTAL OR OTHER CONSENTS AND OBSERVING ANY OTHER APPLICABLE
REQUIREMENTS."
(xiv) The undersigned is organized under and maintains it principal
place of business in, the jurisdiction specified on the signature page hereof,
and the undersigned has no present intention of changing its place of
organization or place of business from such jurisdiction.
3. Acceptance. The undersigned understands that this Subscription and
Acknowledgment is not binding upon the Company until the Company accepts it,
which acceptance is at the sole discretion of the Company and is to be evidenced
by the Company's execution of this Subscription and Acknowledgment where
indicated. This Subscription and Acknowledgment shall be null and void if the
Company does not accept it as aforesaid.
4. Irrevocability. The undersigned understands that this Subscription
and Acknowledgment is irrevocable by the undersigned, except as otherwise may be
provided by applicable state law, and the Company may, in its sole discretion,
reject this Subscription and Acknowledgment in whole or in part.
The undersigned further acknowledges that the Securities shall not be
deemed sold or issued to the undersigned, nor shall the undersigned be deemed a
holder of the Securities, until this Subscription and Acknowledgment is accepted
by the Company.
5. Covenants of the Company. The Company hereby covenants with the
undersigned that:
(a) the undersigned may nominate one person to serve on the
Board of Directors of the Company and the Company will submit such
nominee for consideration to the stockholders of the Company as a
Director at each of the next five annual meetings of stockholders where
Directors are elected and qualified; and
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(b) immediately following consummation of the subscription
contemplated herein, the Company shall engage Mr. Stefan Kallabis as
its Managing Director of European Operations on terms and conditions
satisfactory to it; and
(c) if, once its shares of Common Stock are publicly traded on
a recognized national securities exchange in the United States or on a
recognized market system (e.g., NASDAQ), the Company's shares of Common
Stock have a closing public price in excess of $15 per share on any ten
out of any twenty consecutive trading days, upon request of the
undersigned, provided it is in compliance with Regulation S to do so
the Company will attempt to register for public sale up to 25% of the
shares then owned by the undersigned which are not then either
registered or otherwise freely tradable. The costs for any such
registration, other than sales commissions and any attorneys fees
incurred by the undersigned in connection therewith, shall be borne by
the Company.
6. Indemnification. The undersigned agrees to indemnify the Company and
hold it, and all persons associated with it, harmless from and against any and
all losses, damages, liabilities, costs and expenses which any of them may
sustain or incur in connection with the breach by the undersigned of any
representation, warranty or covenant made by the undersigned.
7. No Assignment. Neither this Subscription and Acknowledgment nor any
of the rights of the undersigned hereunder may be transferred or assigned by the
undersigned.
8. Modification; Enforcement. This Subscription and Acknowledgment (i)
may only be modified by a written instrument executed by the undersigned and the
Company; (ii) sets forth the entire agreement of the undersigned and the Company
with respect to the subject matter hereof; (iii) shall be governed by the laws
of the State of Illinois applicable to contracts made and to be wholly performed
therein, without regard to conflicts of laws rules or principles; and (iv) shall
inure to the benefit of, and be binding upon the Company and the undersigned and
their respective heirs, legal representatives, successors and assigns. The
undersigned (a) agrees that any legal suit, action or proceeding arising out of
or relating to this Agreement shall be instituted exclusively in the Circuit
Court of Cook County, Illinois, or in the United States District Court for the
Northern District of Illinois, Eastern Division, each and any of which shall
apply Illinois law, without reference to its conflicts of laws rules or
principles, (b) waives any objection which the undersigned may have now or
hereafter to the venue of any such suit, action or proceeding, and (c)
irrevocably consents to the jurisdiction of the Circuit Court of Cook County,
Illinois, and the United States District Court for the Northern District of
Illinois, Eastern Division, in any such suit, action or proceeding. The
undersigned further agrees to accept and acknowledge service of any and all
process which may be served in any such suit, action or proceeding in the
Circuit Court
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of Cook County, Illinois, and the United States District Court for the Northern
District of Illinois, Eastern Division.
9. Gender. Unless the context otherwise requires, all personal pronouns
used in this Subscription and Acknowledgment, whether in the masculine, feminine
or neuter gender, shall include all other genders.
10. Notice. Except as otherwise required in this Subscription and
Acknowledgment, any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed given, delivered and received
(i) when delivered, if delivered personally, (ii) three days after mailing, when
sent by registered or certified mail, return receipt requested, postage prepaid,
(iii) the next business day after delivery to a private courier service when
delivered to a private courier service providing documented overnight service,
and (iv) on the date of delivery if delivered by telecopy, receipt confirmed,
provided that a confirmation copy is sent on the next business day by registered
or certified mail, return receipt requested and postage prepaid, addressed as
follows:
To the Company: Alaron.com Corporation
822 West Washington Street
Chicago, Illinois 60607 U.S.A.
Attention: Steven Greenberg, President
To the Purchaser: At the address set forth beneath the
Purchaser's signature
11. Survival. The representations, warranties, covenants and agreements
contained herein shall survive the delivery of and payment for the Securities.
IN WITNESS WHEREOF, the undersigned has executed this Subscription and
Acknowledgment as of the _____ day of _________, 1999.
PURCHASER (DISTRIBUTOR):
By ________________________________
_________________,its___________
Address:_____________________________
ACCEPTANCE OF SUBSCRIPTION
AND ACKNOWLEDGMENT:
ALARON.COM CORPORATION
By:____________________________________
Steven A. Greenberg, President
Date: __________________, 1999
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EXHIBIT 21
LIST OF SUBSIDIARIES
1. Alaron Trading Corporation
822 West Washington Street
Chicago, IL 60607
312-563-8000
312-850-2820 - fax
2. Limitup.com, Inc.
822 West Washington Street
Chicago, IL 60607
312-563-8391
