As filed with the Securities and Exchange Commission on May 26, 2000
Registration No. 333-__________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------------------
CATALOG.COM, INC.
(Exact Name of Small Business Issuer in its Charter)
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Oklahoma 7389 73-1490346
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
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14000 Quail Springs Parkway, Suite 3600
Oklahoma City, Oklahoma 73134
(405) 753-9300
(Address and Telephone Number of
Principal Executive Offices and Principal Place of Business)
Robert W. Crull, President and Chief Executive Officer
Catalog.com, Inc.
14000 Quail Springs Parkway, Suite 3600
Oklahoma City, Oklahoma 73134
(405) 753-9300
(Name, Address and Telephone Number
of Agent for Service)
----------------------------------
COPIES TO:
Douglas A. Branch, Esq.
Phillips McFall McCaffrey McVay & Murrah, P.C.
211 N. Robinson, Twelfth Floor
Oklahoma City, Oklahoma 73102
(405) 235-4100
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. / /
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CALCULATION OF REGISTRATION FEE
====================================== ================ ============================= ===================== ===================
Proposed Maximum Offering Proposed Maximum
Title of Each Class of Amount to be Price Aggregate Amount of
Securities to be Registered Registered(1) Per Share(2) Offering Price (2) Registration Fee
-------------------------------------- ---------------- ----------------------------- --------------------- -------------------
- --------------------------------------- --------------- ------------------------------ --------------------- -------------------
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Common stock, $.01 par value 1,150,000 $12.00 $13,800,000 $ 3,643
- --------------------------------------- --------------- ------------------------------ --------------------- -------------------
Underwriters Warrants 100,000 $0.001 $100 $ 1
- --------------------------------------- --------------- ------------------------------ --------------------- -------------------
Common stock underlying
underwriters warrants (3) 100,000 $13.80 $1,380,000 $364
- --------------------------------------- --------------- ------------------------------ --------------------- -------------------
TOTAL 1,350,000 $15,180,100 $ 4,008
======================================= =============== ============================== ===================== ===================
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(1) Includes shares that the underwriters have the option to purchase from the
company solely to cover overallotments, if any.
(2) Estimated pursuant to Rule 457(a) under the Securities Act of 1933, as
amended, solely for the purpose of computing the amount of the registration fee.
(3) The underwriters' warrants entitle the underwriters to purchase common stock
equal to 10% of the total number of shares sold pursuant to the Registration
Statement, exclusive of any overallotment shares.
--------------------------
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WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH WE ARE
PERMITTED BY U.S. FEDERAL SECURITIES LAW TO OFFER THESE SECURITIES USING THIS
PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR OFFER TO BUY THEM UNTIL THE
DOCUMENTATION FILED WITH THE SEC RELATING TO THESE SECURITIES HAS BEEN
DECLARED EFFECTIVE BY THE SEC. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES OR OUR SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY
JURISDICTION WHERE THAT WOULD NOT BE PERMITTED OR LEGAL.
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SUBJECT TO COMPLETION, DATED MAY 26, 2000
PRELIMINARY PROSPECTUS
[LOGO]
CATALOG.COM, INC.
1,000,000 Shares of Common Stock
This is an initial public offering of 1,000,000 shares of Catalog.com, Inc.
common stock through Institutional Equity Corporation on a firm-commitment
basis. No public market currently exists for our shares. We anticipate that the
initial public offering price will be between $10.00 and $12.00 per share. The
offering price may not reflect the market price of our shares after the
offering.
We intend to apply to have our common stock approved for listing, subject to
notice of issuance, on the American Stock Exchange under the symbol "___"
The underwriters named in this prospectus may purchase up to 150,000 additional
shares of our common stock at the initial public offering price less the
underwriting discount to cover overallotments.
Investing in the shares involves a high degree of risk.
See "Risk Factors" beginning on page __.
Per Share Total
Initial Public Offering Price $ $
Underwriting Fees $ $
Proceeds, Before Expenses,
to Catalog.com, Inc. $ $
We estimate cash expenses, other than the underwriting discounts and commissions
set forth above, will be approximately $500,000 and will include a
non-accountable allowance to the managing underwriter equal to 1.5% of the gross
offering proceeds. We have also agreed to issue a warrant to the managing
underwriter, the terms of which are described under the heading "Underwriting."
Neither the SEC nor any state securities commission has approved or disapproved
these securities or determined whether this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
INSTITUTIONAL EQUITY CORPORATION CAPITAL WEST SECURITIES, INC.
The date of this prospectus is _____________, 2000
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TABLE OF CONTENTS
Page
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Prospectus Summary ............................................................................................. 3
Risk Factors ................................................................................................... 6
Use of Proceeds................................................................................................. 15
Dividend Policy................................................................................................. 15
Capitalization.................................................................................................. 16
Dilution........................................................................................................ 17
Management's Discussion and Analysis of Financial Condition and Results of Operations........................... 18
Business........................................................................................................ 22
Management...................................................................................................... 30
Transactions With Related Parties............................................................................... 32
Principal Shareholders.......................................................................................... 33
Description of Capital Stock.................................................................................... 35
Anti-takeover Effects of Provisions of the Certificate of Incorporation and Bylaws.............................. 37
Shares Eligible for Future Sale................................................................................. 38
Underwriting.................................................................................................... 39
Legal Matters................................................................................................... 41
Experts......................................................................................................... 41
Where You Can Get Additional Information........................................................................ 41
Index to Financial Statements................................................................................... 42
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You should rely only on the information contained in this document. We have
not authorized anyone to provide you with information that is different. This
document may only be used where it is legal to sell these securities. The
information in this document may only be accurate on the date of this document.
2
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PROSPECTUS SUMMARY
Unless otherwise indicated, all information in this prospectus: (i) reflects a
2-for-1 split of our common stock; (ii) reflects the issuance of 794,198 shares
of common stock upon conversion of all of our outstanding preferred stock which
will occur upon completion of this offering; and (iii) assumes that the
underwriters' overallotment option is not exercised. You should read this entire
document carefully, including the section titled "Risk Factors" and the
financial statements and the notes relating to those statements.
Catalog.com, Inc.
Our Business
Catalog.com, Inc. (www.catalog.com) provides a broad range of advanced Web
site hosting and Internet services including:
o Shared Web site hosting and catalog and auction hosting for small and
medium-sized businesses;
o Dedicated hosting services for customers that require a server dedicated
specifically for their use;
o Business to Business ("B2B") and Business to Consumer ("B2C") electronic
commerce ("e-commerce") solutions; and
o Internet access services including dialup and dedicated access.
For our shared hosting customers, i.e. customers who share the same
hardware and software systems, we have developed an automated system that allows
them to register or transfer their domain names and to automatically set up
their Web sites, email, and catalog and auction systems. Within minutes of
establishing a shared hosting account, our customers may begin building their
Web pages and adding their catalog and auction items to their Web site. Our
shared hosting services are available on both the Microsoft NT and Sun
Microsystems Solaris UNIX operating systems.
We have also developed specific expertise in providing Linux-based
dedicated servers to small and medium-sized businesses worldwide. Dedicated
hosting services enable businesses to establish and maintain their Internet
operations using our servers, data center facilities and technical support. We
offer our dedicated hosting customers a reasonable monthly fee which includes
configuration of the server, installation of the server in our data center
facility, and server maintenance and technical support. We also provide and
support dedicated hosting services based on Sun Microsystems Solaris, Microsoft
Windows NT/2000, and Red Hat Linux operating systems.
In addition, we have developed a proprietary Web-based catalog and
auction software system which allows us to combine catalog and auction items
from multiple vendors into a single shopping or buying directory. This allows us
to develop and host complex B2B and B2C solutions for customers.
In the cities where we have operations, we also provide 56k dialup,
ISDN, ADSL and dedicated Internet access services.
Our service offerings are designed to allow our customers to rapidly
implement their online Internet operations. To this end, we offer our customers:
o The ability to register their domain names with the same company that
hosts their Web site thereby reducing the complexity of managing their
Internet presence.
o Automatic setup of their Web site and catalog system within 30 minutes
of the purchase of a Web site hosting plan. This process is completed
with no human intervention. Customers may purchase services 24 hours a
day 7 days a week from anywhere in the world.
o Month-to-month payment plans that allow our customers to avoid
long-term contracts and high set-up fees.
o Ongoing upgrades of server hardware, software and network bandwidth to
support the growth of our customer Internet operations.
o Self-management of their Web sites, email and Web-based catalog and
auction systems.
o Access to our robust network with backup connections at each of our
data centers.
o Access to Sun Microsystems servers with RAID disk file servers from
Network Appliance Corporation to protect against loss of data.
o Telephone and email access to our experienced technical support
personnel who solve customer problems using an advanced Oracle-based
Intranet support system.
o The use of both Unix and Microsoft NT operating system environments
through our shared hosting platform.
3
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As of March 31, 2000 we had over 7,500 customers and hosted over 5,000
Web sites for customers in all 50 states and over 50 foreign countries. We have
over 1,000 resellers and a distributor in Japan who resells our Web site hosting
services to over 500 Japanese companies.
Our Strategic Plan
Our strategy is to take advantage of the growth in Web site hosting and
e-commerce and the outsourcing of hosting services to become the leading
provider of a broad range of hosting solutions serving small and medium-sized
businesses worldwide. To achieve our growth goals we plan to:
o Organize and focus our efforts along three product lines: shared
hosting, dedicated hosting and complex hosting.
o Leverage our proprietary e-commerce and auction software solution to
develop high value vertical solutions for select B2B and B2C markets.
o Identify strategic acquisition opportunities in both the shared hosting
and dedicated hosting markets that allow us to leverage our network
support and data center infrastructure to maintain a cost advantage.
o Develop a leadership position in dedicated Linux hosting services.
o Continue to expand our network of reseller and channel partners.
o Continue to take advantage of the Catalog.com brand which we
believe intuitively denotes e-commerce.
o Establish international sales and marketing operations, including
resellers and distributors.
According to the eMarketer, "eBusiness Report", electronically
transacted sales worldwide will increase 1,164% from nearly $100 billion in 1999
to $1.24 trillion by 2003. Key findings of the "eBusiness Report" include:
o The number of "active" purposeful Web sites in the world will more than
double from 850,000 in 1999 to 2.3 million in 2002.
o Small businesses will make the greatest advances in e-commerce
revenues over the next few years, growing from $14.3 billion in
1999 to $177 billion by 2003.
o Medium and large businesses will continue to account for the majority
of e-commerce revenues, increasing from $57.1 billion in 1999 to $477
billion by 2003.
We believe we are well-positioned with our combination of Web site
hosting and e-commerce capabilities to take advantage of the e-commerce Web site
hosting market opportunity.
Corporate Information
We commenced operations in March 1995 when we began, through our
predecessor, an Internet service provider business in Dallas, Texas under the
trade name "Dallas Internet" (www.dallas.net). We incorporated in Oklahoma in
February 1996 under the name Ethos Communications Corp. to acquire the assets of
Dallas Internet. In 1998 we acquired the Catalog.com name and related Web site
hosting assets, which formed the core of our Web site hosting operations and
which, having started in 1994, represented one of the first Web site hosting
operations in the U.S.
Our executive offices are located at 14000 Quail Springs Parkway, Suite
3600, Oklahoma City, Oklahoma 73134, telephone (405) 753-9300.
4
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THE OFFERING
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Common Stock Offered........................1,000,000 shares
Common Stock Outstanding
Prior to this Offering.............4,189,530 shares
After this Offering................5,189,530 shares
Use of Proceeds.............................We plan to use the proceeds from this offering for capital expenditures, debt reduction
and general corporate purposes, principally working capital, strategic acquisitions and
additional marketing and sales efforts. See "Use of Proceeds" on page __ for a more
detailed description of our use of proceeds.
Risk Factors................................Investing in these shares involves a high degree of risk and immediate substantial
dilution of your investment. As an investor, you should be able to bear a complete loss
of your investment. See "Risk Factors" and "Dilution" for a more detailed discussion.
Proposed AMEX Symbol "___"
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The 4,189,530 shares outstanding prior to this offering includes (i)
the 3,395,332 shares outstanding at May 22, 2000 assuming a 2-for-1 stock split;
and (ii) the issuance of 794,198 shares of common stock upon the conversion of
all of our outstanding Series B preferred stock, both of which will occur at the
completion of this offering.
The 5,189,530 shares that will be outstanding after this offering is
based on the 4,189,530 shares outstanding prior to the offering, plus 1,000,000
shares of common stock to be sold by us in this offering.
The number of shares of common stock that will be outstanding after
this offering does not include:
o 481,500 shares of common stock issuable upon the exercise of currently
outstanding stock options with a weighted average exercise price of
$3.45 per share;
o 145,752 shares of common stock issuable upon the exercise of
currently outstanding warrants with a weighted average exercise
price of $4.50 per share;
o 150,000 shares of common stock issuable pursuant to the underwriters'
overallotment option; and
o 100,000 shares of common stock issuable upon conversion of the
underwriters' warrants.
The proposed trading symbol does not imply that a liquid and active
market will be developed or sustained for the securities upon completion of this
offering.
THE INFORMATION ON OUR WEB SITE IS NOT PART OF THIS PROSPECTUS.
5
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SUMMARY FINANCIAL AND OPERATING DATA
The following selected financial data should be read in conjunction
with our financial statements and the accompanying notes appearing elsewhere in
this prospectus. You should also read "Management's Discussion and Analysis of
Financial Condition and Results of Operations," contained later in this
prospectus. The Statements of Operations Data for the years ended December 31,
1998 and 1999 and the Balance Sheet Data as of December 31 1998 and 1999 are
derived from the financial statements of Catalog.com that have been audited by
Arthur Andersen LLP, independent public accountants. The financial data for the
three-month periods ended March 31, 1999 and 2000 are derived from Catalog.com's
internally-prepared financial statements and are unaudited. In management's
opinion, the unaudited financial statements include all adjustments which
Catalog.com considers necessary for a fair presentation of its financial
position and the results of its operations for these periods. The results of
operations for the three-months ended March 31, 2000 are not necessarily
indicative of the results of operations to be expected for the full year.
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Year ended December 31, Three Months ended March 31,
1999 2000
1998 1999 (unaudited) (unaudited)
(in thousands, except share and per share data)
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Statement of Operations Data:
Revenues $1,913 $2,838 $630 $898
Operating Costs and Expenses 1,872 3,769 550 1,192
Operating income (loss) 41 (931) 80 (294)
OTHER INCOME (EXPENSES)
Interest expense (86) (132) (33) (21)
Interest and other income 5 47 1 21
Net income (loss) (40) (1,016) 48 (294)
Dividends on preferred stock (25) (85) (15) (16)
Net income (loss) applicable
to common stockholders $(65) $(1,101) $33 $(310)
Net income (loss) applicable to
common stockholders
per common share:
Basic $(0.02) $(0.37) $0.01 $(0.09)
Diluted $(0.02) $(0.37) $0.01 $(0.09)
Weighted average common
shares outstanding:
Basic 3,424,974 2,970,890 2,510,143 3,395,332
Diluted 3,424,974 2,970,890 2,584,344 3,395,332
December 31, March 31, 2000
1998 1999 Actual Pro Forma
Balance Sheet Data:
Cash $103 $1,651 $1,329 $ 10,007(1)
Working capital (deficit) (542) 1,086 771 9,594(2)
Total assets 1,809 3,906 3,615 12,016(3)
Notes payable and capital
lease obligations 1,488 816 753 31(4)
Total stockholders' equity
(deficit) (478) (972) (1,282) 11,415(5)
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- ------------------
(1) Reflects remaining proceeds at an initial public offering price of $11.00
per share, of approximately $8,678,000 after deducting offering costs of
approximately $1,600,000 and repayment of outstanding debt of
approximately $722,000.
(2) Reflects remaining proceeds of $8,678,000 and reduction of the current
portion of long-term debt of approximately $145,000.
(3) Reflects remaining proceeds of $8,678,000 less the elimination of other
assets of $277,000 previously capitalized relating to issuance costs on
the Series B preferred stock converted at the closing of this offering.
(4) Reflects repayment of approximately $722,000 of outstanding debt.
(5) Reflects total proceeds of $11,000,000, at an initial public offering
price of $11.00, less offering costs of $1,600,000, repayment of
outstanding debt of $722,000 and elimination of $277,000 of Series B
preferred stock issuance costs.
6
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RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should carefully consider the risks and uncertainties described below and all
other information contained in this prospectus before buying shares of our
common stock. While we have described all risks and uncertainties that we
believe to be material to our business, it is possible that other risks and
uncertainties that affect our business will arise or become material in the
future.
If we are unable to effectively address these risks and uncertainties,
our business, financial condition or results of operations could be materially
and adversely affected. In such event, the trading price of our common stock
could decline and you could lose all or part of your investment.
Our business and prospects are difficult to evaluate because we have a limited
operating history and our business model is still evolving.
We began operations in 1995 as Dallas Internet, and have a limited
operating history. Accordingly, our business model is still evolving. Our
limited operating history makes predicting our future results and evaluating the
execution of our current business model difficult. Our ability to execute our
plans and prospects must be considered in light of the risks, expenses and
difficulties encountered by companies in the new and rapidly evolving Web site
hosting and applications hosting services markets. We may not achieve a
significant rate of revenue growth and may not achieve or sustain profitability
in future quarterly or annual periods.
We have incurred losses since we began doing business and expect these losses to
continue in the foreseeable future.
We experienced operating losses in each year since we began operations.
As of December 31, 1999, we had an accumulated retained deficit of approximately
$2.1 million and a net loss of approximately $1.0 million for the year ended
December 31, 1999. We expect expense levels to increase in the next several
quarters, primarily as a result of increased marketing. Our ability to operate
profitably depends on increasing our sales and achieving sufficient gross profit
margins. We cannot assure you that we will ever become or remain profitable or
that we will generate positive cash flows from operations in the future.
Our quarterly and annual results may fluctuate, possibly resulting in
fluctuations in the price of our common stock.
As our business develops and expands, we may experience significant
annual or quarterly fluctuations in our results of operations. Because of these
fluctuations, comparisons of our operating results from period to period are not
necessarily meaningful and should not be relied upon as an indicator of future
performance. We expect to continue to experience significant fluctuations in our
quarterly and annual results of operations due to a variety of factors, many of
which are outside our control. These factors include:
o demand for and market acceptance of our services;
o introduction of products or services or enhancements by us
and our competitors;
o the mix of services we sell;
o customer retention;
o the timing and success of our advertising and marketing efforts and
service introductions;
o the timing and magnitude of capital expenditures, including
construction costs relating to the expansion of operations;
o increased competition in the Web site hosting and applications hosting
markets;
o changes in our pricing policies and the pricing policies of our
competitors;
o gains or losses of key strategic relationships;
o regulatory changes;
o technological innovations; and
o other general and industry-specific economic factors.
In addition, a relatively large portion of our expenses are fixed in
the short-term, and therefore our results of operations are particularly
sensitive to fluctuations in revenues. Also, if we were unable to continue using
third-party products in our services offerings, our service development costs
could increase significantly.
Failure to expand Internet infrastructure could limit our future growth.
Our business and financial results depend on continued growth in the
use of the Internet by merchants for the sale of goods and services, and by
consumers for the purchase of goods and services. We cannot be certain that this
growth will continue or that it will continue in its present form. If Internet
usage declines or evolves away from our business, our growth will slow or stop
and our business and financial results will suffer.
7
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We may not be successful in protecting our intellectual property rights.
We rely on a combination of trademark, copyright and trade secret laws,
as well as technical measures to establish and protect our proprietary
technology, process and other intellectual property to the extent that such
protection is sought or secured at all. The Catalog.com service mark is
registered in the U.S. We cannot assure you that the steps we have taken to
protect our intellectual property rights will be adequate, or that we will be
able to protect our service marks or trademarks. Our competitors or others could
adopt product or service names similar to Catalog.com or our other service marks
or trademarks, impeding our ability to build brand identity and possibly leading
to customer confusion. We cannot assure you that others will not assert claims
against us for infringement and misappropriation of their intellectual property
rights, for which we may wish to assert claims. Such claims could be costly and
time consuming to litigate, may distract management from the other tasks of
operating the business, and may result in our loss of significant rights and the
loss of our ability to operate our business. Our inability to adequately protect
the name Catalog.com could have a material adverse effect on our business,
results of operations and financial condition.
We also rely on a variety of technologies we license from third
parties, including our database and Internet server software, which we use in
our Web site to perform key functions. We cannot assure you that these
third-party technology licenses will continue to be available to us on
commercially reasonable terms. Our loss or inability to maintain or obtain
upgrades to any of these technology licenses could result in delays in
completing our proprietary software enhancements and new developments until
equivalent technology could be identified, licensed or developed and integrated.
Any such delays would have a material adverse affect on our business, results of
operations and financial condition.
Rapid technological change could render our technology obsolete.
To remain competitive, we must continue to enhance and improve our
technology and the underlying network infrastructure. The Internet and the
e-commerce industry are characterized by rapid technological change, changes in
user and client requirements and preferences, frequent new products and service
introductions embodying new technologies and new industry standards and
practices that could render our existing technology obsolete. Our success will
depend, in part, on our ability to develop leading technologies useful in our
business, enhance our existing services, develop new services and technologies
that address the increasingly sophisticated and varied needs of our customers,
and respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis. The continued development of our
technology entails significant technical and business risks. We cannot assure
you we will use new technologies effectively or adapt our proprietary technology
and transaction-processing systems to customer requirements or emerging industry
standards. If we are unable for technical, legal, financial or other reasons to
adapt in a timely manner to changing market conditions, client requirements or
emerging industry standards, our business, financial condition and results of
operations could be materially adversely affected.
Our network infrastructure depends on telecommunications network capacity and
pricing.
Our success will depend upon the capacity, scalability, reliability and
security of our network infrastructure, including the capacity leased from our
telecommunications network suppliers. Our operating results depend, in part,
upon the pricing and availability of telecommunications network capacity from a
limited number of providers in a market. If capacity (also referred to as
"bandwidth") is not available to us as our customers' usage increases, our
network may not be able to achieve or maintain sufficiently high data
transmission capacity, reliability or performance. In addition, our business
would suffer if our network suppliers increased the prices for their services
and we were unable to pass along any increased costs to our customers. Any
failure on our part or the part of our third-party suppliers to achieve or
maintain high data transmission capacity, reliability or performance could
significantly reduce customer demand for our services and damage our business.
We may not be able to deliver our services and our business may suffer if our
third-party suppliers do not provide us with key components of our network
infrastructure on reasonable terms or at all.
We depend on other companies to supply key components of our network
infrastructure. Any failure to obtain needed products or services in a timely
fashion or at an acceptable cost could adversely affect our business. We have no
guaranteed supply arrangements with our vendors and do not carry significant
inventories. We cannot assure you that we will have the necessary hardware or
parts on hand or that our suppliers will be able to provide them in a timely
manner in the event of equipment failure. Our inability or failure to obtain the
necessary hardware or parts on a timely basis could result in sustained
equipment failure and a loss of revenue due to customer loss or claims for
service credits under our service level guarantees. In addition, the inability
to obtain equipment or technical services on terms acceptable to us would force
us to spend time and money selecting and obtaining new equipment, training our
personnel to use different equipment and deploying alternative components needed
to integrate the new equipment, with the result that our business could be
adversely affected.
8
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We must maintain the compatibility of our services with products offered by our
vendors.
We believe that our ability to compete successfully also depends upon
the continued compatibility and interoperability of our services with products
offered by various vendors. Enhanced or newly-developed third-party products may
not be compatible with our infrastructure, and such products may not adequately
address the needs of our customers. Although we currently intend to support
emerging standards, industry standards may not be established, and, even if they
are established, we may not be able to conform to these new standards in a
timely fashion in order to maintain a competitive position in the market. Our
failure to conform to the prevailing standard, or the failure of a common
standard to emerge, could cause our business to suffer. In addition, products,
services or technologies developed by others could render our services
noncompetitive or obsolete.
We have experienced significant growth in our business in recent periods, and
any failure to manage this growth could damage our business.
Our ability to successfully offer products and services and implement
our business plan in a rapidly evolving market requires an effective planning
and management process. We expect to expand to address potential growth in our
customer base and market opportunities. This expansion could be expensive and
put a strain on management. We expect to add additional key managerial and
operating personnel in the near future. To manage the expected growth of our
operations and personnel, we will be required to improve existing and implement
new transaction processing, operational and financial systems, procedures and
controls, and to expand, train and manage our growing employee base. We also
will be required to expand our finance, administrative and operations staff.
Further, we may enter into relationships with various strategic partners, Web
sites and other online service providers and other third parties necessary to
our business. We cannot assure you that our current and planned personnel,
systems, procedures and controls will be adequate to support our future
operations, that management will be able to hire, train, retain, motivate and
manage required personnel or that our management will be able to identify,
manage and exploit existing and potential strategic relationships and market
opportunities. Our failure to manage growth effectively could have a material
adverse effect on our business, results of operations and financial condition.
Security breaches could harm our business.
A significant barrier to e-commerce is the secure transmission of
confidential information over public networks. Currently, a significant number
of our customers authorize us to bill their credit cards to buy products and
services. For Internet sales we rely on encryption and authentication technology
licensed from third parties to protect the confidentiality of our customers'
information. Advances in computer capabilities, new discoveries in the field of
cryptography or other developments may result in a compromise or breach of the
technology used by us to protect customer transaction data. A party who is able
to circumvent our security measures could misappropriate proprietary information
or cause interruptions in our operations. Our security measures may not prevent
security breaches. Our failure to prevent security breaches could harm our
business, damage our reputation and expose us to a risk of loss or litigation
and possible liability.
Furthermore, despite the implementation of network security measures
our infrastructure is potentially vulnerable to computer break-ins and similar
disruptive problems caused by our customers or others. Computer viruses,
break-ins or other security problems could lead to misappropriation of
proprietary information and interruptions, delays or cessation in service to our
customers. Any computer break-in could affect consumer confidence in the
security of Catalog.com and could seriously damage our business. Moreover, until
more comprehensive security technologies are developed, the security and privacy
concerns of existing and potential customers may hinder the growth of the
Internet as a mass-market medium for commerce.
We could experience system failures which could harm our business and
reputation.
We must be able to operate our network around the clock without
interruption. Our operations depend upon our ability to protect our network
infrastructure, facilities, equipment and customer files against damage from
human error, fire, earthquakes, hurricanes, floods, power loss,
telecommunications failures, sabotage, intentional acts of vandalism and similar
events. Despite precautions we have taken, and plan to take, we do not have a
formal disaster recovery plan and the occurrence of a disaster or other
unanticipated problems at our data centers could result in interruptions in our
services. Although we have attempted to build redundancy into our network, our
network is currently subject to various points of failure, and a problem with
one of our routers or switches could cause an interruption in our services to a
portion of our customers. In the past we have experienced periodic interruptions
in service. In addition, failure of any of our telecommunications providers to
provide the data communications capacity we require, as a result of human error,
a natural disaster or other operational disruption, could result in
interruptions in our services. Any future interruptions could:
o cause customers or end users to seek damages for losses incurred;
o require us to replace existing equipment or add redundant facilities;
o damage our reputation for reliable service;
o cause existing customers to cancel their contracts; or
o make it more difficult for us to attract new customers.
Any of these results could damage our business.
9
<PAGE>
The protection of our domain names is uncertain because the regulation of domain
names is subject to change.
We hold rights to various Internet domain names, including
"catalog.com" and "dallas.net." Regulation of domain names is expected to change
in the near future. Furthermore, regulations governing domain names may not
protect our trademarks and similar proprietary rights. Other parties have domain
names similar to ours, and we may be unable to prevent third parties from
acquiring additional domain names that are similar to ours or that infringe upon
or diminish the value of our trademarks and other proprietary rights.
The Internet is subject to legal uncertainties and potential governmental
regulation that could affect our business.
The application of existing laws to the Internet, particularly with
respect to property ownership, the payment of sales taxes, libel and personal
privacy, is uncertain and may take years to resolve. Because the Internet and
e-commerce are becoming increasingly popular, various governments may seek to
adopt laws and regulations to control their use. These laws and regulations
could apply to privacy, pricing and the characteristics and quality of products
and services. The growth and development of e-commerce may also prompt calls for
more stringent consumer protection laws. These laws may impose additional
burdens on companies conducting business over the Internet. The adoption of any
of these laws or regulations may reduce Internet usage, which, in turn, could
decrease the demand for our products or increase our costs. Due to the
increasing use of the Internet and the burden it has placed on the
telecommunications infrastructure, domestic telephone carriers have requested
the Federal Communications Commission to regulate Internet service providers and
online service providers and impose access fees on those providers. If the FCC
grants these requests, the costs of communicating on the Internet could increase
substantially, which could reduce Internet usage. Any such request granted by
the FCC could harm our business. In addition, U.S. and foreign laws regulate our
ability to use customer information and to develop, buy and sell mailing lists.
New restrictions in this area could limit our ability to operate as planned and
result in significant compliance costs.
Our industry is highly competitive, and we cannot assure you that we will be
able to compete effectively.
The Web site hosting and Internet services market is new, rapidly
evolving and intensely competitive. We expect competition to intensify in the
future, particularly in the area of electronic sales to consumers. We currently
or potentially compete with a variety of companies. These competitors include:
o a significant number of Web site hosting service providers,
applications hosting providers, Internet service providers,
telecommunications companies, large information technology outsourcing
firms, and computer hardware suppliers;
o other companies with substantial customer bases in the computer
and other technical fields; and
o a number of companies which offer Web site hosting and Internet
services to consumers at no cost.
Our competitors may operate in one or more of these areas and include
companies such as AT&T Corp., Concentric Network Corporation, Interland, Inc.,
Data Return Corp., Dell Computer Corporation, Digex Corporation, EarthLink,
Inc., Exodus Communications, Inc., Gateway, Inc., Globix Corporation and
Navisite, Inc.
We cannot assure you that the types of companies listed above, and
others, will not compete directly with us by adopting a similar business model
or developing electronic commerce systems or acquiring such systems from other
service providers.
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 we have. In addition,
larger, well-established and well-financed entities may acquire, invest in or
form joint ventures with online competitors as the use of the Internet and other
online services increases. New technologies and the expansion of existing
technologies could also increase competitive pressures. Increased competition
may result in reduced operating margins for us, as well as a loss of market
share. Further, as a strategic response to changes in the competitive
environment, we may from time-to-time make certain pricing, service or marketing
decisions or acquisitions that could have a material adverse effect on our
business, financial condition and results of operations. We cannot assure you
that we will be able to compete successfully against current and future
competitors, and any inability to do so could have a material adverse effect on
our business, financial condition and results of operations.
10
<PAGE>
We are dependent on our key employees and may have difficulty hiring and
retaining qualified employees.
Our business and financial results depend in part on the continued
service of our key personnel, especially Robert W. Crull, our President, Chief
Executive Officer and co-founder, and Bill C. Miller, our Senior Vice President,
Chief Technology Officer and co-founder, neither of whom is a party to an
employment agreement. We currently carry key person life insurance on Mr. Crull
and Mr. Miller in the amount of $1.3 million and $500,000, respectively, and we
are the beneficiary of these policies. The loss of the services of any of our
executive officers or the loss of the services of certain other key employees
could harm our business and financial results. Our business and financial
results also depend in part on our ability to attract, retain and motivate other
highly skilled employees. Competition for employees in our industry is intense,
and we have at times experienced difficulty in hiring and retaining highly
skilled employees with appropriate qualifications. We cannot assure you that we
will be able to retain our key employees or attract, assimilate and retain other
highly qualified management, technical, sales and marketing personnel in the
future.
We may need additional capital in the future to operate our business.
We require substantial working capital to fund our business and expect
to use a significant portion of the net proceeds of this offering to fund our
expected continuing operating losses. We currently believe that our existing
capital resources, combined with the net proceeds of this offering, will be
sufficient to meet our presently anticipated cash requirements for at least the
next 18-24 months. We may need to raise additional funds in the future to fund
our operations, to enhance and/or expand the range of services we offer or to
respond to competitive pressures and/or perceived opportunities. If additional
funds are raised through the issuance of equity securities, you may experience
significant dilution. We cannot be sure that additional financing will be
available when needed or that, if available, such financing will be available on
terms acceptable to us and our shareholders. If such financing is not available
when required or is not available on acceptable terms, we may be unable to
expand our sales and marketing organization, develop new products and product
enhancements, take advantage of business opportunities or respond to competitive
pressures, any of which could have a material adverse effect on our business,
financial condition and results of operations.
Existing shareholders may control matters requiring shareholder approval even
after the offering.
After this offering, our directors and their affiliates will
beneficially own, in the aggregate, 59.0% of our common stock assuming that (i)
none of such individuals or entities purchase shares of common stock in this
offering; and (ii) none of the outstanding options and warrants to purchase
727,252 shares of common stock are exercised (including the underwriters'
warrants). Accordingly, these shareholders will have the ability to control all
matters requiring shareholder approval, including the election of directors and
approval of significant corporate transactions, such as a sale of our business
or assets.
We may become subject to burdensome government regulation.
As a provider of Internet access and related services, we are not
currently subject to direct regulation by the Federal Communications Commission.
However, several telecommunications carriers are seeking to have communications
over the Internet regulated by the FCC in the same manner as other more
traditional telecommunications services. Local telephone carriers have also
petitioned the FCC to regulate Internet access providers in a manner similar to
long distance telephone carriers and to impose access fees on such providers and
certain recent events suggest that they may be successful in obtaining such
treatment. In addition, we operate our services throughout the U.S., and we
cannot assure you that regulatory authorities at the state level will not seek
to regulate aspects of our activities as telecommunications services. As a
result, we could become subject to FCC and state regulation as Internet services
and telecommunications services converge. Changes in the regulatory environment
could decrease our revenues and increase our costs.
We remain subject to numerous additional laws and regulations that
could affect our business. Because of the Internet's popularity and increasing
use, new laws and regulations with respect to the Internet are becoming more
prevalent. Such laws and regulations have covered, or may cover in the future,
issues such as:
o user privacy;
o pricing;
o intellectual property;
o federal, state and local taxation;
o distribution; and
o characteristics and quality of products and services.
Legislation in these areas could dampen the growth in use of the
Internet generally and decrease the acceptance of the Internet as a
communications and commercial medium. It may take years to determine how
existing laws such as those governing intellectual property, privacy, libel and
taxation apply to the Internet. Any new legislation or regulation regarding the
Internet, or the application of existing laws and regulations to the Internet,
could harm us. Additionally, while we do not currently have operations outside
of the U.S., the international regulatory environment relating to the Internet
market could have an adverse effect on our business, especially if we should
expand operations internationally.
11
<PAGE>
The growth of the Internet, coupled with publicity regarding Internet
fraud, may also lead to the enactment of more stringent consumer protection
laws. For example, numerous bills have been presented to Congress and various
state legislatures designed to address the prevalence of bulk email ("spam") on
the Internet. These laws may impose additional burdens on our business. The
enactment of any additional laws or regulations in this area may impede the
growth of the Internet, which could decrease our potential revenues or otherwise
cause our business to suffer.
We may experience problems introducing new services because of product defects
or delays.
If we experience problems related to the reliability and quality of our
services or delays in the introduction of new versions of, or enhancements to,
our services, we could experience increased subscriber cancellations, adverse
publicity and reduced sales of advertising and products. Our services are very
complex and are likely to contain a number of undetected errors and defects,
especially when new features or enhancements are first released. These errors or
defects, if significant, could harm the performance of such services, result in
ongoing redevelopment and maintenance costs, and/or cause dissatisfaction on the
part of subscribers and advertisers. Such costs, delays or dissatisfaction could
negatively affect our business.
Disruption of our services caused by unknown software defects could harm our
business and reputation.
Our service offerings depend on complex software, including our
proprietary software tools and software licensed from third parties. Complex
software often contains defects, particularly when first introduced or when new
versions are released. We may not discover software defects that affect our new
or current services or enhancements until after they are deployed. Although we
have not experienced any material software defects to date, it is possible that
defects may occur in the software. These defects could cause service
interruptions, which could damage our reputation or increase our service costs,
cause us to lose revenue, delay market acceptance or divert our development
resources.
Providing services to customers with critical Web sites and Web-based
applications could potentially expose us to lawsuits for customers' lost profits
or other damages.
Because our Web site hosting and applications hosting services are
critical to many of our customers' businesses, any significant interruption in
our services could result in lost profits or other indirect or consequential
damages to our customers. Although the standard terms and conditions of our
customer contracts disclaim our liability for any such damages, a customer could
still bring a lawsuit against us claiming lost profits or other consequential
damages as the result of a service interruption or other Web site or application
problems that the customer may ascribe to us. There can be no assurance a court
would enforce any limitations on our liability, and the outcome of any lawsuit
would depend on the specific facts of the case and legal and policy
considerations. We also believe we would have meritorious defenses to any such
claims, but there can be no assurance we would prevail. In such cases, we could
be liable for substantial damage awards. Such damage awards might exceed our
liability insurance by unknown but significant amounts, which would seriously
harm our business.
We may be accused of infringing the proprietary rights of others, which could
subject us to costly and time-consuming litigation.
In addition to the technologies we develop or have developed, we
license certain technologies from third parties and may license additional
technologies in the future. To date, we have not been notified that our services
infringe on the proprietary rights of any third parties, but third parties could
claim infringement by us with respect to current or future services. We expect
that participants in our markets will be increasingly subject to infringement
claims as the number of services and competitors in our industry segment grows.
Any such claim, whether meritorious or not, could be time-consuming, result in
costly litigation, cause service installation delays or require us to enter into
royalty or licensing agreements. These royalty or licensing agreements might not
be available on terms acceptable to us or at all. As a result, any such claim
could have a material adverse effect upon our business, results of operations
and financial condition. In addition, third parties may change the terms of
their license agreements in ways that would prevent us from using technologies
licensed from them on commercially reasonable terms or that would prevent us
from using them at all. We may not be able to replace those technologies with
technologies that have the same features or functionality on commercially
reasonable terms or at all.
12
<PAGE>
We could face liability for information disseminated through our network.
The law relating to the liability of online services companies for
information carried on or disseminated through their networks is currently
unsettled. Claims could be made against online services companies under both
U.S. and foreign law for defamation, negligence or copyright or trademark
infringement, or other theories based on the nature and content of the materials
disseminated through their networks. Several private lawsuits seeking to impose
such liability upon other entities are currently pending against other
companies. In addition, legislation has been proposed that imposes liability for
or prohibits the transmission over the Internet of certain types of information.
Other countries may also enact legislation or take action that could impose
liability on us or cause us not to be able to operate in those countries. The
imposition upon us and other online services of potential liability for
information carried on or disseminated through our systems could require us to
implement measures to reduce our exposure to such liability, which may require
us to expend substantial resources, or to discontinue certain service offerings.
The increased attention focused upon liability issues as a result of these
lawsuits and legislative proposals also could affect the growth of Internet use.
The future sale of our common stock may depress our stock price.
If our shareholders sell substantial amounts of our common stock
(including shares issued upon the exercise of outstanding options) in the public
market following the offering, the market price of our common stock could fall.
Such sales also might make it more difficult for us to sell equity securities in
the future at a time and price that we deem appropriate. After the offering, we
will have 5,189,530 shares of common stock outstanding. Of these shares, the
1,000,000 shares being offered hereby may be freely traded. This leaves
4,189,530 shares eligible for sale in the public market as follows:
Number of Shares Date of Availability for Sale
128,310 Currently
794,198 Upon expiration of the lock-up period
3,267,022 At various times after expiration
of the lock-up period
Our directors and officers and certain of our shareholders have agreed,
subject to specified exceptions, that they will not sell, directly or
indirectly, any common stock without the prior written consent of Institutional
Equity Corporation for a period of 180 days from the date of this prospectus.
The above table assumes the effectiveness of such lock-up arrangements.
In addition, we intend to register for resale the 540,000 shares of
common stock reserved for issuance under the 1997 and 1999 Stock Option Plans.
We expect such registration to become effective immediately upon filing. As of
the date of this prospectus, options to purchase a total of 481,500 shares of
common stock are outstanding, of which options to purchase 175,500 shares will
be immediately exercisable upon the closing of this offering. Upon exercise,
these shares and shares subject to options granted after the date hereof will be
covered by that registration and will be eligible for resale in the public
market from time to time subject to vesting and, in the case of certain options,
the expiration of lock-up agreements. These stock options generally have
exercise prices significantly below the assumed initial public offering of our
common stock. The possible sale of a significant number of these shares may
cause the price of our common stock to fall.
Certain shareholders, representing approximately 794,198 shares of
common stock, have the right, subject to conditions, to include their shares in
registration statements relating to our securities. By exercising their
registration rights and causing a large number of shares to be registered and
sold in the public market, these holders may cause the price of the common stock
to fall. In addition, any demand to include such shares in our registration
statements could have an adverse effect on our ability to raise needed capital.
There has been no prior market for our common stock and we anticipate that our
stock price will be highly volatile.
Prior to the offering, there has been no public market for our common
stock. We cannot predict the extent to which investor interest in Catalog.com
will lead to the development of an active trading market or how liquid that
market might become. The market price of the common stock may decline below the
initial public offering price. The initial public offering price for the shares
will be determined by negotiations between us and the underwriters'
representatives and may not be indicative of prices that will prevail in the
trading market. The stock market has experienced extreme price and volume
fluctuations. The market prices of the securities of Internet-related companies
have been especially volatile. In the past, companies that have experienced
volatility in the market price of their stock have been the object of securities
class action litigation. If we were the object of securities class action
litigation, it could result in substantial costs and a diversion of our
management's attention and resources.
13
<PAGE>
We will have broad discretion in using a substantial portion of the offering
proceeds and how we invest these proceeds may not yield a favorable return.
Our management can spend the proceeds from this offering in ways with
which the shareholders may not agree. The net proceeds of this offering are not
allocated for specific uses other than working capital and general corporate
purposes, which gives management broad discretion on the use of these proceeds.
We cannot predict that the proceeds will be invested to yield a favorable
return.
We have anti-takeover provisions that may make it difficult for a third party to
acquire us.
Provisions of our certificate of incorporation, our bylaws and Oklahoma
law could make it more difficult for a third party to acquire us, even if doing
so might be beneficial to our shareholders. See "Description of Capital Stock."
We do not plan to pay dividends in the foreseeable future; shareholders will
need to sell shares to realize a return on their investment.
We have not declared or paid any cash dividends on our common stock
since inception. We intend to retain any future earnings to finance the
operation and expansion of our business and do not anticipate paying any cash
dividends in the foreseeable future. Consequently, shareholders will need to
sell shares of common stock in order to realize a return on their investment, if
any.
You should not rely on forward-looking statements because they are inherently
uncertain.
You should not rely on forward-looking statements in this prospectus.
This prospectus contains forward-looking statements that involve risks and
uncertainties. We use words such as "believes," "anticipates," "plans,"
"expects," "future," "intends" and similar expressions. This prospectus also
contains forward-looking statements attributed to certain third parties relating
to their estimates regarding the growth of the Internet. Our actual results
could differ materially from those expressed or implied by such forward-looking
statements as a result of certain factors, including the risk factors described
above and elsewhere in this prospectus. We undertake no obligation to update
publicly any forward-looking statements for any reason, even if new information
becomes available or other events occur in the future.
The reliability of market data included in this prospectus is uncertain.
Since we operate in a new and rapidly changing market, we have included
market data from industry publications. The reliability of these data cannot be
assured. Market data used throughout this prospectus were obtained from internal
company surveys and industry publications. Industry publications generally state
that the information contained in these publications has been obtained from
sources believed to be reliable, but that its accuracy and completeness is not
guaranteed. Although we believe market data used in this prospectus to be
reliable, it has not been independently verified. Similarly, internal company
surveys, while believed by us to be reliable, have not been verified by any
independent sources.
14
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds we receive from the sale of the
1,000,000 shares, assuming an offering price of $11.00 and after deducting the
underwriting discount and offering expenses of approximately $1.6 million, will
be $9.4 million if the underwriters' overallotment option is not exercised.
We currently intend to use approximately $3.4 million of the net
proceeds to fund capital expenditures consisting of the purchase of servers and
other hardware, and the build-out of new and existing data center facilities. We
also intend to use approximately $0.7 million to pay off our outstanding notes
payable as described in the notes to our financial statements included in this
prospectus. We intend to use the balance of the proceeds, or approximately $5.3
million, to expand our sales and marketing efforts, working capital and other
general corporate purposes. We may use some of the proceeds for strategic
investments and acquisitions, although we have no current plans, agreements or
commitments with respect to any acquisition or investments of this type. Our
management will have significant flexibility in applying a substantial portion
of the net proceeds of the offering. Until we use such net proceeds, we intend
to invest the net proceeds in interest-bearing instruments.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock.
We currently intend to retain future earnings, if any, to finance the operation
and expansion of our business and do not anticipate paying any cash dividends in
the foreseeable future.
15
<PAGE>
DILUTION
The difference between the public offering price per share of the
common stock and the as adjusted pro forma net tangible book value per share of
the common stock after this offering constitutes the dilution to investors in
this offering. Net tangible book value per share is determined by dividing the
net tangible book value (total assets less intangible assets and total
liabilities), by the number of outstanding shares of common stock.
The pro forma net tangible book value of our common stock as of March
31, 2000 after giving effect to the conversion of all outstanding preferred
stock into 794,198 shares of common stock, was $783,000, or approximately $.19
per share. Assuming we sell all 1,000,000 shares offered hereby at an assumed
initial public offering price of $11.00 per share, and after deducting
underwriting discounts and estimated offering expenses and applying the
estimated net proceeds therefrom, the pro forma net tangible book value of
Catalog.com as of March 31, 2000 would have been $10,183,000, or $1.96 per share
of common stock. This represents an immediate increase in pro forma net tangible
book value of $1.77 per share to existing shareholders and an immediate dilution
in pro forma net tangible book value of $9.04 per share to new investors. The
following table illustrates this per share dilution to new investors:
<TABLE>
<S> <C>
Initial public offering price per share.......................................................$11.00
Pro forma net tangible book value per share as of March 31, 2000..............$ 0.19
Increase attributable to new investors........................................ 1.77
------
Pro forma net tangible book value per share after offering.................................... 1.96
-----
Dilution in net tangible book value per share to new investors................................$ 9.04
=====
</TABLE>
This table excludes all options that will remain outstanding on
completion of this offering. At March 31, 2000, there were 481,500 shares of
common stock reserved for issuance upon exercise of outstanding options at a
weighted average exercise price of $3.45 per share. To the extent that these
options are exercised, there will be further dilution to new investors.
The following table sets forth, as of March 31, 2000, the differences
between the total consideration and average price per share paid to us by
officers, directors and affiliates thereof in connection with the purchase of
common stock and the total consideration and the average price per share paid by
the new investors in this offering, before deducting expenses payable by us,
using the estimated public offering price of $11.00 per share.
<TABLE>
<CAPTION>
Average
Shares Purchased Total Consideration Price Per
Number Percent Amount Percent Share
<S> <C> <C> <C> <C> <C>
Officers, directors 3,069,356 75.4% $ 1,294,085 10.5% $ .42
and affiliates
New investors 1,000,000 24.6% 11,000,000 89.5% 11.00
--------- ----- ---------- -----
Total 4,069,356 100.0% $12,294,085 100.0%
=========== ======= ============== ======
</TABLE>
If the underwriters' overallotment option is exercised in full, the
number of shares held by new public investors will be increased to 1,150,000 or
approximately 21.5% of the total number of shares of our common stock
outstanding after this offering.
16
<PAGE>
CAPITALIZATION
The following table sets forth (i) the actual capitalization of
Catalog.com as of March 31, 2000; and (ii) pro forma capitalization of
Catalog.com after giving effect to the sale of the 1,000,000 shares offered
hereby at an assumed initial public offering price of $11.00 per share, after
deducting the underwriting discounts and estimated offering expenses payable by
us and the application of the net proceeds therefrom.
This information should be read in conjunction with the financial
statements and the notes relating to such statements appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
March 31, 2000
-----------------------------------------
Actual Pro Forma
(in thousands)
<S> <C> <C>
Cash $ 1,329 $ 10,007(1)
======= ===========
Notes payable and capital lease obligations $ 753 $ 31(2)
Series B preferred stock, $.01 par value; 800,000
shares authorized; 794,198 shares issued and
outstanding, actual; no shares issued and
outstanding on a pro forma basis 3,574 --(3)
Stockholders' equity (deficit)
Common stock, $.01 par value; 19 million shares
authorized; 3,395,332 shares issued and outstanding,
actual; 5,189,530 shares issued and outstanding on a pro
forma basis 34 52(4)
Additional paid-in capital 1,057 13,736(5)
Retained deficit (2,373) (2,373)
------- -------
Total stockholders' equity (deficit) (1,282) 11,415
------- -------
Total capitalization $ 3,045 $ 11,446
======= =========
</TABLE>
- --------------------
(1) Reflects remaining proceeds at an initial public offering price of $11.00
per share, of approximately $8,678,000 after deducting offering costs of
approximately $1,600,000 and repayment of outstanding debt of approximately
$722,000.
(2) Reflects the repayment of approximately $722,000 of outstanding debt.
(3) Reflects conversion of the Series B preferred stock which will occur at the
completion of this offering.
(4) Reflects the issuance of 794,198 of common stock upon conversion of the
Series B preferred stock and the issuance of the 1,000,000 shares of common
stock in this offering.
(5) Reflects the additional paid-in capital on 1,000,000 common shares at an
initial public offering price of $11.00 per common share and the conversion of
the Series B preferred stock with a redemption value of approximately
$3,574,000.
The 5,189,530 shares of common stock issued and outstanding on a pro
forma basis reflects a 2-for-1 split and the issuance of 794,198 shares of
common stock upon conversion of all of our outstanding convertible preferred
stock which will occur at the closing of this offering, but does not include:
o 481,500 shares of common stock issuable upon the exercise of
outstanding stock options with a weighted average exercise price
of $3.45 per share as of May 22, 2000;
o 145,752 shares of common stock issuable upon the exercise of
currently outstanding warrants with a weighted average exercise
price of $4.50 per share;
o 150,000 shares of common stock issuable pursuant to the
overallotment option; and
o 100,000 shares of common stock issuable upon the exercise of the
underwriters' warrants.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
We provide a broad range of advanced Web site hosting and Internet
services, including shared Web site hosting and catalog and auction hosting for
small and medium-sized businesses, dedicated hosting services for customers that
require a separate server dedicated specifically for their use, B2B and B2C
e-commerce solutions, and Internet access services including dialup and
dedicated access.
Our shared hosting services are available on both the Microsoft NT and
Sun Microsystems Solaris UNIX operating systems and are automated to permit our
customers to register or transfer their domain names and to automatically set up
their Web sites, email, and catalog and auction systems. We also provide
Linux-based dedicated servers to small and medium-sized businesses worldwide,
which permit our customers to establish and maintain their Internet operations
using our servers, data center facilities and technical support. We offer our
dedicated hosting customers a reasonable monthly fee which includes
configuration of the server, installation of the server in our data center
facility, and server maintenance and technical support. We also provide and
support dedicated hosting services based on Sun Microsystems Solaris, Microsoft
Windows NT/2000, and Red Hat Linux operating systems.
In addition, we have developed a proprietary Web-based catalog and
auction software system which allows us to combine catalog and auction items for
multiple vendors into a single shopping or buying directory. This allows us to
develop and host complex B2B and B2C solutions for customers.
Results of Operations
In the text below, financial statement numbers have been rounded;
however, the percentage changes are based on our actual financial statements.
The following table sets forth percentage of revenue data for the years ended
December 31, 1998 and 1999, and the three-month periods ended March 31, 1999 and
2000.
<TABLE>
<CAPTION>
% of Revenues
Year Ended Three Months Ended
December 31, March 31,
1998 1999 1999 2000
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Communications and operations 31.0 23.8 25.7 22.5
Sales and marketing 7.2 18.6 3.6 23.0
General and administrative 39.3 69.8 39.7 68.2
Depreciation and amortization 20.4 20.6 18.3 19.1
Operating income (loss) 2.1 (32.8) 12.7 (32.8)
Other income (expense):
Interest and other income 0.3 1.7 0.2 2.4
Interest expense (4.5) (4.7) (5.3) (2.3)
Net income (loss) (2.1) (35.8) 7.6 (32.7)
</TABLE>
Three Months Ended March 31, 2000 Compared to the Three Months Ended March 31,
1999
Revenues
Our revenues increased $268,000 to $898,000 for the three-month period
ended March 31, 2000 from $630,000 for the three-month period ended March 31,
1999. The increase was primarily due to the overall increase in the number of
our customers, the addition of new customers that require more complex hosting
services, and customers generating higher average monthly hosting fees.
Communications and Operations
Our communications and operations costs increased $40,000 to $202,000,
or 22.5% of revenue, during the three-month period ended March 31, 2000 from
$162,000, or 25.7% of revenue, during the three-month period ended March 31,
1999. The increase in communications and operations costs over the two periods
was due primarily to increases in our bandwidth connectivity to the Internet and
expenses under operating lease facilities on network equipment. Our bandwidth
expenses increased $5,000 to approximately $165,000 for the three-month period
ended March 31, 2000 from $160,000 for the three-month period ended March 31,
1999, to support our increased business activities. Equipment operating lease
expense increased $14,000 in the three-months ended March 31, 2000 over the same
period in 1999, as additional equipment was added to strengthen our
infrastructure. We expect our communications and operations costs to continue to
increase in conjunction with the growth of our business.
Sales and Marketing
Sales and marketing expenses increased $183,000 to $206,000, or 23% of
revenues, during the three-month period ended March 31, 2000 from $23,000, or
3.6% of revenues, in the three-month period ended March 31, 1999. The increase
was due primarily to an increase in marketing and sales personnel and related
expenses, and increased advertising costs associated with efforts to increase
sales and market exposure. Sales and marketing personnel and related expenses
increased $134,000 to $153,000, or 77.1% of sales and marketing expense, from
$19,000 for the three-month period ended March 31, 1999. Advertising costs
increased $44,000 in the three-month period ended March 31, 2000 over the same
period in 1999. We intend to significantly increase our sales and marketing
expenditures during the remainder of fiscal 2000.
18
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General and Administrative
General and administrative expenses increased $362,000 to $612,000, or
68.2% of revenue, during the three-month period ended March 31, 2000 from
$250,000, or 39.7% of revenue, for the three-month period ended March 31, 1999.
The increase is primarily due to increases in personnel and related expenses and
expansion of office facilities to accommodate our growth. Personnel and related
expenses increased $255,000 to $433,000, or 69.8% of general and administrative
expenses, for the three-month period ended March 31, 2000 from $178,000 for the
three-month period ended March 31, 1999. Expenses related to office facilities
increased $52,000 to $73,000 for the three-month period ended March 31, 2000
from $21,000 for the three-month period ended March 31, 1999.
Depreciation and Amortization
Depreciation and amortization increased $57,000 to $172,000 for the
three-month period ended March 31, 2000 from $115,000 for the three-month period
ended March 31, 1999. This increase was due primarily to depreciation on
additions to property and equipment purchased to sustain the growth of our
business, and amortization of internal use software and Web site development
costs. Depreciation expense was $40,000 greater in the three-month period ended
March 31, 2000 than in the same period ended March 31, 1999. Amortization
expense was $17,000 greater in the three-month period ended March 31, 2000 than
in the same period ended March 31, 1999.
Other Income (Expense)
Other income (expense) consists primarily of interest income on our
cash balances and interest expense on our outstanding notes payable and capital
lease obligations. Interest earned on our cash and cash equivalents increased
$20,000 to $21,000 for the three-month period ended March 31, 2000 from $1,000
for the three-month period ended March 31, 1999. This increase was due primarily
to the closing of a private placement of equity securities in September 1999,
which resulted in larger cash balances available for investment. During the
three-month periods ended March 31, 1999 and 2000, we incurred interest expense
in the amount of $33,000 and $21,000, respectively. This decrease was due to a
reduction in our overall debt levels.
Income Taxes
No provision for federal income taxes has been recorded as we have
incurred net operating losses from inception through December 31, 1999. As of
December 31, 1999, we had approximately $874,000 of federal net operating loss
carryforwards available to offset future taxable income. These carryforwards
begin to expire in 2013. We have recorded a valuation allowance for all of our
net deferred tax assets for all periods presented due to uncertainty that we
will generate sufficient taxable income during the carryforward period to
realize the benefit of our net deferred tax asset. In addition, after this
offering, we may experience a change in control under Section 382 of the Revenue
Code, which would limit our use of these net operating loss carryforwards.
Net Income (Loss)
Our net loss for the three-month period ended March 31, 2000 was
$294,000 compared to net income for the three-month period ended March 31, 1999
of $48,000. Our net loss for the three-month period ended March 31, 2000 was
incurred primarily as a result of a $40,000 increase in communications and
operations costs, a $183,000 increase in sales and marketing expenses, a
$362,000 increase in general and administrative expenses and a $57,000 increase
in depreciation and amortization expense from the three-month period ended March
31, 1999. These increases were partially offset by an increase in revenue of
approximately $268,000 to $898,000 for the three-month period ended March 31,
2000 from $630,000 for the three-month period ended March 31, 1999.
Year Ended December 31, 1999 Compared to the Year Ended December 31, 1998
Revenues
Our revenues for the year ended December 31, 1999 were approximately
$2.8 million compared to $1.9 million for the year ended December 31, 1998. The
increase in our revenues of $900,000, or 48.4%, in 1999 is primarily due to
growth in Web site hosting and the acquisition of the Web site hosting customers
of Network Wizards on July 31, 1998. The number of our customer accounts
increased from approximately 5,900 at December 31, 1998 to approximately 6,400
at December 31, 1999.
Communications and Operations
Our communications and operations costs increased $82,000 to $675,000,
or 23.8% of revenue, during fiscal 1999 from $593,000, or 31.0% of revenue,
during fiscal 1998. This increase in communications and operations costs was
primarily due to increases in bandwidth and expenses under operating lease
facilities on network equipment. Our bandwidth expenses increased $26,000 to
$602,000 for the year ended December 31, 1999 from $576,000 for the year ended
December 31, 1998 to support our increased business activities. Equipment
operating lease expense increased approximately $37,000 from the year ended
December 31, 1998 to the year ended December 31, 1999 as additional equipment
was added to strengthen our infrastructure. We expect our communications and
operations costs to continue to increase in conjunction with the growth of our
business.
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<PAGE>
Sales and Marketing
Sales and marketing expenses increased $392,000 to $529,000, or 18.6%
of revenues, during 1999 from $137,000, or 7.2% of revenues, during 1998. The
increase was due primarily to an increase in advertising costs incurred as the
result of an enhanced marketing campaign. Advertising costs increased $391,000
to $403,000, or 76.2% of sales and marketing expenses, from $12,000 for the year
ended December 31, 1998. We intend to significantly increase our sales and
marketing expenditures during the remainder of fiscal 2000.
General and Administrative
General and administrative expenses increased $1,227,000 to $1,980,000,
or 69.8% of revenue, during the year ended December 31, 1999 from $753,000, or
39.3% of revenue, for the year ended December 31, 1998. The increase is
primarily due to increases in personnel and related expenses, employee
recruiting fees and expansion of office facilities to accommodate our growth.
Personnel and related expenses increased $867,000 to $1,368,000, or 69.1% of
general and administrative expenses, for the year ended December 31, 1999 from
$501,000 for the year ended December 31, 1998. Expenses related to office
facilities increased $151,000 to $214,000 for the year ended December 31, 1999
from $63,000 for the year ended December 31, 1998.
Depreciation and Amortization
Depreciation and amortization increased $197,000 to $586,000, or 20.6%
of revenue, during the year ended December 31, 1999 from $389,000, or 20.4% of
revenue, during the year ended December 31, 1998. This increase was due
primarily to depreciation on additions of property and equipment purchased to
sustain the growth of our business, and amortization of intangibles recorded on
the purchase of the Network Wizards assets in July 1998. Depreciation expense
was $56,000 greater in fiscal 1999 than fiscal 1998. Amortization expense was
$141,000 greater in fiscal 1999 than fiscal 1998.
Other Income (Expense)
Other income (expense) consists primarily of interest income on our
cash balances and interest expense on our outstanding notes payable and capital
lease obligations. Interest earned on our cash and cash equivalents increased
$42,000 to $47,000 for the year ended December 31, 1999 from $5,000 for the year
ended December 31, 1998. This increase was primarily due to the closing of a
private placement of equity securities in September 1999, which resulted in
larger cash balances for investment. During the years ended December 31, 1998
and 1999, we incurred interest expense in the amount of $86,000 and $132,000,
respectively. The increase in 1999 is primarily due to the underlying debt
incurred in mid-1998.
Income Taxes
No provision for federal income taxes has been recorded as we have
incurred net operating losses from inception through December 31, 1999. As of
December 31, 1999, we had approximately $874,000 of federal net operating loss
carryforwards available to offset future taxable income. These carry-forwards
begin to expire in 2013. We have recorded a valuation allowance for all of our
net deferred tax asset for all periods presented due to uncertainty that we will
generate sufficient taxable income during the carryforward period to realize the
benefit of our net deferred tax asset. In addition, after this offering, we may
experience a change in control under Section 382 of the Revenue Code, which
would limit our use of these net operating loss carryforwards.
Net Loss
Our net loss increased $977,000 to approximately $1,017,000 during the
year ended December 31, 1999 from $40,000 during the year ended December 31,
1998. Our net loss increased primarily as a result of increased sales and
marketing expenses, and general and administrative expenses in 1999 from 1998.
This increase was partially offset by an increase in revenue of approximately
$900,000 to $2.8 million in 1999 from $1.9 million in 1998.
Liquidity and Capital Resources
We have historically financed our operations primarily through private
placements of equity and internally generated cash flows from operations. The
long term debt reflected on our December 31, 1999 balance sheet was incurred to
purchase the Catalog.com Internet services assets of Network Wizards on July 31,
1998.
At December 31, 1999 and March 31, 2000, we had cash totaling
approximately $1.7 million and $1.3 million, respectively. The net change of
$322,000 in the three-month period ended March 31, 2000 was due to $103,000 used
to fund operations, $63,000 used to meet capital lease and debt service
requirements and $156,000 of investments in property and equipment including
network infrastructure, dedicated Web servers and internal use software and Web
site development costs.
20
<PAGE>
Total borrowings under our notes payable as of March 31, 2000 were
approximately $722,000. We intend to repay the amount of long term debt
outstanding with a portion of the proceeds of this offering.
We believe that our current cash balances, proceeds from this offering
and cash flows from operations will be sufficient to meet our working capital
and capital expenditure requirements for at least the next 24 months. However,
on a long-term basis, we may require additional external financing for working
capital and capital expenditures. If additional funds are raised through the
issuance of equity or convertible securities, the percentage ownership of our
shareholders will be reduced and our shareholders may experience additional
dilution. We anticipate that further expansion of our operations will cause us
to incur negative cash flows on a short-term basis, and therefore require us to
use our cash and other liquid resources to support our growth. Our operating and
investing activities on a long-term basis may require us to obtain additional
equity or debt financing. We have no present understandings, commitment or
agreements with respect to any acquisitions of other businesses, products,
services or technologies. However, we may evaluate potential acquisitions of
other businesses, products and technologies from time to time. In order to
consummate potential acquisitions, we may need additional equity or debt
financings in the future.
21
<PAGE>
BUSINESS
Overview
We provide a broad range of advanced Web site hosting and Internet
services including:
o Shared Web site hosting and catalog and auction hosting for
small to medium-sized businesses;
o Dedicated hosting services for customers that require a separate server
dedicated specifically for their use;
o B2B and B2C e-commerce solutions; and
o Internet access services including dialup and dedicated access.
For our shared hosting customers, i.e. customers who share the same
hardware and software systems, we have developed an automated system that allows
them to register or transfer their domain names and to automatically set up
their Web sites, email, and catalog and auction systems. Within minutes of
establishing a shared hosting account, our customers may begin building their
Web pages and adding their catalog and auction items to their Web site. Our
shared hosting services are available on both the Microsoft NT and Sun
Microsystems Solaris UNIX operating systems.
We have also developed specific expertise in providing Linux-based
dedicated servers to small and medium-sized businesses worldwide. Dedicated
hosting services enable businesses to establish and maintain their Internet
operations using our servers, data center facilities and technical support. We
offer our dedicated hosting customers a reasonable monthly fee that includes
configuration of the server, installation of the server in our data center
facility, and server maintenance and technical support. We also provide and
support dedicated hosting services based on Sun Microsystems Solaris, Microsoft
Windows NT/2000, and Red Hat Linux operating systems.
In addition, we have developed a proprietary Web-based catalog and
auction software system which allows us to combine catalog and auction items for
multiple vendors into a single shopping or buying directory. This allows us to
develop and host complex B2B and B2C solutions for customers.
In the cities where we have operations, we also provide 56k dialup,
ISDN, ADSL and dedicated Internet access services.
Our service offerings are designed to allow our customers to rapidly
implement their online Internet operations. To this end, we offer our customers:
o The ability to register their domain names with the same company that
hosts their Web site thereby reducing the complexity of managing their
Internet presence.
o Automatic setup of their Web site and catalog system within 30 minutes
of the purchase of a Web site hosting plan. This process is completed
with no human intervention. Customers may purchase services 24 hours a
day 7 days a week from anywhere in the world.
o Month-to-month payment plans that allow our customers to avoid
long-term contracts and high set-up fees.
o Ongoing upgrades of server hardware, software and network bandwidth to
support the growth of our customer Internet operations.
o Self-management of their Web sites, email and Web-based catalog and
auction systems.
o Access to our robust network with backup connections at each data
centers.
o Access to Sun Microsystems servers with RAID disk file servers from
Network Appliance Corporation to protect against loss of data.
o Telephone and email access to our experienced technical support
personnel who solve customer problems using an advanced Oracle-based
Intranet support system.
o The use of both Unix and Microsoft NT operating system environments
through our shared hosting platform.
As of March 31, 1999 we had over 7,500 customers and hosted over 5,000
Web sites for customers in all 50 states and over 50 foreign countries. We have
over 1,000 resellers and a distributor in Japan who resells our Web site hosting
services to host over 500 Japanese companies' Web sites.
22
<PAGE>
Company History
We commenced operations in March 1995 when we began, through our
predecessor, an Internet service provider business in Dallas, Texas under the
trade name "Dallas Internet" (www.dallas.net). In February 1996, we incorporated
under the laws of the State of Oklahoma as "Ethos Communications Corp." for the
purpose of acquiring the assets of Dallas Internet. Also in that year we
expanded our services to Oklahoma City and Tulsa, Oklahoma (www.oklahoma.net)
under the name Ethos Internet Services, creating full coverage of North Texas
and Oklahoma.
In early 1997, we became one of the first companies to provide an
Internet-based catalog system. Our catalog system was unique in that all
functions, from adding new products to changing prices, were accomplished over
the Internet. Due to the proprietary nature of the catalog software engine, we
are able to fully integrate the software with the www.catalog.com Web site
hosting services thereby providing unique shopping functionality and ease of
use.
On July 31, 1998, we acquired the Catalog.com name and Web site hosting
assets of Network Wizards, for $1.2 million in cash. The acquisition included
approximately 1,900 Web site hosting subscribers along with the "Catalog.com"
name. These assets represented one of the first Web site hosting operations in
the United States. The acquisition not only increased our revenues, but also
provided us with a "branded" name for future marketing activities. To further
identify us with the expanded operations occasioned by this acquisition, we
changed our name to "Catalog.com, Inc." in April 1999.
The Industry
The Internet. The Internet continues to demonstrate significant growth.
One of the many reasons for the overall growth in Internet users has been the
rapid emergence of the Internet as a global B2B and B2C commerce medium. Since
the commercialization of the Internet in the early 1990s, businesses have
rapidly established Web sites as a means to expand customer reach and improve
communications and operational efficiency. As businesses become more familiar
with the Internet as a communications and commerce platform, an increasing
number of businesses have begun to implement more complex and mission-critical
applications over the Internet. These applications include sales, customer
service, customer acquisition and retention programs, communication tools such
as email and messaging, and B2B and B2C e-commerce.
The increasing reliance on the Internet and the growing complexity and
functionality of Web sites has made the management and maintenance of Web sites
an increasingly complex task. As a result, many businesses, particularly small
and medium-sized businesses, have elected to outsource the implementation and
management of their Web sites. We believe outsourcing can provide a business
with a number of benefits including:
o Lower start-up and operating costs;
o Faster time to market;
o Greater security and reliability; and
o Less attention diverted from a company's core business activities.
Applications Hosting Market. Applications hosting enables software
applications to be deployed, managed, supported and upgraded from an
applications service provider's centrally-located servers, rather than on
individual desktop computers. Applications service providers typically rent
software applications over the Internet to customers for a monthly fee.
Advantages of applications hosting to customers include reduced upfront capital
expenditures, lower operating costs and faster applications implementation. Due
to these advantages, the applications hosting market is growing rapidly.
Current Market Fragmentation. Both the Web and applications hosting markets
today are fragmented and consist primarily of the following types of providers:
o Small Web site hosting providers who do not have the capital,
resources and focus to develop and offer a broad selection of high
quality services and support at competitive prices;
o Large providers whose core service offerings tend to be geared
toward large businesses or only toward those businesses which seek
to implement or maintain the most complex types of Web sites;
o National and local Internet service providers or ISPs whose core
business focus centers around the provision of Internet
connectivity rather than hosting; and
o Web design and consulting firms whose core expertise is not
hosting.
Market Opportunity. We believe that small and medium-sized businesses
are a large and rapidly growing segment of the market that have been underserved
by Web and applications hosting companies. Many small and medium-sized
businesses without internal technical resources dedicated to Internet services
have found that developing an Internet presence may be a complicated and
time-consuming task. Similarly, such small and medium-sized businesses have not
had access to the type and quality of Internet-based services that larger, more
sophisticated companies currently enjoy. We therefore believe that a significant
market opportunity exists for us to deliver a comprehensive and easy-to-use
suite of services designed to address the specific needs of the small and
medium-sized business customer.
23
<PAGE>
Strategy
Our strategy is to take advantage of the growth in Web site hosting and
e-commerce and the outsourcing of hosting services to become the leading
provider of a broad range of hosting solutions serving small and medium-sized
businesses worldwide. To achieve our growth goals we plan to:
o Organize and focus our efforts along three product lines: shared
hosting, dedicated hosting and complex hosting.
o Leverage our proprietary e-commerce and auction software solutions to
develop high value vertical solutions for select B2B and B2C markets.
o Identify strategic acquisition opportunities in both the shared hosting
and dedicated hosting markets that allow us to leverage our network
support and data center infrastructure to maintain a cost advantage.
o Develop a leadership position in dedicated Linux hosting services.
o Continue to expand our network of reseller and channel partners.
o Continue to take advantage of the Catalog.com brand which we
believe intuitively denotes e-commerce.
According to the eMarketer, "eBusiness Report", electronically
transacted sales worldwide will increase 1,164% from nearly $100 billion in 1999
to $1.24 trillion by 2003. Key findings of the "eBusiness Report" include:
o The number of "active" purposeful Web sites in the world will more than
double from 850,000 in 1999 to 2.3 million in 2002.
o Small businesses will make the greatest advances in e-commerce
revenues over the next few years, growing from $14.3 billion in 1999 to
$177 billion by 2003.
o Medium and large businesses will continue to account for the majority of
e-commerce revenues, increasing from $57.1 billion in 1999 to $477
billion by 2003.
We believe we are well-positioned with our combination of Web site
hosting and e-commerce capabilities to take advantage of the e-commerce Web site
hosting market opportunity.
Product Strategy
Our product strategy consists of four key components:
o domain name registration;
o shared hosting services;
o dedicated hosting services; and
o complex hosting services.
Every company using Web site hosting services must register a domain
name. We have applied and obtained ICANN accreditation to be a domain name
registrar. This will allow us to provide ".com", ".net" and ".org" domain names
to companies worldwide and to potentially serve as the first contact for
companies establishing an initial Web presence. We anticipate that our
registration system will be operational by the end of June 2000. In the interim,
we are registering domain names using OpenSRS, a service of Tucows.
Most small and medium-sized companies utilize shared hosting services.
We offer six shared hosting plans; three on the UNIX operating system and three
on the Microsoft NT platform, providing our customers with a complete range of
shared hosting services. These plans currently range from $24.95 per month to
$59.95 per month, making them affordable to most small-sized companies.
Dedicated hosting provides companies complete control of their hosting
platform. We use Cobalt Networks and their LINUX based server appliances as our
platform for dedicated hosting. We also offer dedicated Microsoft NT and Red Hat
Linux dedicated servers. Our dedicated hosting solutions currently range from
$199 per month to several thousand dollars depending on the customer's
requirements.
For customers requiring more sophisticated hosting solutions we offer
complex hosting services that include sophisticated solutions engineered
specifically for the customer.
To increase the number of our domain registrations, shared Web site
hosting and dedicated subscribers and increase our revenues, we intend to
aggressively advertise our hosting capability on the leading online hosting
directories. We are building an outside sales force to solicit additional
complex Web site hosting customers.
24
<PAGE>
We currently have a number of retailers hosting their sites with
Catalog.com and several affiliates that pay for products purchased as a result
of being directed to their site from Catalog.com. We also have a network of over
1,000 Web designers ("resellers") that refer Web site hosting subscribers to us
in exchange for a portion of our monthly recurring fee calculated at:
o 20% of the retail sales price for the first 10 products, plus
o 40% of the retail sales price for 11 or more products.
We intend to expand our independent Web designer reseller channel by
advertising in trade journals read by Web designers, direct marketing to Web
designers via email and entering into strategic alliances with Web design firms.
Unified Messaging
We offer a unique and innovative electronic event notification service
known as eNotify.com, which provides Web-based email, email monitors/filters, a
calendar/scheduler, a pager service and a network monitoring tool. When a
customer signs up to eNotify, a free email account is automatically set up as
well. Any email sent to that address can be put in the inbox, forwarded to an
alpha-numeric pager, forwarded to another email address or any combination of
the three. The email monitor has the ability to create filters. If any incoming
messages match the filters, a page will be sent to the customer's alpha-numeric
pager.
The eNotify Calendar-Scheduler-Reminder Service is a highly effective,
free itinerary, event scheduler and calendar that permits user group level
security, thus allowing users to authorize associates, family or others to add,
modify and/or delete events depending on their defined level of authorization.
Any event in the calendar can be easily sent to an eNotify user by alpha pager,
PCS phone, email or fax. eNotify can send notification at the moment of an event
or at user-defined intervals, including multiple reminders up until the time of
the event.
In addition to the free eNotify service, we have developed the eNotify
Application Monitor. The eNotify Application Monitor is a subscription based
service. With this tool, a customer can monitor various Internet applications.
This service allows the user to monitor their Internet service or network
administrators to monitor routers, dial-in boxes and other equipment and all of
their user services 24 hours a day, seven days a week. eNotify will log all
service problems in a database, which allows the user to come back at a later
date and note when outages occurred. We are incorporating eNotify into our
Internet services package to enhance the level of service available to our
customers.
Network Infrastructure
We have four connections to the Internet. These include connections
with BBN Corporation, Cable & Wireless USA, Inc., Sprint and Savvis
Communications Corporation. These connections have the total physical capacity
for over 300 MB of Internet traffic. All but the BBN Corporation connection are
peering points utilizing Border Gateway Protocol to exchange full Internet
routes. By maintaining an internal network in Texas and Oklahoma, we achieve a
certain level of redundancy and tolerance to failures from any one carrier.
We also maintain our own IP address space with 64 Class C addresses
from ARIN. Our network contains the equivalent of 370 Class C addresses
inclusive of address space utilized from our peering points. We utilize our own
domain name servers and are an ICANN accredited domain registrar.
We further provide Web site hosting and online commerce services by
utilizing co-location racks at GTE's Genuity data center located in San Jose,
California (MAE-West) and AT&T co-location space in Dallas, Texas. Our primary
data center is located in downtown Oklahoma City, Oklahoma. We are in the
process of adding an additional 1,000 square feet of data center space at our
headquarters located at 14000 Quail Springs Parkway in Oklahoma City. This space
will be connected to the downtown Oklahoma City space with a 10MB ethernet
connection provided by Cox Communications. We intend to build out at least
10,000 square feet of data center space in 2001 and will connect such space to
the other facilities utilizing the Cox fiber ring in Oklahoma City.
We offer Internet access service through four Points of Presence
("POPs") in two states. Users located within local dialing range of a
Catalog.com POP connect to the POP through telephone lines provided by the local
telephone company. The POPs are connected to the Internet through our four
Internet connections.
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<PAGE>
Sales and Marketing
We market our Web site hosting and e-commerce products primarily
through automated online order forms located at our www.catalog.com site.
Potential customers are brought to our site by search engines and by advertising
at sites dedicated to Web site hosting, such as www.ispcheck.com.
We also have over 1,000 resellers that are primarily Web site
developers and designers. These resellers receive a referral fee that ranges
from 20% to 40% of the monthly fee actually charged to the customer.
If the customer is purchasing a dedicated server, he is usually
directed to an internal sales person to help him configure the server. Leads for
dedicated servers are also generated through online advertising.
We are in the process of building an outside sales force to target
sponsoring organizations that will offer our Web site hosting and e-commerce
solutions to the members of their organizations.
Strategic Relationships
We are a Microsoft Solution Provider which permits us early access to
Microsoft products and services. We are also a Cobalt True Blue Saphire partner
which provides us the ability to purchase directly from Cobalt the server
appliances we utilize for our Linux dedicated hosting solution. Cobalt also
provides technical support to our dedicated server customers and marketing
assistance in the form of co-marketing dollars to be used to sell our dedicated
hosting solution.
Competition
The e-commerce market is new, rapidly evolving and intensely
competitive. Because there are no substantial barriers to entry, we expect
competition from both existing competitors and new market entrants in the
future. We currently or potentially compete with a variety of companies. These
competitors include:
o a significant number of Web site hosting service providers,
applications hosting providers, Internet service providers,
telecommunications companies, large information technology outsourcing
firms, and computer hardware suppliers;
o other companies with substantial customer bases in the computer
and other technical fields; and
o a number of companies which offer Web site hosting and Internet
services to consumers at no cost.
Our competitors may operate in one or more of these areas and include
companies such as AT&T Corp., Concentric Network Corporation, Interland, Inc.,
Data Return Corp., Dell Computer Corporation, Digex Corporation, EarthLink,
Inc., Exodus Communications, Inc., Gateway, Inc., Globix Corporation, and
Navisite, Inc.
We cannot assure you that we can maintain a competitive position
against current or future competitors, particularly those with greater
financial, marketing, service, support, technical and other resources. Our
inability to maintain a competitive position within the market could have a
material adverse effect on our business, financial condition and results of
operations.
We believe the principal competitive factors determining success in our
markets include:
o Technical expertise in developing advanced Web site hosting solutions;
o Internet system engineering and technical expertise;
o Quality of service, including speed, network capability, scalability,
reliability, security and functionality;
o Brand name recognition;
o Competitive pricing;
o Ability to maintain and expand distribution channels;
o Customer service and support;
o Broad geographic presence;
o A complete portfolio of services and products;
o Timing of introductions of new and enhanced services and products;
o Network security and reliability;
o Financial resources; and
o Conformity with industry standards.
As a developing company, we may lack the financial and other resources,
expertise or capabilities to capture increased market share in this environment
in the future.
Although it is impossible to quantify our relative competitive position
in our market, many of our competitors have substantially greater financial,
technical and marketing resources, larger customer bases, longer operating
histories, greater name recognition and more established relationships in the
industry than we have. As a result, many of these competitors may be able to
develop and expand their network infrastructures and service offerings more
rapidly, adapt to new or emerging technologies and changes in customer
requirements more quickly, take advantage of acquisitions, consolidation
opportunities and other opportunities more readily, devote greater resources to
the marketing and sale of their services and adopt more aggressive pricing
policies than we can. In addition, these competitors have entered and will
likely continue to enter into joint ventures or consortia to provide additional
services competitive with those provided by us.
26
<PAGE>
As a strategic response to changes in the competitive environment, we
may from time to time make certain pricing, service or marketing decisions or
acquisitions that could result in reduced margins or otherwise have a material
adverse effect on our business, financial condition and results of operations.
New technologies and the expansion of existing technologies may increase the
competitive pressures. For example, applications that select specific titles
from a variety of Web sites may channel customers to online retailers 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 could provide
direct access 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.
Government Regulation
We are not currently subject to direct federal, state or local
government regulation, other than regulations applicable to businesses
generally. There is currently only a limited body of laws and regulations
directly applicable to businesses that provide access or commerce on the
Internet.
The "Digital Millennium Copyright Act" became effective in October 1998
and provides a limitation on liability of online service providers for copyright
infringement for transmitting, routing or providing connections, transient
storage, caching or storage at the direction of a user, if the service provider
had no knowledge or awareness that the transmitted or stored material was
infringing and meets certain other conditions. Since this law is new and does
not apply outside of the U.S., we are unsure of how it will be applied to limit
any liability we may face in the future for any possible copyright infringement
or copyright-related issues. This new law also requires service providers to
follow "notice and take-down" procedures and to meet other conditions to qualify
to take advantage of the limitation on liability.
We recently implemented these procedures and believe we meet the
conditions to qualify for the protection provided by the Digital Millennium
Copyright Act. Moreover, our customers are subject to an acceptable use policy
which prohibits them from transmitting, storing or distributing material on or
through any of our services which, in our sole judgment is (1) in violation of
any U.S. local, state or federal law or regulation, or infringes on the
copyright of a third party, (2) fraudulent online marketing or sales practices,
or (3) fraudulent customer information, including identification and payment
information. Although this policy is designed to promote the security,
reliability and privacy of our systems and network, we cannot be certain that
our policy will accomplish this goal or effectively limit our liability.
Despite enactment of the Digital Millennium Copyright Act, the law
relating to the liability of online services companies and Internet access
providers for information carried on or disseminated through their networks
remains largely unsettled. It is possible claims could be made against online
services companies and Internet access providers under both U.S. and foreign law
for defamation, obscenity, negligence, copyright or trademark infringement, or
other theories based on the nature and content of the materials disseminated
through their networks. Several private lawsuits seeking to impose such
liability upon online services companies and Internet access providers are
currently pending.
Although sections of the Communications Decency Act of 1996 that
proposed to impose criminal penalties on anyone distributing indecent material
to minors over the Internet were held to be unconstitutional by the U.S. Supreme
Court, in October 1998, Congress passed the Child Online Privacy Protection Act,
which sought to make it illegal to communicate, for commercial purposes,
information that is harmful to minors. In February 1999, the U.S. District Court
judge issued a preliminary injunction against the enforcement of the Child
Online Protection Act on constitutional grounds. An appeal from the District
Court's ruling is pending. While we cannot predict the ultimate outcome of this
proceeding, even if the Child Online Protection Act is ruled unconstitutional,
similar laws may be proposed, adopted, or upheld in the future. The nature of
future legislation and the manner in which it may be interpreted and enforced
cannot be fully determined and, therefore, legislation similar to the
Communications Decency Act could subject us and/or our customers to potential
liability, which in turn could harm our business. The adoption of any of these
types of laws or regulations might decrease the growth of the Internet, which in
turn could decrease the demand for our services or increase our cost of doing
business or in some other manner harm our business.
27
<PAGE>
The Children's Online Privacy Protection Act of 1998, and the rules
promulgated by the Federal Trade Commission implementing the provisions of the
act, regulate the collection, use or disclosure of personally identifiable
information from and about children on the Internet by operators of Web sites or
online services directed to children, and operators of general audience Web
sites who knowingly collect information from children. The act and the FTC rules
require the operators of such Web sites and online services to (1) provide
notice of its information collection, use, and disclosure practices, (2) obtain
parental consent prior to any collection, use or disclosure of personal
information collected from children, (3) provide an opportunity for parental
review of personal information collected from children and the right to prohibit
further use or maintenance of that information, (4) not condition a child's
participation in any online activity on disclosing more personal information
than is necessary, and (5) to establish and maintain reasonable procedures to
protect the confidentiality, security and integrity of personal information
collected from children. An operator will be deemed to be in compliance with the
requirements of the act and the FTC rules if the operator complies with any
industry self-regulatory guidelines approved by the FTC. The FTC is authorized
to bring enforcement actions and impose civil penalties for violations of the
FTC rule. We may operate Web sites that are directed to children on behalf of
some of our customers. The Children's Online Privacy Protection Act and the FTC
rules implementing it went into effect on April 21, 2000. We have not yet taken
affirmative steps to adopt or comply with any FTC-approved industry
self-regulatory guidelines.
In February 1995, the European Union adopted Directive 95/46/EC on the
protection of individuals with regard to the processing of personal data and on
the free movement of such data. Pursuant to this directive the 15 member
countries of the European Union were required to pass specific privacy
protection legislation by October 1998 regarding the collection and use of
personally identifiable information. One section of the directive requires
member states to ensure that personally identifiable information is only
transferred outside of the EU to countries with adequate privacy protection. In
response to the directive, the U.S. Department of Commerce has proposed seven
"Safe Harbor" principles designed to serve as guidelines for U.S. companies. In
light of the "Safe Harbor" principles, the EU announced in the fall of 1998 that
it would avoid disrupting the exchange of information with the U.S. by allowing
its member countries to transfer information to the U.S. so long as it continues
good faith negotiations with the EU. However, if an EU member country determines
that a Web site administered by a U.S. company has a significant presence in the
country and is in violation of the "Safe Harbor" principles, it may nonetheless
prosecute and sanction the U.S. company through its regulatory agency for
improper data collection. Most EU member countries, including the United
Kingdom, have enacted legislation consistent with the directive that has forced
some U.S. companies to take actions to comply with the directive.
Although we currently provide services over the Internet in the United
Kingdom and other countries that are members of the EU, we have not taken
affirmative steps to comply with the "Safe Harbor" principles announced by the
U.S. Department of Commerce.
While there currently are relatively few laws or regulations directly
applicable to the Internet or to applications hosting providers, due to the
increasing popularity of the Internet and Web-based applications it is likely
that such laws and regulations may be adopted. These laws may cover a variety of
issues including, for example, user privacy and the pricing, characteristics and
quality of products and services. The adoption or modification of laws or
regulations relating to commerce over the Internet could substantially impair
the future growth of our business or expose us to unanticipated liabilities.
Moreover, the applicability of existing laws to the Internet and Internet
application service providers is uncertain. These existing laws could expose us
to substantial liability if they are found to be applicable to our business. For
example, we provide services over the Internet in many states in the U.S. and in
the United Kingdom, and we facilitate the activities of our customers in those
jurisdictions. As a result, we may be required to qualify to do business, be
subject to taxation or be subject to other laws and regulations in these
jurisdictions, even if we do not have a physical presence or employees or
property there. The application of existing laws and regulations to the Internet
or our business, or the adoption of any new legislation or regulations
applicable to the Internet or our business, could materially adversely affect
our financial condition and operating results.
Intellectual Property
We rely on a combination of trademark, copyright and trade secret laws,
as well as technical measures to establish and protect our proprietary rights.
The Catalog.com trademark is registered in the U.S. We also have domain name
registrations for "catalog.com," "catalog.net," "mycatalog.com," "dallas.net,"
"ethos.net," "enotify.com," "oklahoma.net" and "oklahoma.com," each of which we
believe are material to our business. "Dallas Internet," "Ethos Internet,"
"eNotify," "eReceivables," and the Dallas Internet and Ethos Internet logos are
other trademarks of Catalog.com. There can be no assurance that we will be able
to secure significant protection for our service marks or trademarks. It is
possible that our competitors or others will adopt product or service names
similar to ours or other service marks or trademarks, thereby impeding our
ability to build brand identity and possibly leading to customer confusion. Our
inability to protect the name "Catalog.com" adequately could have a material
adverse effect on our business, results of operations and financial condition.
We cannot assure you that the steps we take will prevent misappropriation of our
technology or that agreements entered into for that purpose will be enforceable.
Notwithstanding the precautions we may take, it might be possible for a third
party to copy or otherwise obtain and use our software or other proprietary
information without authorization or to develop similar software independently.
Policing unauthorized use of our technology is difficult, particularly because
the global nature of the Internet makes it difficult to control the ultimate
destination or security of software or other data transmitted. The laws of other
countries may afford us little or no effective protection of our intellectual
property.
We also rely on a variety of technologies that we license from third
parties, including our database and Internet server software, which is used in
our Web site to perform key functions. We cannot assure you that these
third-party technology licenses will continue to be available to us on
commercially reasonable terms. Our loss or inability to maintain or obtain
upgrades to any of these technology licenses could result in delays in
completing our proprietary software enhancements and new developments until
equivalent technology could be identified, licensed or developed and integrated.
Any such delays would materially adversely affect our business, results of
operations and financial condition.
28
<PAGE>
Employees
As of May 22, 2000, we had 27 full-time employees and one part-time
employee. We also utilize the services of contractors and consultants as needed.
None of our employees is represented by a labor union, and we believe employee
relations are good.
Facilities
Our principal offices are located in Plano, Texas and Oklahoma City,
Oklahoma and handle the majority of the administration and sales and marketing
functions. Our properties are as follows:
<TABLE>
<CAPTION>
Area Occupied
Location Purpose of Facility (Sq. Ft.) Owned or Leased
<S> <C> <C> <C>
Plano, TX Office 5,000 Leased
Oklahoma City, OK Office/Data Center 4,500 Leased
</TABLE>
Legal Proceedings
We are not a party to any material legal proceedings.
29
<PAGE>
MANAGEMENT
Directors, Executive Officers and Key Employees
Our directors and executive officers, and their ages and positions as
of May 22, 2000, are as follows:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Robert W. Crull 38 Chairman, President and Chief Executive Officer
David D. Gaither 40 Chief Financial Officer
Bill C. Miller 38 Senior Vice President and Chief Technology Officer; Director
D. Len Reeves 36 Vice President of Customer Service and General Manager
Rodric M. Phillips, Jr., M.D. 38 Director
David E. Rainbolt 44 Director
</TABLE>
Robert W. Crull has served as our Chairman, President and Chief
Executive Officer since 1995. Prior thereto, Mr. Crull was director of
Oracle Learning Architecture with Oracle Corporation from 1995 to 1996
where he was the executive responsible for developing Oracle's online
education Internet offerings. Before that, he was with EDS Corp. and Perot
Systems, Inc. Mr. Crull earned a B.S. from Oklahoma State University in
1985. Mr. Crull is a class III director whose term expires in 2003.
David D. Gaither has served as our Chief Financial Officer since June,
1999. From 1987 to 1999 he served in various capacities with LSB
Industries, Inc., most recently serving as Vice President Accounting. He
received his B.S. in Accounting from Oklahoma Christian University in 1981.
Mr. Gaither is a Certified Public Accountant.
Bill C. Miller has served as our Chief Technology Officer and a
director since our incorporation and was elected Senior Vice President in
May 2000. For the 12 years prior to joining Catalog.com, Mr. Miller was
with Rockwell International, Fidelity Investments, Perot Systems, Inc. and
Oracle Corporation. Mr. Miller earned an M.S.E.E. from Southern Methodist
University in 1988 and a B.S.E.E. from Oklahoma State University in 1984.
He holds several communications-related patents. Mr. Miller is a class II
director whose term expires in 2002.
D. Len Reeves has served as our Vice President of Customer Service and
General Manager since February 1995. Prior to joining Catalog.com, Mr.
Reeves worked as a technical recruiter and hospital physician liaison with
Jackson & Coker, a physician recruitment company. Mr. Reeves earned a B.A.
in Business Management/Marketing from Harding University.
Rodric M. Phillips Jr., M.D. has served as a director of Catalog.com
since 1998. Dr. Phillips received his Doctorate in Medicine from the
University of Oklahoma College of Medicine in 1988. He completed his
residency in anesthesia in 1992, and has served as the Director of
Anesthesia at Orthopedic Associates since 1996 and Northwest Surgical
Hospital in Oklahoma City since 1998. Dr. Phillips is a class II director
whose term expires in 2002.
David E. Rainbolt has served as a director of Catalog.com since April
2000. He is currently President and Chief Executive Officer of BancFirst
Corporation (an affiliate of BancFirst Investment Corporation), a position
he has held since 1992. Prior to 1992, Mr. Rainbolt served as Executive
Vice President and Chief Financial Officer for BancFirst. He has been a
member of BancFirst's board of directors since 1984 and is a member of the
board of directors of ZymeTx, Inc., a publicly-held biotechnology company.
Mr. Rainbolt earned a B.B.A. in Finance from the University of Oklahoma in
1978 and an M.B.A. in Finance from Tulane University in 1979. Mr. Rainbolt
is a class I director whose term expires in 2001.
Directors' Terms
The board of directors is divided into three classes, each of whose
members will serve for a staggered three-year term. Upon the expiration of the
term of a class of directors, directors in such class will be elected for
three-year terms at the annual meeting of shareholders in the year in which such
term expires.
30
<PAGE>
Board Committees
The Audit Committee of the board of directors reviews, acts on and
reports to the board of directors with respect to various auditing and
accounting matters, including the recommendation of our auditors, the scope of
the annual audits, fees to be paid to the auditors, the performance of our
independent auditors and the accounting practices of Catalog.com. Mr. Crull,
Dr. Phillips and Mr. Rainbolt are the members of the Audit Committee.
The Compensation Committee of the board of directors recommends,
reviews and oversees the salaries, benefits and stock option plans for our
employees, consultants, directors and other individuals compensated by
Catalog.com. The Compensation Committee also administers our compensation plans.
Mr. Crull, Dr. Phillips and Mr. Rainbolt are the members of the Compensation
Committee.
Director Compensation
Following this offering we will pay each of our outside directors
$5,000 per year and $1,000 per meeting, and grant each director 10,000 stock
options for each three-year term of service which will vest over three years.
Executive Compensation
Summary Compensation Table
The following table sets forth the total compensation of our chief
executive officer and each other executive officer whose total salary and bonus
during the last three fiscal years exceeded $100,000 (each a named executive
officer, and collectively, the named executive officers).
Long-Term
Name and Principal Position Annual Compensation Compensation
Securities
Underlying
Year Salary Options
Robert W. Crull 1999 $180,000 40,000 (1)
Chief Executive Officer 1998 120,200 --
1997 91,500 --
Michael J. McKay (2) 1999 $165,000 91,500 (2)
President 1998 -- --
1997 -- --
Bill C. Miller 1999 $156,700 40,000 (1)
Senior Vice President 1998 99,200 --
and Chief Technology 1997 78,500 --
Officer
- ---------------------------
(1) Vests at a rate of 25% per year on each of October 1, 2000,
October 1, 2001, October 1, 2002 and October 1, 2003.
(2) Mr. McKay's services as our President terminated on February
18, 2000. Mr. McKay's options must be exercised on or before June 18, 2000.
Option Grants in Fiscal 1999
The following table sets forth certain information regarding options
granted to the Named Executive Officers during the year ended December 31, 1999.
We have not granted any stock appreciation rights.
<TABLE>
<CAPTION>
Percent of Total
Number of Securities Options Granted Exercise
Underlying Options to Employees in Price Per Expiration
Name Granted(1) Fiscal 1999 Share Date
<S> <C> <C> <C> <C>
Robert W. Crull 40,000 10.5% $4.95 10/1/04
Michael J. McKay 51,500 13.5% $2.50 (1)
40,000 10.5% $4.50 (1)
Bill C. Miller 40,000 10.5% $4.50 10/1/09
- --------------------------
</TABLE>
(1) Mr. McKay's services as our President terminated on February 18, 2000. Mr.
McKay's options must be exercised on or before June 18, 2000.
Aggregated Option Exercises in the Year Ended December 31, 1999
31
<PAGE>
And Year-end Option Values
The following table sets forth certain information concerning the
number and value of unexercised options held by each of the Named Executive
Officers at December 31, 1999. None of the Named Executive Officers exercised
options during the year ended December 31, 1999.
The "Value of Unexercised In-the-Money Options" at December 31, 1999 is
based on a value of $10.00 per share of our common stock, which is the minimum
initial offering price, less the per share exercise price multiplied by the
number of shares issued upon the exercise of the options.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at December 31, 1999 at December 31, 1999
---------------------------- --------------------
<S> <C> <C> <C> <C>
Name Vested Unvested Vested Unvested
- ---- ------ -------- ------ --------
Robert W. Crull -- 40,000 -- $202,000
Michael J. McKay -- 91,500 -- 606,250
Bill C. Miller -- 40,000 -- 220,000
</TABLE>
Stock Option Plans
1997 Stock Option Plan. Under the 1997 Stock Option Plan our employees
and directors are eligible to receive awards of stock options. The 1997 Stock
Option Plan provides for grants of "incentive stock options" meeting the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended,
and "non-qualified stock options."
Under the 1997 Stock Option Plan 200,000 shares of common stock are
reserved for issuance (subject to anti-dilution and similar adjustments).
Incentive stock options for 194,000 shares have been granted or exercised under
the 1997 Stock Option Plan as of May 22, 2000.
1999 Stock Option Plan. We have also established the 1999 Stock Option
Plan, pursuant to which our employees and directors are eligible to receive
awards of stock options. The 1999 Stock Option Plan provides for grants of
"incentive stock options" meeting the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended, and "non-qualified stock options."
Under the 1999 Stock Option Plan, 340,000 shares of common stock are
reserved for issuance (subject to anti-dilution and similar adjustments).
Incentive stock options for 295,000 shares have been granted or exercised under
the 1999 Stock Option Plan as of May 22, 2000.
Employment Agreements
We have not entered into employment agreements with our executive
officers, and the employment of such persons may be terminated at any time at
the discretion of our board of directors. All of our employees have executed
confidentiality agreements with us.
TRANSACTIONS WITH RELATED PARTIES
On July 23, 1999, Catalog.com and eight lenders entered into a bridge
loan agreement under which we issued bridge notes in the principal amount of
$1,400,000 with an interest rate of 7.0% per annum. In August 1999, all
outstanding bridge notes were converted into 311,114 shares of Series B
preferred stock at a price of $4.50 per share. Rodric M. Phillips, Jr., M.D.,
one of our directors, held $150,000 in principal amount of bridge notes, which
converted into 33,334 shares of Series B preferred stock.
In February 1996, BancFirst Investment Corp. ("BIC") purchased
1,600,000 shares of common stock for an aggregate purchase price of
approximately $468,000 or $0.2925 per share. In July 1998, in connection with a
$300,000 subordinated debt financing provided by BancFirst, an affiliate of BIC,
we issued 675,255 shares of Series A preferred stock in exchange for the
1,600,000 shares of common stock held by BIC. We redeemed the Series A preferred
stock on July 29, 1999 in consideration of the payment of approximately $468,000
plus a mandatory dividend of approximately $28,000 and the issuance to BIC of
627,022 shares of common stock. As a part of the redemption of the Series A
preferred stock, we repaid a loan from BancFirst in the amount of $300,000.
David E. Rainbolt, one of our directors, is also a BIC director. On July 31,
1998 we also borrowed $1,000,000 under a U.S. Small Business Administration loan
through BancFirst. As of March 31, 2000, total borrowings under this loan were
approximately $722,000. We intend to repay the balance of this loan with
proceeds of this offering.
32
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of May 22, 2000, certain information
with respect to the beneficial ownership of our equity securities by
o each person known by us to beneficially own more than (or own the
right to eventually convert to more than) 5% of all equity securities
outstanding;
o each of our directors;
o each of our executive officers; and
o all of our directors and executive officers as a group.
Except as otherwise indicated, and subject to applicable community
property laws, the persons named in the table below have sole voting and
investment power with respect to all shares of common stock held by them.
Beneficial ownership is determined in accordance with the rules and regulations
of the SEC. Shares of common stock subject to options currently exercisable or
exercisable on or before __________ __, 2000, are deemed outstanding for
purposes of computing the percentage of ownership of each person holding such
options and for all officers and directors as a group, but are not deemed
outstanding in computing the percentage of any other person.
Applicable percentage ownership in the following table is based on
4,189,530 shares of common stock outstanding as of May 22, 2000, which gives
effect to the 2-for-1 stock split and is adjusted to reflect the conversion of
all outstanding shares of preferred stock upon the closing of this offering.
To the extent that any shares are issued upon exercise of options,
warrants or other rights to acquire our capital stock that are presently
outstanding or granted in the future or reserved for future issuance under our
stock option plans, there will be further dilution to new public investors.
The numbers shown in the table below assume no exercise by the
underwriters of their overallotment option. We have granted the underwriters an
option to purchase up to 150,000 shares to cover overallotments, if any.
33
<PAGE>
<TABLE>
<CAPTION>
Percent of Class
Name and Address Amount and Nature of Before After
Title of Class of Beneficial Owner Beneficial Ownership Offering Offering
<S> <C> <C> <C> <C>
Common Robert W. Crull 1,800,000 (1) 43.0 % 34.7 %
14000 Quail Springs Parkway,
Suite 3600
Oklahoma City, OK 73134
Common Bill C. Miller 402,000 (2) 9.6 % 7.7 %
6404 International Parkway,
Suite 2200
Plano, TX 75093
Common Michael J. McKay 91,500 (3) 2.2 % 1.7 %
5414 Edlen Drive
Dallas, Texas 75220
Common BancFirst Investment Corporation 627,022 15.0 % 12.1 %
101 N. Broadway, Suite 460
Oklahoma City, OK 73102
Common Schloss Brothers, LP 240,000 5.7 % 4.6 %
29 E. Maryland St.
Indianapolis, IN 46205
Common Rodric M. Phillips, Jr., M.D. 233,334 (4) 5.6 % 4.5 %
14000 Quail Springs Parkway,
Suite 3600
Oklahoma City, OK 73134
Common David E. Rainbolt 627,022 (5) 15.0 % 12.1 %
101 N. Broadway Ave.
Oklahoma City, OK 73126
Common Richmont Opportunity Fund, L.P. 250,044 (6) 6.0 % 4.8 %
16251 Dallas Parkway, 7th Fl.
Addison, TX 75001
Common Jerral W. Jones Family Limited
Partnership 244,444 (7) 5.8 % 4.7 %
One Cowboy Parkway
Irving, TX 75063
All Directors and Officers as a Group (7 persons) 3,062,356 73.1 % 59.0 %
</TABLE>
- -----------------------
(1) Excludes options to purchase 40,000 shares that become exercisable over a
period of four years from October 1, 2000.
(2) Includes 2,000 shares held by Bill C. Miller as custodian for Jordan Marie
Powell and Cameron Blaine Powell. Excludes options to purchase 40,000 shares
that become exercisable over a period of four years from October 1, 2000.
(3) Mr. McKay's services as the President of Catalog.com terminated on February
18, 2000. Includes 91,500 shares of common stock subject to currently
exercisable options.
(4) Excludes options to purchase 6,000 shares that become exercisable over a
period of four years from October 1, 2000.
(5) Includes 627,022 shares beneficially owned by BIC. Mr. Rainbolt disclaims
beneficial ownership of the shares held by BIC except to the extent of his
pecuniary interest therein.
(6) Includes 42,268 shares beneficially owned by Richmont Opportunity Partners,
Ltd., 5,600 shares beneficially owned by Richmont Asia-Pacific Limited and
22,222 shares of common stock subject to warrants held by Richmont Opportunity
Management Partners, L.P.
(7) Includes 22,222 shares of common stock subject to warrants held by Pro
Silver Star, Ltd.
34
<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
Our certificate of incorporation authorizes the issuance of 19,000,000
shares of common stock, par value $.01 per share, and 2,000,000 shares of
preferred stock, par value $.01 per share, the rights and preferences of which
may be established from time to time by our board of directors. Immediately
prior to this offering 3,395,332 shares of common stock and 794,198 shares of
preferred stock were issued and outstanding. Upon completion of this offering,
5,189,530 shares of common stock and no shares of preferred stock will be
outstanding. As of May 22, 2000, we had 19 holders of common stock and 21
holders of preferred stock.
The following description of our capital stock does not purport to be
complete. It is qualified in its entirety by reference to our certificate of
incorporation and bylaws filed as exhibits to the registration statement of
which this prospectus forms a part, and by the applicable provisions of the
Oklahoma General Corporation Act.
Common Stock
Holders of common stock are entitled to one vote per share on all
matters to be voted on by shareholders. Subject to any preference granted to
holders of any outstanding preferred stock, holders of common stock are entitled
to receive such dividends, if any, as may be declared by the board of directors
out of funds legally available therefore. Holders of common stock have no
cumulative voting, redemption or conversion rights. All of the outstanding
shares of common stock are fully paid and nonassessable.
The holders of Series B preferred stock which will convert to common
stock at the closing of this offering have certain contractual "registration
rights" which generally require us to register such common stock (i) under
certain conditions upon request by the holders thereof; or (ii) at such time as
we register any of our securities under the Securities Act for sale to the
public.
Preferred Stock
Our certificate of incorporation authorizes the board of directors,
from time to time, to issue shares of preferred stock in one or more series.
They may establish the number of shares to be included in any such series, and
may fix the designations, powers, preferences and rights (including voting
rights) of the shares of each such series and any qualifications, limitations or
restrictions on preferred shares. No shareholder authorization is required for
the issuance of these shares of preferred stock unless imposed by then
applicable law. Shares of preferred stock may be issued for any general
corporate purposes, including acquisitions. The board of directors may issue one
or more series of preferred stock with rights more favorable with regard to
voting, dividends and liquidation than the rights of holders of common stock.
Issuance of a series of preferred stock also could be used for the purpose of
preventing a hostile takeover of Catalog.com, even if the takeover is considered
to be desirable by the holders of common stock. Issuance of a series of
preferred stock could otherwise adversely affect the voting power of the holders
of common stock, and could serve to perpetuate the board of directors' control
of Catalog.com under certain circumstances.
No shares of preferred stock will be outstanding after giving effect to
the conversion of all outstanding shares of our preferred stock into common
stock at the closing of this offering and we currently have no plans that would
result in the issuance of any shares of preferred stock.
35
<PAGE>
Registration Rights
Upon completion of this offering the holders of approximately 1,533,972
shares of our common stock, and rights to acquire our common stock, will be
entitled to rights with respect to the registration of those shares under the
Securities Act of 1933. Under the terms of an Amended and Restated Registration
Rights Agreement we entered with the holders of those registrable shares,
following the closing of this offering if we propose to register any additional
securities under the Securities Act, we must notify the holders of such shares
who will be entitled to have their shares of common stock included in the
registration. In addition, the holders of the registrable shares are also
entitled to specific demand registration rights. These demand registration
rights permit the holders of 50% or more of such shares to require us, on up to
two separate occasions, to file a registration statement with respect to their
shares of common stock and to use our best efforts to cause the registration
statement to be declared effective. Furthermore, under the Amended and Restated
Registration Rights Agreement, subject to various conditions, the holders of
registrable shares may require us to file an unlimited number of additional
registration statements under the Securities Act on Form S-3.
These registration rights are subject to certain conditions and
limitations, among them the right of the underwriters of an offering to limit
the number of shares of common stock held by security holders with registration
rights to be included in such registration. Catalog.com is generally required to
bear all of the expenses of all such registrations, except underwriting
discounts and selling commissions. Registration of any of the shares of common
stock held by security holders with registration rights would result in shares
becoming freely tradable without restriction under the Securities Act
immediately upon effectiveness of such registration.
Warrants
At May 22, 2000 we had outstanding currently exercisable warrants to
purchase 145,752 shares of our common stock at an exercise price of $4.50 per
share, which expire as follows:
Shares Subject to Warrants Expiration Date
5,000 8/2/02
20,000 9/8/06
8,000 4/12/04
44,444 8/25/06
68,308 12/1/05
36
<PAGE>
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF
THE CERTIFICATE OF INCORPORATION AND BYLAWS
Certain provisions of our certificate of incorporation and bylaws,
which provisions will be in effect upon the closing of the offering and are
summarized in the following paragraphs, may be deemed to have an anti-takeover
effect and may delay, defer or prevent a tender offer or takeover attempt that a
shareholder might consider in its best interest, including those attempts that
might result in a premium over the market price for the shares held by
shareholders.
Board of Directors Vacancies. Our certificate of incorporation
authorizes the board of directors to fill vacant directorships or increase the
size of the board of directors. This may deter a shareholder from removing
incumbent directors and simultaneously gaining control of the board of directors
by filling the vacancies created by such removal with its own nominees.
Shareholder Action; Special Meetings of Shareholders. The certificate
of incorporation further provides that (i) shareholders may not take action by
written consent, but only at duly called annual or special meetings of
shareholders; and (ii) special meetings of shareholders may be called only by
the Chairman of the board of directors or a majority of the board of directors.
Advance Notice Requirements for Shareholder Proposals and Director
Nomination. The 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 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 120 days
nor more than 150 days prior to the first anniversary of the date of
Catalog.com's notice of annual meeting provided with respect to the previous
year's annual meeting of shareholders; provided, that if no annual meeting of
shareholders was held in the previous year or the date of the annual meeting of
shareholders has been changed to be more than 30 calendar days earlier than or
60 calendar days after such anniversary, notice by the shareholder, to be
timely, must be so received not more than 90 days nor later than the later of
(1) 60 days prior to the annual meeting of shareholders, or (2) the close of
business on the 10th day following the date on which notice of the date of the
meeting is given to shareholders or made public, whichever first occurs. The
bylaws also specify certain requirements as to the form and content of a
shareholder's notice. These provisions may preclude shareholders from bringing
matters before an annual meeting of shareholders or from making nominations for
directors at an annual meeting of shareholders.
Authorized but Unissued Shares. The authorized but unissued shares of
common stock and preferred stock are available for future issuance without
shareholder approval, subject to certain limitations imposed by the American
Stock Exchange. These additional shares may be used for a variety of corporate
purposes, including future public offerings to raise additional capital,
corporate acquisitions and employee benefit plans. The existence of authorized
but unissued and unreserved common stock and preferred stock could render more
difficult or discourage an attempt to obtain control of Catalog.com by means of
a proxy contest, tender offer, merger or otherwise.
The Oklahoma General Corporation Act provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or bylaws, unless
a corporation's certificate of incorporation or bylaws, as the case may be,
requires a greater percentage.
Limitation of Liability and Indemnification Matters
Our bylaws include certain provisions whereby our officers and
directors are to be indemnified against certain liabilities. Our certificate of
incorporation also limits, to the fullest extent permitted by Oklahoma law, a
director's liability for monetary damages for breach of fiduciary duty,
including gross negligence. Under Oklahoma law, however, a director's liability
cannot be limited for (i) breach of the director's duty of loyalty; (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law; (iii) the unlawful payment of a dividend or unlawful stock
purchase redemption; or (iv) any transaction from which the director derives an
improper personal benefit. Oklahoma law does not eliminate a director's duty of
care and this provision has no effect on the availability of equitable remedies
such as injunction or rescission based upon a director's breach of the duty of
care.
There is currently no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the certificate of incorporation, and we are not
aware of any threatened litigation or proceeding that may result in a claim for
such indemnification.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is UMB Bank, N.A.
American Stock Exchange Listing
We intend to apply for listing our shares of common stock, subject to
notice of issuance, on the American Stock Exchange under the symbol "____."
37
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock,
and we cannot predict the effect, if any, that sales of our common stock or the
availability of common stock for sale will have on its market price.
Nevertheless, sales of substantial amounts of our common stock in the public
market, or the perception that such sales could occur, could negatively affect
the market price of the common stock and impair our ability to raise capital
through the sale of our equity securities in the future.
Upon the closing of the offering, we will have an aggregate of
5,189,530 shares of common stock outstanding, assuming no exercise of the
underwriters' overallotment option and no exercise of outstanding options or
conversion of outstanding warrants. Of the outstanding shares, all of the
1,000,000 shares sold in this offering will be freely tradable, except that any
shares held by "affiliates" of Catalog.com, as that term is defined in Rule 144
under the Securities Act, may only be sold in compliance with the limitations
described below. Of the remaining 4,189,530 shares of common stock 1,680,720
will be deemed "restricted securities" as defined under Rule 144 and 2,508,810
shares are eligible for sale without restriction or further registration under
Rule 144(k), unless they are held by "affiliates" of Catalog.com or subject to a
"lock-up" agreement as summarized below. Restricted securities may be sold in
the public market only if registered or if they qualify for an exemption from
registration under Rules 144, 144(k) or 701 promulgated under the Securities
Act, which rules are summarized below. Subject to the lock-up agreements
described below and the provisions of Rules 144, 144(k) and 701, additional
shares will be available for sale in the public market as follows:
o Upon the filing of a registration statement to register for resale
shares of common stock issuable upon the exercise of options
granted under the 1997 and 1999 Stock Option Plans;
o At various times after 90 days from the date of this prospectus;
o After 180 days from the date of this prospectus (subject, in some
cases to volume limitations); and
o At various times after 180 days from the date of this prospectus.
In general, under Rule 144, as currently in effect, a person (or
persons whose shares are required to be aggregated), including an affiliate, who
has beneficially owned shares for at least one year is entitled to sell, within
any three-month period commencing 90 days after the date of this prospectus, a
number of shares that does not exceed the greater of:
o 1% of the then-outstanding shares of common stock (approximately
52,000 shares immediately after the offering); or
o the average weekly trading volume in the common stock during the
four calendar weeks preceding the date on which notice of such
sale is filed, subject to certain restrictions.
In addition, a person who is not deemed to have been our affiliate at
any time during the 90 days preceding a sale and who has beneficially owned the
shares proposed to be sold for at least two years would be entitled to sell such
shares under Rule 144(k) without regard to the requirements described above. To
the extent that shares were acquired from an affiliate of Catalog.com, such
person's holding period for the purpose of effecting a sale under Rule 144
commences on the date of transfer from the affiliate.
As of the date of this prospectus, options to purchase a total of
481,500 shares of common stock are outstanding, of which 175,500 are currently
exercisable. We intend to file a Form S-8 registration statement under the
Securities Act shortly after the date of this prospectus to register all shares
of common stock issuable under the 1997 and 1999 Stock Option Plans. Such
registration statement will automatically become effective upon filing.
Accordingly, shares covered by that registration statement will thereupon be
eligible for sale in the public markets, unless such options are subject to
vesting restrictions or the contractual restrictions described above.
38
<PAGE>
UNDERWRITING
Subject to the terms and conditions stated in the underwriting
agreement dated the date hereof, each underwriter named below has severally
agreed to purchase and we have agreed to sell to such underwriters, the number
of shares set forth opposite the name of such underwriters.
Name Number of Shares
Institutional Equity Corporation
Capital West Securities, Inc.
Total
The underwriting agreement provides that the obligations of the
underwriters to purchase the shares included in this offering are subject to
approval of certain legal matters by counsel and to certain other conditions.
The underwriters are obligated to purchase all the shares (other than those
covered by the overallotment option described below) if they purchase any of the
shares.
Public Offering Price and Dealers Concession
The underwriters, for whom Institutional Equity Corporation and Capital
West Securities, Inc. are acting as representatives, propose to offer some of
the shares directly to the public at the public offering price set forth on the
cover page of this prospectus and some of the shares to certain dealers, who are
members of the National Association of Securities Dealers, Inc., at the public
offering price less a concession not in excess of $ ___ per share. The
underwriters may allow, and such dealers may reallow, a concession not in excess
of $ ___ per share on sales to certain other dealers. If all of the shares are
not sold at the initial offering price, the representatives may change the
public offering price and the other selling terms. No such change will alter the
amount of proceeds to be received by us as set forth on the cover page of this
prospectus. The representatives have advised us that the underwriters do not
intend to confirm any sales to any accounts over which they exercise
discretionary authority.
Overallotment Option
We have granted to the underwriters an option, exercisable for 45 days
from the date of this prospectus, to purchase up to 150,000 additional shares of
common stock from us on the same terms as set forth in this prospectus with
respect to the 1,000,000 shares offered hereby. The underwriters may exercise
such option solely for the purpose of covering overallotments, if any, in
connection with this offering. To the extent such option is exercised, each
underwriter will be obligated, subject to certain conditions, to purchase a
number of additional shares approximately proportionate to such underwriter's
initial purchase commitment.
39
<PAGE>
Underwriters' Compensation
The following table shows the underwriting discounts and commissions we will pay
to the underwriters in connection with this offering. We have agreed to pay the
underwriters a commission of 10% of the per share offering price for shares sold
to the public, and 7% of the per share offering price for shares sold to friends
and family of our existing shareholders. These amounts are shown assuming both
no exercise and full exercise of the underwriters' overallotment option to
purchase additional shares of common stock.
Total
Without With
Per Share(1) Overallotment Overallotment
Underwriting fees paid by us
Expenses payable by us
Deemed compensation paid by us
Total
__________
(1) Based on a per share commission of 10% of the offering price.
Indemnification of Underwriters
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments the underwriters may be required to make in respect of
any of those liabilities.
Underwriters' Warrants
Upon completion of this offering, we will sell to the underwriters, for
there own accounts, warrants covering an aggregate of up to 100,000 shares of
common stock exercisable at a price of _____ (115% of the offering price) per
share. The underwriters will pay a price of $0.001 per warrant. The
underwriters may exercise these warrants as to all or any lesser number of the
underlying shares of common stock commencing on the first anniversary of the
date of this offering until the fifth anniversary of the date of this offering.
The terms of these warrants require us to register the common stock for which
these warrants are exercisable within one year of the date of this prospectus.
These underwriters' warrants are not transferable by the warrant holders other
than to officers and partners of the underwriters. The exercise price of these
underwriters' warrants and the number of shares of common stock for which
these warrants are exercisable are subject to adjustment to protect the warrant
holders against dilution in certain events.
Lock-up Agreements
In connection with this offering, our existing officers and directors
and some of our shareholders, who will own a total of ______ shares of common
stock after the offering, have entered into lock-up agreement pursuant to which
they have agreed not to offer or sell any shares of common stock for a period of
180 days after the date of this prospectus without the prior written consent of
Institutional Equity Corporation, which may, in its sole discretion, at any time
and without notice, waive any of the terms of these lock-up agreements.
Institutional Equity Corporation currently has no intention to allow any shares
of the common stock to be sold or otherwise offered by Catalog.com prior to the
expiration of the 180 day lock-up period, although it may decide to do so in
light of the purpose for which any such shares are requested to be sold or
otherwise offered, prevailing market conditions and any other factor which
Institutional Equity Corporation, in its sole discretion, may deem to be
relevant. Following the lock-up period, these shares will not be eligible for
sale in the public market without registration under the Securities Act unless
such sale meets the conditions and restrictions of Rule 144.
In addition, we have agreed that for a period of 180 days after the
date of this prospectus, we will not sell or offer to sell or otherwise dispose
of any shares of common stock without the prior written consent of Institutional
Equity Corporation, except that we may issue, and grant options to purchase,
shares of common stock under our stock option plans.
40
<PAGE>
Determining the Offering Price
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for the shares was
determined by negotiations among us and the underwriters' representatives. Among
the factors considered in determining the initial public offering price were our
record of operations, current financial condition, future prospects and markets,
the economic conditions in and future prospects for the industry in which we
compete, our management, and currently prevailing general conditions in the
equity securities markets, including current market valuations of publicly
traded companies considered comparable to us. We cannot assure you that the
prices at which the shares will sell in the public market after this offering
will not be lower than the price at which they are sold by the underwriters or
that an active trading market in the common stock will develop and continue
after this offering.
Stabilization and other Transactions
In connection with the offering, Institutional Equity Corporation, on
behalf of the underwriters, may overallot, or engage in syndicate covering
transactions, stabilizing transactions and penalty bids. Overallotment involves
syndicate sales of common stock in excess of the number of shares to be
purchased by the underwriters in the offering, which creates a syndicate short
position. Syndicate covering transactions involve purchases of the common stock
in the open market after the distribution has been completed in order to cover
syndicate short positions. Stabilizing transactions consist of certain bids or
purchases of common stock made for the purpose of preventing or retarding a
decline in the market price of the common stock while the offering is in
progress. Penalty bids permit the underwriters to reclaim a selling concession
from a syndicate member when Institutional Equity Corporation, in covering
syndicate short positions or making stabilizing purchases, repurchases shares
originally sold by that syndicate member. These activities may cause the price
of the common stock to be higher than the price that otherwise would exist in
the open market in the absence of such transactions. These transactions may be
effected on the American Stock Exchange. None of the transactions described in
the paragraph is required, and, if they are undertaken, they may be discontinued
at any time.
Advisory Director
We have agreed that upon the conclusion of this offering we will appoint
to our board of directors one non-voting advisory director selected by the
underwriters' representatives.
LEGAL MATTERS
The validity of the common stock in the offering will be passed upon
for Catalog.com by Phillips McFall McCaffrey McVay & Murrah, P.C., Oklahoma
City, Oklahoma, which holds 23,810 shares of our common stock. Douglas A.
Branch, a shareholder and director of that firm, serves as our Secretary.
Certain legal matters in connection with the offering will be passed upon for
the underwriters by Bingham Dana, LLP.
EXPERTS
The financial statements as of December 31, 1998 and 1999 and for each
of the two years in the period ended December 31, 1999 included in this
prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
WHERE YOU CAN GET ADDITIONAL INFORMATION
We filed with the SEC a registration statement on Form SB-2 (including
the exhibits, schedules and amendments thereto) under the Securities Act with
respect to the shares of common stock to be sold in the offering. This
prospectus does not contain all the information set forth in the registration
statement. For further information with respect to Catalog.com and the shares of
common stock to be sold in the offering, reference is made to the registration
statement. Statements contained in this prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete,
and in each instance reference is made to the copy of such contract, agreement
or other document filed as an exhibit to the registration statement, each such
statement being qualified in all respects by such reference.
You may read and copy all or any portion of the registration statement
or any other information Catalog.com files at the SEC's public reference room at
450 Fifth Street, N.W., Washington, D.C. 20549. You can request copies of these
documents, upon payment of a duplicating fee, by writing to the SEC. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. Our SEC filings, including the registration statement, are also
available to you on the SEC's Web site (http://www.sec.gov).
As a result of the offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act of 1934, as amended, and,
in accordance therewith, will file periodic reports, proxy statements and other
information with the SEC. Upon approval of the common stock for listing on the
American Stock Exchange such reports, proxy and information statements and other
information may also be inspected at the American Stock Exchange office,
located at 86 Trinity Place, New York, New York 10006-1872. We intend to furnish
our shareholders with annual reports containing audited financial statements and
make available quarterly reports for the first three quarters of each year
containing unaudited interim financial information.
41
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Page
Catalog.com, Inc.
Report of independent public accountants...............................................................F-1
Balance sheets as of December 31, 1999 and March 31, 2000 (unaudited)..................................F-2
Statements of operations for the years ended December 31, 1998, 1999 and
three-months ended March 31, 2000 and 1999 (unaudited)............................................F-4
Statement of stockholders' deficit for the years ended December 31, 1997, 1998,
1999 and three-months ended March 31, 2000 (unaudited)............................................F-5
Statements of cash flows for the years ended December 31, 1998, 1999 and
three-months ended March 31, 2000 and 1999 (unaudited).............................................F-6
Notes to financial statements..........................................................................F-7
Network Wizards
Report of independent public accountants...............................................................F-16
Statement of operations for the period from January 1, 1998 to July 30, 1998...........................F-17
Statement of cash flows for the period from January 1, 1998 to July 30, 1998...........................F-18
Notes to financial statements..........................................................................F-19
</TABLE>
42
<PAGE>
Report of Independent Public Accountants
To the Board of Directors of
Catalog.com, Inc.:
After the 2 for 1 split of the common and Series B preferred stock discussed in
Note 11 to Catalog.com's financial statements is effected, we expect to be in a
position to render the following audit report.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma,
February 18, 2000
We have audited the accompanying balance sheet of Catalog.com, Inc. (formerly
Ethos Communications Corp.) (an Oklahoma corporation) as of December 31, 1999,
and the related statements of operations, stockholders' deficit and cash flows
for each of the two years in the period ended December 31, 1999. 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 auditing standards generally accepted
in the United States. 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 Catalog.com, Inc. as of
December 31, 1999, and the results of its operations and cash flows for each of
the two years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
F-1
<PAGE>
CATALOG.COM, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
ASSETS 1999 2000
- ------ -------- ------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,650,994 $ 1,329,424
Accounts receivable, net of allowance for doubtful accounts of $2,437 119,251 165,634
Prepaids and other 5,754 21,876
------------ ------------
Total current assets 1,775,999 1,516,934
------------ ------------
PROPERTY AND EQUIPMENT:
Computer equipment 882,850 974,488
Furniture and fixtures 110,381 131,041
Capital lease equipment 319,604 319,604
Leasehold improvements 12,102 12,332
------------ ------------
1,324,937 1,437,465
Less- Accumulated depreciation (779,417) (867,262)
------------ ------------
Net property and equipment 545,520 570,203
------------ ------------
OTHER ASSETS:
Customer list, net of accumulated amortization of $234,309 921,312 879,323
Software development costs, net of accumulated amortization of $239,916 189,873 193,740
Domain names, net of accumulated amortization of $8,274 126,726 121,895
Preferred stock issuance costs, net of amortization of $20,891 292,459 276,764
Other 53,773 56,253
------------ ------------
Total other assets $ 1,584,143 $ 1,527,975
------------ ------------
Total assets $ 3,905,662 $ 3,615,112
============ ============
</TABLE>
F-2
<PAGE>
CATALOG.COM, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
LIABILITIES AND STOCKHOLDERS' DEFICIT 1999 2000
- ------------------------------------- -------- ------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 159,963 $ 218,946
Deferred revenue 318,496 342,066
Other accrued liabilities 9,424 8,516
Current maturities of long-term debt 142,708 144,891
Current maturities of capital lease obligations 59,578 31,090
------------ ------------
Total current liabilities 690,169 745,509
------------ ------------
OBLIGATIONS DUE AFTER ONE YEAR:
Long-term debt 613,471 577,412
COMMITMENTS (Notes 4 and 5)
SERIES B PREFERRED, $.01 par value; 800,000 shares authorized, 794,198 shares issued
and outstanding 3,573,891 3,573,891
STOCKHOLDERS' DEFICIT:
Common stock, $.01 par value; 19 million shares authorized, 3,395,332 shares
issued and outstanding 33,953 33,953
Series A preferred stock, $.01 par value; 1 million shares authorized,
no shares issued and outstanding - -
Additional paid-in capital 1,056,924 1,056,924
Retained deficit (2,062,746) (2,372,577)
------------ ------------
Total stockholders' deficit (971,869) (1,281,700)
------------ ------------
Total liabilities and stockholders' deficit $ 3,905,662 $ 3,615,112
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
CATALOG.COM, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
1998 1999 1999 2000
------- -------- ------- ------
(Unaudited)
<S> <C> <C> <C> <C>
INTERNET AND ONLINE SERVICE REVENUES $ 1,912,744 $ 2,837,683 $ 629,989 $ 898,387
OPERATING COSTS AND EXPENSES:
Communications and operations 592,834 674,864 161,932 202,380
Sales and marketing 136,511 528,742 22,649 206,264
General and administrative 752,562 1,980,213 250,416 612,182
Depreciation and amortization 389,135 585,832 114,981 172,008
----------- ------------ ----------- -----------
Total operating costs and expenses 1,871,042 3,769,651 549,978 1,192,834
----------- ------------ ----------- -----------
Operating income (loss) 41,702 (931,968) 80,011 (294,447)
----------- ------------ ----------- -----------
OTHER (INCOME) AND EXPENSES:
Interest expense 86,441 132,179 33,350 20,918
Interest and other income (5,061) (47,385) (1,183) (21,229)
----------- ------------ ----------- -----------
Total other expenses (income) 81,380 84,794 32,167 (311)
----------- ------------ ----------- -----------
NET INCOME (LOSS) (39,678) (1,016,762) 47,844 (294,136)
dividends on preferred stock (25,432) (84,573) (15,259) (15,695)
----------- ------------ ----------- -----------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS (65,110) (1,101,335) 32,585 (309,831)
=========== ============ ========= ============
BASIC NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS (.02) (0.37) .01 (.09)
=========== ============ ========= ============
DILUTED NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS (.02) (0.37) .01 (.09)
=========== ============ ========= ============
BASIC WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 3,424,974 2,970,890 2,510,143 3,395,332
=========== ============ =========== ============
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 3,424,974 2,970,890 2,584,344 3,395,332
=========== ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
CATALOG.COM, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Series A Additional Total
Preferred Stock Common Stock Paid-in Retained Stockholders'
---------------------------- -------------------------
Shares Amount Shares Amount Capital Deficit Deficit
---------- ---------- --------- ---------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 - $ - 4,108,810 $ 41,088 $ 477,204 $ (524,301) $ (6,009)
Exchange of common stock for redeemable
Convertible Series A preferred stock 675,255 433,085 (1,600,000) (16,000) (452,000) (372,000) (406,915)
Dividend on Series A preferred stock - - - - - (25,432) (25,432)
Net loss - - - - - (39,678) (39,678)
---------- ---------- --------- --------- -------- ------------- -------------
BALANCE, DECEMBER 31, 1998 675,255 433,085 2,508,810 25,088 25,204 (961,411) (478,034)
Common stock issued - - 259,500 2,595 604,905 - 607,500
Dividends on Series A preferred stock - - - - - (63,682) (63,682)
Redemption of Series A preferred stock (675,255) (433,085) 627,022 6,270 426,815 - -
Dividend on Series B preferred stock - - - - - (20,891) (20,891)
Net loss - - - - - (1,016,762) (1,016,762)
---------- ---------- ----------- --------- ------------ -------------- ------------
BALANCE, DECEMBER 31, 1999 - - 3,395,332 33,953 1,056,924 (2,062,746) (971,869)
Dividend on Series B preferred
stock (unaudited) - - - - - (15,695) (15,695)
Net loss (unaudited) - - - - - (294,136) (294,136)
--------- ---------- ----------- ------- -- --------- ------------- ------------
BALANCE, MARCH 31, 2000 (unaudited) - $ - 3,395,332 $ 33,953 $ 1,056,924 $(2,372,577) $ (1,281,700)
========== ========== =========== ========= ============ ============= =============
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-5
<PAGE>
CATALOG.COM, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
<S> <C> <C> <C> <C>
1998 1999 1999 2000
-------- -------- -------- ------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (39,678) $ (1,016,762) $ 47,844 $ (294,136)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operations-
Depreciation and amortization 389,135 585,832 114,981 172,008
Changes in current assets and liabilities-
Increase in accounts receivable (14,879) (76,447) (40,148) (46,383)
(Increase) decrease in prepaids and other (1,337) 2,500 (1,224) (16,122)
Increase in accounts payable 38,249 70,400 18,024 58,983
Increase (decrease) in deferred revenue 77,194 46,785 (4,105) 23,570
Increase (decrease) in other accrued liabilities 222 4,030 (4,828) (908)
------------ ------------ ------------ ------------
Net cash provided by (used in) operating
activities 448,906 (383,662) 130,544 (102,988)
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (52,290) (515,139) (34,756) (112,528)
Acquisition of web hosting assets (1,180,000) - - -
Acquisition of domain names (10,000) (125,000) - -
Non-compete agreement (10,000) - - -
Trademark registration - (6,751) - (888)
Software development costs (166,917) (107,436) (20,162) (38,705)
Other non-current assets - (14,010) - (4,097)
------------ ------------ ------------ ------------
Net cash used in investing activities (1,419,207) (768,336) (54,918) (156,218)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of short-term debt - 1,400,000 - -
Repayment of note payable - shareholder (9,195) (40,583) (3,774) -
Repayment of long-term debt (90,332) (568,351) (45,827) (33,876)
Proceeds from issuance of long-term debt 1,274,062 44,964 - -
Payments of capital lease obligations (113,474) (108,357) (25,049) (28,488)
Proceeds from issuance of common stock - 607,500 - -
Proceeds from issuance of preferred stock - 1,860,541 - -
Deferred financing costs - - (10,000) -
Redemption of Series A preferred stock - (467,952) - -
Series A preferred stock dividends - (28,077) - -
------------ ------------ ------------ ------------
Net cash provided by (used in) financing
activities 1,061,061 2,699,685 (84,650) (62,364)
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH 90,760 1,547,687 (9,024) (321,570)
CASH, beginning of period 12,547 103,307 103,307 1,650,994
------------ ------------ ------------ ------------
CASH, end of period $ 103,307 $ 1,650,994 $ 94,283 $ 1,329,424
============ ============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 81,646 $ 132,041 $ 33,350 $ 20,918
Income taxes paid $ - $ - $ - $ -
NON-CASH FINANCING ACTIVITIES:
Series A preferred stock dividend $ 25,432 $ 35,605 $ 15,259 $ -
Series B preferred stock dividend $ - $ 20,891 $ - $ 15,695
Conversion of short-term debt to Series B preferred
stock $ - $ 1,400,000 $ - $ -
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-6
<PAGE>
CATALOG.COM, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION:
-------------
Catalog.com, Inc. (the "Company"), formerly Ethos Communications Corp., based in
Oklahoma City, Oklahoma, was incorporated in Oklahoma on February 28, 1996, and
provides Internet services including an online catalog search engine
(Catalog.com), Internet access, web hosting and Internet application
development. The Company conducts its business within one industry segment with
web hosting customers in all 50 states and 50 foreign countries. Internet access
services are provided in the Dallas/Ft. Worth, Texas, Oklahoma City and Tulsa,
Oklahoma markets.
The Company is the successor to the operations of Washita Communications, LLC
("Washita"). Washita was owned by the current majority stockholders of
Catalog.com. Effective February 29, 1996, the assets and liabilities of Washita
and $468,000 from BancFirst Investment Corporation, were exchanged for common
stock in the Company. On July 31, 1998, the Company purchased certain fixed
assets, accounts receivable, web hosting assets and electronic commerce assets
from a sole proprietor for $1.2 million ("Network Wizards Assets"). Included in
these assets were the rights to the domain name "Catalog.com." Upon completion
of this purchase, the Company began doing business as Catalog.com. Effective
April 14, 1999, the Company changed its name to Catalog.com, Inc.
The Company's future success is dependent on continued growth in the use of the
Internet and on its ability to retain existing customers while continuing to
attract new customers. The market for Internet services is characterized by
rapidly changing technology, standards, services and products. The Company's
success will depend, in part, on its ability to market its services effectively,
retain its customer base, and to continue to develop its technical
infrastructure and solutions.
All per share amounts for the Company's common stock and Series B preferred
stock have been retroactively adjusted to reflect the Company's stock split,
discussed in Note 11.
2. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES:
---------------------------------------------------------
Interim Financial Statements
The interim financial statements as of March 31, 2000, and for the three-month
periods ended March 31, 1999 and 2000, are unaudited, and certain information
and footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States
have been omitted. In the opinion of management, all adjustments, consisting of
normal recurring adjustments, necessary to fairly present the financial
position, results of operations and cash flows with respect to the interim
financial statements have been included.
Property and Equipment
Property and equipment are recorded at cost. Major additions and improvements
are capitalized at cost, while maintenance and repairs which do not extend the
useful lives of the respective assets are expensed. When assets are sold or
retired, cost and accumulated depreciation are removed from the respective
accounts. Any gains or losses resulting from disposal are included in other
income. Depreciation is provided over the assets' estimated useful lives using
the straight-line method of depreciation. The estimated useful lives of assets
are as follows:
Years
Computer equipment 3
Furniture and fixtures 5
Leasehold improvements 5-6
Depreciation of property and equipment was approximately $229,500 and $284,000
for the years ended December 31, 1998 and 1999, respectively.
F-7
<PAGE>
Software Development Costs
The Company's online service is comprised of various features which
contribute to the overall functionality of the Catalog.com website. The Company
capitalizes costs incurred in the development of software used in the sale of
its services. Capitalized costs include direct labor and related overhead for
software produced by the Company and the cost of software purchased from third
parties. Research and development costs are expensed as incurred until
technological feasibility of the software has been established. Once
technological feasibility has been established, such costs are capitalized until
the software is available for its intended use. Software development costs are
amortized using the straight-line method over a maximum of three years or the
expected life of the product, whichever is less. Accumulated amortization of
$239,916 is deducted from software development costs on the accompanying balance
sheet at December 31, 1999. Amortization expense relating to software
development costs totaled approximately $85,000 and $119,000 during 1998 and
1999, respectively.
Effective January 1, 1998, the Company adopted Statement of Position 98-1 ("SOP
98-1"), "Accounting for the Cost of Computer Software Developed or Obtained for
Internal Use." SOP 98-1 provides guidance over accounting for computer software
developed or obtained for internal use including the requirement to capitalize
specified costs and amortization of such costs. The Company's adoption of SOP
98-1 did not have a material effect on the Company's capitalization policy,
operations or financial position.
Customer List
Customer list capitalized cost relates to the portion of the total
purchase price of the Network Wizards Assets purchased in 1998 allocated to the
customer base acquired in the acquisition. Customer list is being amortized on a
straight-line basis over a 7-year period. Amortization expense of the customer
list during 1998 and 1999 totaled approximately $69,200 and $165,100,
respectively.
Domain Names
Domain names capitalized cost consist of the purchase price paid by the Company
to acquire rights to domain names such as "catalog.net," "mycatalog.com" and
"catalog.com." Domain names are amortized on a straight-line basis over a 7-year
period. Amortization expense for domain names during 1998 and 1999 totaled
approximately $600 and $7,700, respectively.
Other Assets
Other assets consist primarily of trademark rights, deferred charges, and
deposits. The trademark rights are net of accumulated amortization of $2,126,
and are being amortized over 15 years. Deferred charges relate to costs incurred
in connection with the Company's borrowing under the United States Small
Business Administration loan. These costs are being amortized over the life of
the loan and are shown net of accumulated amortization of $5,244 in the
accompanying balance sheet. Deposits represent security deposits on the
Company's leased facilities.
Revenue Recognition
Internet access and web hosting services, subscription and usage fees are earned
over the period services are provided which is generally one month to one year.
Service fees are billed in advance and are recognized over the period the
service is provided. Billings in advance of revenues being earned are recorded
as deferred revenue in the accompanying balance sheets.
No one customer accounted for 10% or more of net revenues during 1998 or 1999.
Advertising Costs
Advertising costs are charged to operations when incurred. Advertising
expense during 1998 and 1999 totaled approximately $12,800 and $335,000,
respectively.
F-8
<PAGE>
Income Taxes
Deferred income taxes are provided to reflect the future tax consequences of
differences between the tax bases of assets and liabilities and their reported
amounts in the financial statements. Deferred income tax assets and liabilities
are computed using the currently enacted tax laws and rates that apply to the
periods in which they are expected to affect taxable income. Income tax expense
is the current tax payable or refundable for the period plus or minus the net
change in the deferred tax assets and liabilities.
Deferred taxes are classified as current or noncurrent, depending on the
classification of the assets and liabilities to which they relate. Deferred
taxes arising from temporary differences that are not related to an asset or
liability are classified as current or noncurrent depending on the period in
which the temporary differences are expected to be used. A valuation allowance
is established when it is more likely than not that some portion or all of the
deferred tax assets will not be realized.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash, trade
receivables, trade payables, capital lease obligations and bank debt. The
carrying value of cash, trade receivables and trade payables are considered to
be representative of their respective fair values, due to the short maturity of
these instruments. The fair value of capital lease obligations and bank debt
approximates its carrying value based on the borrowing rates currently available
to the Company for leases and bank loans with similar terms and maturities.
Concentration and Credit Risk
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of cash and trade receivables. Concentration of
credit risk with respect to trade receivables is limited as the outstanding
total represents a large number of customers with individually small balances.
The Company does not require collateral or other security against trade
receivable balances; however, it does maintain reserves for potential credit
losses and such losses have been within management's expectations.
Loss Per Common Share
The Company computes basic and diluted loss per common share in accordance with
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per
Share." SFAS 128 requires the Company to report both basic loss per share, which
is based on the weighted average number of common shares outstanding, and
diluted loss per share, which is based on the weighted average number of common
shares outstanding and all potentially dilutive common stock equivalents
outstanding. Diluted loss per common share has been omitted because the impact
of stock options, warrants and convertible preferred stock on the Company's loss
per common share is anti-dilutive.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
Comprehensive Loss
In 1998, the Company adopted SFAS No. 130 "Reporting Comprehensive
Income." Net loss for the periods ended December 31, 1998 and 1999, are the
same as comprehensive loss defined pursuant to SFAS No. 130.
Business Segments
The Company operates in one business segment pursuant to Statement of
Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of
an Enterprise and Related Information."
Recently Issued Accounting Pronouncements
In December 1999, the U.S. Securities and Exchange Commission ("SEC")
released Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" (SAB101), which clarifies the SEC's views on revenue recognition.
The Company believes its existing revenue recognition policies and procedures
are in compliance with SAB101 and therefore, SAB101's adoption will have no
material impact on the Company's financial condition, results of operations or
cash flows.
F-9
<PAGE>
3. LONG-TERM DEBT:
---------------
The Company's long-term debt at December 31, 1999, consists of the following:
Line of credit agreement (a) $ -
Promissory note with a stockholder (b) -
SBA loan with a bank (c) 714,497
Term loan with a bank (d) -
Note payable (e) 41,682
-----------
Total long-term debt 756,179
Less- Current maturities (142,708)
-----------
Long-term debt $ 613,471
===========
(a) In October 1996, the Company entered into a revolving line of credit
agreement with a bank which is an affiliate of a stockholder of the
Company. Under the revolving line of credit, the Company could borrow up
to $100,000. Borrowings bear interest at a rate of 2% over the prime rate
of larger commercial banks. The outstanding principal plus all accrued
interest as of April 30, 1997, was due in 24 monthly payments beginning
May 30, 1997, and continuing on the 30th day of each month until maturity
on April 30, 1999. Borrowings under this agreement were secured by all
furniture, fixtures, equipment, software, inventory and accounts of the
Company. During 1999, the outstanding balance was paid in full and the
line expired.
(b) In February 1996, the Company borrowed $64,000 under an unsecured
promissory note, bearing no interest, with a stockholder of the Company.
Principal payments of $3,556 were due monthly with the remaining balance
due at maturity on December 1, 1997. On December 1, 1997, the note was
amended to provide for 10% interest until paid in full with no stated
maturity date or mandatory principal payments. During 1999, the
outstanding balance was paid in full.
(c) On July 31, 1998, the Company borrowed $1,000,000 under a United States
Small Business Association loan through a bank which is an affiliate of a
stockholder of the Company. The note bears interest at a rate equal to
Wall Street Journal prime plus 2.5% adjusted quarterly (10.75% at
December 31, 1999). Principal and interest payments of $17,123 are due
monthly until maturity on July 31, 2005. The note is secured by all
assets of the Company and a personal guarantee of the Chief Executive
Officer of the Company. During December 1999, the Company made an
additional principal payment of $132,733 on the outstanding balance.
(d) On July 28, 1998, the Company borrowed $300,000 under a note payable to a
bank which is an affiliate of a stockholder. The note bears interest at a
10% fixed rate with interest payments due monthly. Four principal
payments of $60,000 were due annually beginning July 28, 1999, with a
fixed principal and interest payment of $60,500 due at maturity on July
28, 2003. The note is secured by a personal guarantee of the Chief
Executive Officer of the Company. During 1999, the outstanding balance
was paid in full.
(e) In August 1999, the Company borrowed $44,965 under two unsecured notes
payable with a finance company. The notes bear interest at a 10.26% fixed
rate with interest and principal payments of $953 due monthly until
maturity on July 31, 2004.
On July 23, 1999, the Company borrowed $1,400,000 under a bridge loan agreement
with eight individuals (the "Bridge Loans"). The Bridge Loans bore interest at a
fixed rate of 7.0% with interest payments due on the last day of the year. All
principal, plus any accrued interest, was due on the earlier of a Qualified
Private Placement or July 23, 2000. Upon certain conditions, the Bridge loans
were convertible to preferred stock at a price per preferred share equal to
$4.50, as adjusted for the stock split. Proceeds from the Bridge Loans were used
to fund the required cash component of the Series A preferred stock redemption,
pay all Mandatory and Accrued Dividends and pay off the $300,000 of outstanding
indebtedness and accrued interest under the Company's term loan described in
(d). On August 25, 1999, the Bridge Notes were converted into 311,114 shares of
Series B preferred stock.
F-10
<PAGE>
The annual maturities of long-term debt at December 31, 1999, are as follows:
2000 $ 142,708
2001 158,787
2002 176,679
2003 196,587
2004 and thereafter 81,418
-----------
Total $ 756,179
===========
4. CAPITAL LEASE OBLIGATIONS:
--------------------------
The Company leases computer equipment under three capital leases each
expiring in 2000. The assets and liabilities under these capital leases are
recorded at the lower of the present value of the minimum lease payments or the
fair value of the assets. The assets are depreciated over the lower of their
related lease terms or their estimated useful lives.
Minimum future lease payments under capital leases as of December 31,
1999, are:
2000 $ 60,871
Less- Amount representing interest (1,293)
-----------
Present value of net minimum lease payment $ 59,578
===========
Interest rates on capitalized leases vary from 7.05% to 7.31% and are
imputed based on the lower of the Company's incremental borrowing rate at the
inception of each lease or the lessor's implicit rate of return.
5. COMMITMENTS:
The Company has operating leases on facilities and certain equipment. At
December 31, 1999, lease rental commitments under noncancelable leases with
original terms in excess of one year are as follows:
2000 $ 246,308
2001 214,182
2002 188,429
2003 182,029
2004 143,883
2005 and thereafter 27,020
------------
Total $ 1,001,851
============
6. INCOME TAXES:
-------------
The differences between the provision for income taxes at the expected Federal
statutory rates and the provision for income taxes recorded in the statements of
operations are summarized as follows:
Year Ended December 31,
1998 1999
-------- ------
Federal income tax provision (benefit) at
statutory rates $(13,490) $(345,699)
State income taxes, net of Federal income tax
benefit (1,591) (40,670)
Nondeductible expenses 3,142 2,366
Tax exempt interest - (15,831)
Change in valuation allowance 11,939 399,834
----------- ---------
Provision for income taxes $ - $ -
=========== ========
F-11
<PAGE>
The significant components of the Company's deferred tax assets and liabilities
as of December 31, 1999, are as follows:
Deferred tax assets:
Deferred revenue $ 121,028
Depreciation 55,912
Amortization of intangibles 44,852
Net operating losses 332,263
Other 3,766
-----------
Gross deferred tax assets 557,821
-----------
Deferred tax liabilities:
Other 261
-----------
Less- Valuation allowance (557,560)
-----------
Total deferred tax assets $ -
===========
A valuation allowance has been established due to the uncertainty of realizing
certain loss carryforwards and other deferred tax assets. The establishment of
the valuation allowance has not resulted in a current or deferred income tax
provision or benefit. The valuation allowance was established in 1996 and
increased in 1998 and 1999 because of temporary differences that increased the
recorded deferred tax assets.
For income tax purposes, the Company has net operating loss carryforwards of
approximately $874,000 which begin to expire in year 2013.
7. STOCKHOLDERS' DEFICIT AND PREFERRED STOCK:
------------------------------------------
Upon its incorporation, the Company was authorized to issue up to 40,000 shares
of common stock and 10,000 shares of preferred stock, both classes with a par
value of $1.00. On May 22, 1997, the Company's Board of Directors increased the
total authorized number of shares to 20 million shares consisting of 19 million
shares of common stock and 1 million shares of preferred stock. In addition, the
par value on both classes of stock was changed to $.01 per share.
On May 28, 1997, the Company effected a 200 for 1 stock split of the Company's
$.01 par value common stock. As a result of the split, 3,980,000 additional
shares were issued, and additional paid-in capital was reduced by $20,000,
offset by an increase in common stock at par.
On July 23, 1998, the Board of Directors designated 675,255 shares of the
Company's $.01 par value preferred stock as Series A Redeemable Convertible
Preferred Stock ("Series A Preferred"). Cumulative dividends on the Series A
Preferred were to be declared annually and paid out of funds legally available
at the rate per annum of $.0208 per share ("Mandatory Dividends". In addition,
the holders of Series A Preferred Stock were to be entitled to receive, out of
funds legally available, annual dividends at the rate per annum of $.0208 per
share, when, as and if declared by the Board of Directors (the "Elective
Dividend"). Unpaid Mandatory and Elective Dividends were to accrue from day to
day, whether or not earned or declared, and were to be cumulative.
F-12
<PAGE>
The Holder of the Series A Preferred Stock had the right at its option at any
time prior to the issuance by the Company of a redemption notice or an initial
public offering ("IPO") notice to convert all, but not less than all, of such
shares of Series A Preferred into an equal number of fully paid and
nonassessable shares of common stock.
The Company had the right at any time to redeem all, but not less than all, of
the issued and outstanding shares of Series A Preferred Stock by paying $467,952
cash ($.693 per share) plus all unpaid dividends, whether or not declared,
computed to such redemption date and issuing to the holders of Series A
Preferred a certain number of shares of common stock. The number of common
shares required to be issued upon redemption by the Company was as follows:
Number of
Redemption Date Common Shares
On or before July 31, 1999 627,022
August 1, 1999 through July 31, 2000 835,966
August 1, 2000 through July 31, 2001 1,074,870
After July 31, 2001 1,350,510
On July 28, 1998, the Company entered into a Share Exchange Agreement with a
stockholder whereby the Company exchanged 675,255 shares of Series A Preferred
for 1,600,000 shares of common stock held by the stockholder. As a result of the
exchange, the Series A Preferred was valued at $1.24 per share with the cash
redemption feature of $406,915. During 1998 and 1999, the Company recorded
dividends of $25,432 and $35,605, respectively, associated with the cash
redemption feature of the Series A preferred stock.
On April 2, 1999, the Company issued 252,000 shares of common stock, $.01 par
value for $630,000.
On April 12, 1999, the Company's Board of Directors increased the total
authorized number of shares of the Company to 21 million shares consisting of 19
million shares of common stock and 2 million shares of preferred stock.
On July 28, 1999, the Company redeemed and cancelled all outstanding shares of
the Series A Preferred at a total redemption price of $467,952 in cash plus the
issuance of 627,022 shares of common stock. In addition, the Company declared
and paid cash dividends totaling $28,077.
On August 25, 1999, the Board of Directors designated 800,000 shares of the
Company's $.01 par value preferred stock as Series B Convertible Preferred Stock
("Series B Preferred"). Dividends upon the Series B Preferred Stock shall be
paid out of funds legally available annually beginning on August 1, 2001, at the
rate per annum of $.27 per share ("Mandatory Dividend" and collectively the
"Mandatory Dividends"). In addition, commencing on August 1, 2001, the holders
of Series B Preferred shall be entitled to receive, out of funds legally
available additional annual dividends at the rate per annum of $.27 per share,
when, as and if declared by the Board of Directors. All dividends accrue from
day to day, whether or not earned or declared and are cumulative from August 1,
2001.
The holders of the Series B Preferred have the right, at their option at any
time, to convert any such shares of Series B Preferred into such number of
shares of common stock as is obtained by multiplying the number of shares of
Series B Preferred so to be converted by the conversion price of $4.50 per
share, as adjusted for the 2 for 1 stock split. On July 31, 2004, the Company
must redeem any outstanding shares of the Series B Preferred at a redemption
price of $4.50 per share.
On August 25, 1999, the Company entered into a Share Exchange Agreement
with the bridge loan holders whereby the Company converted the $1.4 million of
bridge loans into 311,114 shares of Series B Preferred Stock. During 1999, the
Company also issued 483,084 shares of Series B Preferred for $1,860,541, net of
issuance costs of $313,350. The Series B Preferred are recorded at their
redemption value with the issuance cost reflected in other assets on the
accompanying December 31, 1999 balance sheet. The preferred stock issuance costs
are being amortized over a 5-year period as a preferred stock dividend.
As of December 31, 1999, the Company had outstanding warrants to purchase 25,000
and 112,752 shares of the Company's common stock and Series B preferred stock,
respectively, each at a price of $4.50 per share. These warrants were issued at
various dates from August through October of 1999, are exercisable upon issuance
and expire at various dates through 2006.
F-13
<PAGE>
8. PURCHASE OF WEB HOSTING ASSETS:
-------------------------------
On July 31, 1998, the Company acquired substantially all of the assets of a web
hosting business operated by a sole proprietor for $1.2 million ("Lottor
Assets"). The acquisition was accounted for using the purchase method, with the
purchase price allocated to assets and liabilities acquired based on their
respective fair values at the date of acquisition and, accordingly, the
accompanying statements of operations do not include any revenues or expenses
related to the acquisition prior to the acquisition date. Of the total purchase
price, approximately $10,000 was allocated to non-compete agreement,
approximately $10,000 was allocated to domain name, and the remainder was
allocated to customer list. Following are the Company's unaudited pro forma
results for 1998 assuming the acquisition occurred on January 1, 1998 (in
thousands):
Pro forma:
Net revenues $ 2,206
Net loss $ (221)
Net loss applicable to common stockholders $ (246)
Basic net loss applicable to common stockholders per common
share $ (.07)
These unaudited pro forma results have been prepared for comparative purposes
only and do not purport to be indicative of the results of the results of
operations, which would have actually resulted had the purchase occurred on the
date indicated, or which may result in the future.
9. EMPLOYEE BENEFIT PLAN:
----------------------
Effective January 1, 1998, the Company adopted a 401(k) Profit Sharing Plan and
Trust (the "401(k) Plan"). Contributions to the 401(k) Plan are made at the
discretion of the Company. Any contributions are allocated to the participants'
individual accounts based on the ratio of the participant's compensation to
total participant compensation. Employees become eligible for participation in
the 401(k) Plan upon employment with the Company and attaining the age of 21.
Employees can make contributions to the 401(k) Plan up to 12% of their
compensation. Upon a discretionary contribution by the Company, participants
will vest in the Company contribution at a rate of 20% for each full year of
continuous service beginning in year two of employment. Amounts forfeited are
allocated annually to the remaining participants in the same manner as the
Company's contribution. During 1998 and 1999, the Company made no discretionary
contributions to the 401(k) Plan.
10. STOCK BASED COMPENSATION:
-------------------------
On May 22, 1997, the Company's Board of Directors approved The Ethos
Communication Corp., subsequently renamed Catalog.com, 1997 Stock Option Plan
(the "1997 Plan") and set aside 200,000 shares of common stock to be reserved
for issuance under the plan.
The Company accounts for this plan under APB Opinion No. 25, under which no
compensation cost has been recognized. Had compensation cost for these plans
been determined consistent with FASB Statement No. 123, the Company's net income
and loss per common share would have been reduced to the following pro forma
amounts (in thousands of dollars):
<TABLE>
<S> <C> <C>
1998 1999
-------- ------
Net loss applicable to common stockholders:
As reported $ (65,110) $ (1,101,335)
=========== =============
Pro forma $ (105,135) $ (1,524,973)
=========== =============
Basic net loss applicable to common stockholders
per common share
As reported $ (0.02) $ (0.37)
========== =============
Pro forma $ (0.03) $ (0.51)
========== =============
</TABLE>
F-14
<PAGE>
Diluted net loss per common share has been omitted because the impact of common
stock equivalents is anti-dilutive.
On June 4, 1997, 132,000 options were granted with an exercise price of
$1.00 per share. The exercise price was based upon the fair market value of a
share of common stock at the date the option is granted. The options vest 25%
per year beginning on the first anniversary of the date the options were granted
such that options are fully vested four years from the date of the grant.
Participants may exercise 100% of vested options in any given year. Each option
may be exercised during a period of ten years from the date of the grant of the
option.
In March 1999, 7,500 vested stock options were exercised at $1.00 per
share by an employee of the Company. In April and June 1999, an additional
29,000 and 61,500 stock options, respectively, were granted under the 1997 plan
with a $2.50 per share exercise price. Of the stock options granted under the
1997 plan, 3,000 and 25,500 were subsequently forfeited in 1998 and 1999,
respectively. No compensation expense was recognized for the grants.
Effective October 1, 1999, the Company's Board of Directors approved
the Catalog.com 1999 Stock Option Plan (the "1999 Plan") and set aside 340,000
shares of common stock to be reserved for issuance under the plan.
In October 1999, 255,000 stock options were granted under the 1999 Plan
with a $4.50 per share exercise price and 40,000 with a $4.95 per share exercise
price. None of these options have been exercised or forfeited as of December 31,
1999, and no compensation expense was recognized for the grants. The options
vest 25% per year beginning on the first anniversary of the date the options
were granted such that options are fully vested four years from the date of the
grant.
11. SUBSEQUENT EVENT:
-----------------
The Company is in the process of filing a form SB-2 registration statement to
issue 1,000,000 shares of common stock to the public. Upon the registration
becoming effective, a 2-for-1 stock split of both the common stock and the
Series B Preferred stock will occur and the Series B Preferred will be converted
to 794,198 shares of common stock. Per-share and share amounts relating to both
common stock and Series B Preferred stock in the accompanying financial
statements have been adjusted for the split.
F-15
<PAGE>
Report of Independent Public Accountants
To Network Wizards:
We have audited the accompanying statements of operations and cash flows of
Network Wizards ("Network Wizards") a sole proprietorship for the period from
January 1, 1998, through July 30, 1998. These financial statements are the
responsibility of Network Wizards' management. Our responsibility is to express
an opinion on these statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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 statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the operations and cash flows of Network Wizards for the
period from January 1, 1998, through July 30, 1998, in conformity with
accounting principles generally accepted in the United States.
Oklahoma City, Oklahoma,
May 22, 2000
F-16
<PAGE>
NETWORK WIZARDS
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 1, 1998, THROUGH JULY 30, 1998
REVENUES $ 304,873
OPERATING COSTS AND EXPENSES:
Communications and operations 27,662
General and administrative 318,299
Depreciation 17,859
-----------
Total operating costs and expenses 363,820
-----------
NET LOSS $ (58,947)
===========
The accompanying notes are an integral part of this financial statement.
F-17
<PAGE>
NETWORK WIZARDS
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1998, THROUGH JULY 30, 1998
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (58,947)
Adjustments to reconcile net loss to net cash used in operations-
Depreciation 17,859
Changes in current assets and liabilities-
Increase in accounts receivable (209)
Increase in accounts payable 25,858
Increase in deferred revenue 630
-------------
Net cash used in operating activities (14,809)
-------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (4,046)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES -
-------------
NET DECREASE IN CASH (18,855)
CASH, beginning of period 27,611
-------------
CASH, end of period $ 8,756
=============
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-18
<PAGE>
NETWORK WIZARDS
NOTES TO THE FINANCIAL STATEMENTS FOR THE
PERIOD FROM JANUARY 1, 1998, THROUGH JULY 30, 1998
1. BASIS OF PRESENTATION:
----------------------
Mark Lotter, an individual doing business as "Network Wizards," is a sole
proprietor that began operations in Menlo Park California in 1994. Network
Wizards (the "Company") primarily provides web site hosting, consultation
services and some custom construction of hardware components.
The Company's web hosting customers are located primarily throughout the United
States and Japan. On July 31, 1998, all web hosting assets, including the rights
to the Catalog.com domain name and the customer list of the Company, were sold
to Ethos Communications Corp. for $1,200,000. Revenues associated with the web
hosting assets totaled approximately $294,000 for the period of January 1, 1998,
through July 30, 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES:
---------------------------------------------------------
Property and Equipment
Property and equipment are recorded at cost. Major additions and improvements
are capitalized at cost, while maintenance and repairs which do not extend the
useful lives of the respective assets are expensed. When assets are sold or
retired, cost and accumulated depreciation are removed from the respective
accounts. Any gains or losses resulting from disposal are included in other
income. Depreciation is provided over the assets' estimated useful lives using
the straight-line method of depreciation. The estimated useful lives of assets
are as follows:
Years
Computer equipment 3
Furniture and fixtures 3
Revenue Recognition
Internet access and web hosting services encompass subscription and usage fees
earned over the period services are provided which is generally one month to one
year. Service fees are billed in advance and are recognized over the period the
service is provided. Billings in advance of revenues being earned are deferred
and recognized as revenue when earned.
For the period ended July 30, 1998, one customer accounted for approximately 35
percent of revenues.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash, trade receivables
and trade payables. The carrying value of cash, trade receivables and trade
payables are considered to be representative of their respective fair values,
due to the short maturity of these instruments.
Concentration and Credit Risk
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of cash and trade receivables. Concentration of
credit risk with respect to trade receivables is limited as the outstanding
total represents a large number of customers with individually small balances.
The Company does not require collateral or other security against trade
receivable balances; however, it does maintain reserves for potential credit
losses and such losses have been within management's expectations.
F-19
<PAGE>
Use of Estimates
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States requires Network Wizards to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Business Segments
The Company operates in one business segment pursuant to Statement of
Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of
an Enterprise and Related Information."
Income Taxes
No provision for income taxes is provided in the accompanying financial
statements as income taxes, if any, are payable by the individual taxpayer under
the Internal Revenue Code.
3. ALLOCATED COSTS:
----------------
Included in general and administrative expenses for the period ended July 30,
1998, is approximately $13,000 of costs associated with the use of the
proprietor's home for conducting business. Also included in the allocated amount
is depreciation for the home, home mortgage interest, real estate taxes and
indirect utilities. Costs are allocated based upon the percentage of the home
utilized in the conduct of business (35.41% during the period ended July 30,
1998).
4. PROPRIETOR COMPENSATION:
------------------------
The accompanying statement of operations for the period ended July 30, 1998,
includes approximately $217,000 of compensation to the sole proprietor which is
included in general and administrative expense.
F-20
<PAGE>
(LOGO)
CATALOG.COM, INC.
1,000,000 Shares
of
Common Stock
---------------------------
PROSPECTUS
---------------------------
Institutional Equity
Corporation
1-877-467-7891
Capital West Securities, Inc.
1-877-664-6644
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the estimated costs and expenses, other
than the underwriting discounts and commissions, payable by Catalog.com in
connection with the sale of the common stock being registered. All of the
amounts shown are estimates, except the registration fee, and assume exercise of
the underwriters' overallotment option.
SEC registration fee ........................$ 4,008
NASD filing fees............................. 1,880
American Stock Exchange listing fee.......... 20,000
Printing and engraving expenses.............. 75,000
Legal fees................................... 100,000
Accounting fees and expenses................. 75,000
Blue Sky fees and expenses................... 10,000
Transfer Agent and Registrar fee............. 6,000
Miscellaneous expenses....................... 58,112
---------
TOTAL EXPENSES.............................. $350,000
========
Item 14. Indemnification of Officers and Directors
The General Corporation Act of the State of Oklahoma grants every
corporation the power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
other than an action by or in the right of the corporation, by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
The Oklahoma statute also grants every corporation the power to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action or suit by or in the right of
the corporation to procure a judgment in its favor by reason of the fact that he
is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses, including attorneys' fees, actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believe 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 for negligence or
misconduct in the performance of his duty to the corporation unless and only to
the extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the court shall deem proper.
The Oklahoma statute provides that to the extent that a present or
former director or officer of a corporation has been successful on the merits or
otherwise in defense of any action, suit, or proceeding referred to in the
statute, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses, including attorneys' fees, actually incurred by
him in connection therewith.
Article VII of the Registrant's bylaws provides that the Registrant
shall indemnify to the full extent permitted under the General Corporation Act
of the State of Oklahoma any director, officer, employee, or agent of the
Registrant.
Article IX of the Registrant's certificate of incorporation exculpates
the directors of the Registrant from and against certain liabilities. Article IX
provides that a director of the Registrant shall have no personal liability to
the Registrant or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (a) for any breach of the director's
duty of loyalty to the Registrant or its stockholders, (b) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (c) for acts or omissions specified in Section 1053 of the General
Corporation Act of the State of Oklahoma regarding the unlawful payment of
dividends and the unlawful purchase or redemption of the Registrant's stock, and
(d) for any transaction from which the director derived an improper personal
benefit.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the certificate of incorporation. Catalog.com is not
aware of any threatened litigation or proceeding that may result in a claim for
such indemnification.
Item 15. Recent Sales of Unregistered Securities
Catalog.com has sold and issued the following unregistered securities
during the last three years, which have been adjusted to reflect the 2-for-1
split for all common stock approved by the board of directors on May 17, 2000:
Since inception through May 22, 2000 (the most recent practicable date)
we granted stock options to acquire an aggregate of 489,000 shares of our common
stock at prices ranging from $1.00 to $4.95 to employees and directors pursuant
to our 1997 and 1999 Stock Option Plans. These shares were issued in reliance in
Section 4(2) and rule 701 of the Securities Act of 1933.
On June 18, 1997, August 29, 1997, and on September 3, 1997, we sold an
aggregate 85,000 shares of common stock to seven non-accredited investors who
were acquaintances of our president, two of our officers, and our president's
brother and father, for an aggregate $85,000. These shares were issued in
reliance on Section 4(2) of the Securities Act of 1933 and Regulation D
promulgated thereunder.
On October 30, 1997, we issued 23,810 shares of common stock to
Phillips McFall McCaffrey McVay & Murrah, P.C., our legal counsel in
consideration for legal services. These shares were issued in reliance on
Section 4(2) of the Securities Act of 1933.
On July 28, 1998 we issued 675,255 shares of Series A preferred stock
to BancFirst Investment Corporation in exchange for 1,600,000 shares of common
stock held by BIC pursuant to the terms of a Share Exchange Agreement between us
and BIC. These shares were issued in reliance on Section 4(2) of the Securities
Act of 1933.
On March 15, 1999, we issued 7,500 shares to a former employee upon the
exercise of certain stock options at an exercise price per share of $1.00 held
by such former employee. These shares were issued in reliance on Section 4(2) of
the Securities Act of 1933.
On April 2, 1999, we issued 240,000 shares of common stock to Schloss
Brothers, L.P. for an aggregate of $600,000. These shares were issued in
reliance on Section 4(2) of the Securities Act of 1933 and Regulation D
promulgated thereunder.
On May 28, 1999, we issued 12,000 shares of common stock to Santa Fe
Capital Group (NM), Inc. for an aggregate of $30,000 upon exercise of a warrant
issued to Santa Fe Capital Group in connection with the private placement of
shares closed April 1, 1999. These shares were issued in reliance on Section
4(2) of the Securities Act of 1933.
On July 28, 1999, we issued 627,022 shares of common stock to BIC in
exchange for the redemption of all outstanding shares of Series A preferred
stock at a redemption price of approximately $468,000. These shares were issued
in reliance on Section 4(2) of the Securities Act of 1933.
On August 25, 1999 and September 11, 1999, we issued an aggregate of
794,198 shares of Series B preferred stock to 21 accredited investors for an
aggregate offering price of $3,573,879. These shares were issued in reliance on
Section 4(2) of the Securities Act of 1933 and Regulation D promulgated
thereunder.
On August 2, 1999 we issued warrants to purchase 5,000 shares of common
stock at an exercise price of $4.50 per share to Net Me Up. These warrants were
issued in reliance on Section 4(2) of the Securities Act of 1933.
On August 25, 1999 we issued warrants to purchase 22,222 shares of
Series B preferred stock at an exercise price of $4.50 per share to Richmont
Opportunity Management Partners L.P. These warrants were issued in reliance on
Section 4(2) of the Securities Act of 1933.
On September 8, 1999 we issued warrants to purchase 20,000 shares of
common stock at an exercise price of $4.50 per share to Interactive Applications
Group, Inc. These warrants were issued in reliance on Section 4(2) of the
Securities Act of 1933.
On September 10, 1999 we issued warrants to purchase 22,222 shares of
Series B preferred stock at an exercise price of $4.50 per share to Pro Silver
Star, Ltd. These warrants were issued in reliance on Section 4(2) of the
Securities Act of 1933.
On December 1, 1999 we issued warrants to purchase 68,308 shares of
Series B preferred stock at an exercise price of $4.50 per share to Southwest
Securities, Inc. These warrants were issued in reliance on Section 4(2) of the
Securities Act of 1933.
On April 12, 2000 we issued warrants to purchase 8,000 shares of common
stock at an exercise price of $4.50 per share to The Towler Group L.L.C. These
warrants were issued in reliance on Section 4(2) of the Securities Act of 1933.
No underwriters were involved in connection with the sales of
securities referred to in this Item 15, although we paid a fee to Southwest
Securities, Inc. for placement agent services in connection with our sale of
Series B preferred stock in August and September, 1999.
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a)......Exhibits.
<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement(1).
3.1 Amended and Restated Certificate of Incorporation (2).
3.2 Amended and Restated Bylaws (2).
4.1 Specimen common stock certificate (2).
4.2 See Exhibits 3.1, and 3.2 for provisions defining the rights of holders of common stock.
4.3 Form of Warrant Agreement between us and the underwriters (1).
4.4 1999 Stock Option Plan (2).
4.5 1997 Stock Option Plan (2).
5.1 Opinion of Phillips McFall McCaffrey McVay & Murrah, P.C., as the legality of the securities being registered (1).
10.1 Amended and Restated Registration Rights Agreement (2).
10.2 Amended and Restated Shareholder Agreement (2).
10.3 Loan Agreement dated July 31, 1998 between us and the U.S. Small Business Administration (2).
10.4 Asset Purchase Agreement dated July 9, 1998 between us and Mark K. Lotter (2).
10.5 Noncompetition Agreement dated July 31, 1998 between us and Mark K. Lotter (2).
10.6 Form of Lock-up Agreement (1).
10.7 Lease Agreement dated January 7, 1999 by and between us and CB Parkway Business Center, Ltd.(2).
10.8 First Amendment to Lease Agreement dated July 31, 1999 by and between us and CB Parkway Business Center(2).
10.9 Office Lease dated July 1999 by and between us and TMK Income Properties, L.P. (2).
23.1 Consent of Phillips McFall McCaffrey McVay & Murrah, P.C. (2).
23.2 Consent of Arthur Andersen LLP (2).
24.1 Powers of Attorney (see signature page).
27.1 Financial Data Schedule (2).
- ------------------------
</TABLE>
(1) To be filed by amendment.
(2) Filed electronically herewith.
(b) Financial Statement Schedules. Schedules not listed above have been omitted
because the information required to be set forth therein is not applicable or is
shown in the financial statements or notes thereto.
Item 17. Undertakings
The undersigned registrant hereby undertakes to provide to the
Underwriter at the closing specified in the Underwriting Agreement, certificates
in such denominations and registered in such names as required by the
Underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant 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. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant 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 registrant will, unless in
the opinion of 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 of 1933 and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, 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 pursuant to Rule 424 (b)(1) or (4), or
497(h) under the Securities Act of 1933, shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable ground to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Oklahoma
City, Oklahoma, State of Oklahoma on this 26 day of May, 2000.
CATALOG.COM, INC.
By: /s/ Robert W. Crull
___________________
Robert W. Crull
------------------------------------------
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and/or officers of Catalog.com, Inc.
hereby severally constitute and appoint Robert W. Crull and David D. Gaither,
and each of them individually, with full powers of substitution and
resubstitution, our true and lawful attorneys, with full powers to them and each
of them to sign for us, in our names and in the capacities indicated below, the
Registration Statement on Form SB-2 filed with the Securities and Exchange
Commission, and any and all amendments to said Registration Statement (including
post-effective amendments), and any registration statement filed pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, in connection with the
registration under the Securities Act of 1933, as amended, of our equity
securities, and to file or cause to be filed the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as each
of them might or could do in person, and hereby ratifying and confirming all
that said attorneys, and each of them, or their substitute or substitutes, shall
do or cause to be done by virtue of this Power of Attorney.
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dated stated:
<TABLE>
<S> <C> <C>
Signature Title Date
/s/ Robert W. Crull President, Chief Executive May 26, 2000
------------------------------
Robert W. Crull Officer, Director
/s/ David D. Gaither Chief Financial Officer May 26, 2000
-------------------------------
David D. Gaither
/s/ Bill C. Miller Senior Vice President and Chief May 26, 2000
-------------------------------
Bill C. Miller Technology Officer, Director
/s/ D. Len Reeves Vice President of Customer May 26, 2000
-----------------
D. Len Reeves Service and General Manager
/s/ Rodric M. Phillips, Jr., M.D. Director May 26, 2000
--------------------------------
Rodric M. Phillips, Jr., M.D.
/s/ David E. Rainbolt Director May 26, 2000
------------------------------
David E. Rainbolt
</TABLE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CATALOG.COM, INC.
CATALOG.COM, INC., a corporation organized and existing under the laws of the
State of Oklahoma (the "Corporation"), does hereby certify that:
FIRST: The name of this Corporation is Catalog.com, Inc, and the name under
which it was originally incorporated is Ethos Communications Corp.
SECOND: The date of filing of this Corporation's original Certificate of
Incorporation with the Secretary of State of the State of Oklahoma was February
28, 1996. The date of filing of this Corporation's Certificate of Amendment to
the Certificate of Incorporation with the Secretary of State of the State of
Oklahoma was April 14, 1999.
THIRD: Pursuant to Sections 1077 and 1080 of the Oklahoma General
Corporation Act, this Amended and Restated Certificate of Incorporation
restates, integrates and amends the provisions of the Corporation's Certificate
of Incorporation as follows:
ARTICLE I
Name
The name of this Corporation is: Catalog.com, Inc.
ARTICLE II
Registered Agent
The address of the Corporation's registered office in the State of Oklahoma is
14000 Quail Springs Parkway, Suite 3600, Oklahoma City, Oklahoma, Oklahoma
County, Oklahoma 73134. The name of its registered agent at such address is
Catalog.com, Inc.
ARTICLE III
Duration
The duration of the Corporation is perpetual.
ARTICLE IV
Purposes
The objectives and purposes for which the Corporation is organized is for any
lawful act or activity for which a corporation may be organized under the
General Corporation Act of the State of Oklahoma, now or hereafter in effect.
<PAGE>
6
ARTICLE V
Authorized Capital
The total number of shares of all classes of stock which the
Corporation shall have the authority to issue is 21,000,000 shares,
divided into classes designated as follows: (i) 19,000,000 shares of
common stock, par value $.01 per share (the "Common Stock"); and (ii)
2,000,000 shares of preferred stock, par value $.01 per share (the
"Preferred Stock").
ARTICLE VI
Attributes of Stock
The designations, powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, for each class of
stock of the Corporation shall be as follows:
Common Stock: Each share of Common Stock shall be equal to each
other share of Common Stock and, when issued, shall be fully paid and
non-assessable, and the personal property of shareholders shall not be
liable for corporate debts. Subject to any preferential rights of the
holders of Preferred Stock, the holders of Common Stock of the
Corporation shall each be entitled to share in any dividends of the
Corporation ratably, if, as and when declared by the Board of
Directors.
Each holder of record of Common Stock shall have one vote for
each share of Common Stock outstanding in his name on the books of the
Corporation and shall be entitled to vote said stock.
Preferred Stock: Shares of Preferred Stock may be issued from
time to time in one or more series as determined by the Board of
Directors. All shares of Preferred Stock shall be of equal rank and
shall be identical, except in respect of the particulars fixed by the
Board of Directors for each series as provided herein. All shares of
any one series shall be identical in all respects with all the other
shares of such series, except that shares of any one series issued at
different times may differ as to the dates from which dividends thereon
shall be cumulative.
The Board of Directors is hereby authorized, by resolution or
resolutions to provide, out of the unissued shares of Preferred Stock
not then allocated to any series of Preferred Stock, for one or more
series of Preferred Stock. Before any shares of any such series are
issued, the Board of Directors shall fix and determine, and is hereby
expressly authorized and empowered to fix and determine, by resolution
or resolutions, the powers, designations, preferences and relative,
participating, optional or other rights, if any, and the
qualifications, limitations or restrictions thereof, if any, and in
connection therewith, the Board of Directors is expressly authorized
and empowered to fix and determine any or all of the following
provisions of the shares of such series:
<PAGE>
(i) the designation of such series and the number of shares which shall
constitute
such series;
(ii) the annual dividend rate payable on shares of such
series, expressed in a dollar amount per share, and the date or dates
from which such dividends shall commence to accrue and shall be
cumulative;
(iii) the price or prices at which and the terms and conditions, if any, on
which
shares of such series may be redeemed;
(iv) the amounts payable upon shares of such series, in the
event of the voluntary or involuntary liquidation, distribution of
assets (other than payment of dividends), dissolution, or winding up of
the affairs of the Corporation;
(v) the sinking funds or mandatory redemption provisions, if any, for the
redemption or purchase of shares of such series;
(vi) the extent of the voting powers, if any, of the shares of such series;
(vii) the terms and conditions, if any, on which shares of
such series may be converted into shares of stock of the Corporation or
any class or classes thereof; and
(viii) any other preferences and relative, participating,
optional or other special rights, and any qualifications, limitations
or restrictions of such preferences or rights, of shares of such
series.
ARTICLE VII
Board of Directors
<PAGE>
The Board of Directors shall be divided into three (3) classes, as
nearly equal in number as reasonably possible, with the term of office of the
first class to expire at the 2001 annual meeting of shareholders, the term of
office of the second class to expire at the 2002 annual meeting of shareholders
and the term of office of the third class to expire at the 2003 annual meeting
of shareholders. At each annual meeting of shareholders following such initial
classification and election, directors elected to succeed those directors whose
terms expire shall be elected for a term of office to expire at the third
succeeding annual meeting of shareholders after their election. The number of
directors which shall constitute the whole Board of Directors of the Corporation
and each class thereof shall be as specified pursuant to the Bylaws of the
Corporation and may be altered from time to time as may be provided therein;
provided, however, the number of directors which shall constitute the whole
Board of Directors shall be no more than thirteen (13) and no less than three
(3). Directors and officers need not be shareholders. In case of vacancies in
the Board of Directors, including vacancies occurring by reason of an increase
in the number of directors, a majority of the remaining members of the Board,
even though less than a quorum, may elect directors to fill such vacancies to
hold office until the next annual meeting of the shareholders.
ARTICLE VIII
Amendment of Bylaws
The Board of Directors of the Corporation is expressly authorized to
adopt, amend or repeal the Bylaws of the Corporation. The shareholders of the
Corporation may not adopt, amend or repeal the Bylaws of the Corporation other
than by the affirmative vote of 66-2/3% of the combined voting power of all
outstanding voting securities of the Corporation entitled to vote generally in
the election of directors of the Board of Directors of the Corporation ("Voting
Power"), voting together as a single class. In addition to any affirmative vote
required by applicable law and in addition to any vote of the holders of any
series of Preferred Stock provided for or fixed pursuant to the provisions of
Article VI of this Certificate of Incorporation, any alteration, amendment or
repeal relating to this Article VIII must be approved by the affirmative vote of
the holders of at least 66-2/3% of the Voting Power, voting together as a single
class.
ARTICLE IX
Exculpatory Provisions
<PAGE>
No director of the Corporation shall be liable to the Corporation or
any of its shareholders for monetary damages for breach of fiduciary duty as a
director, provided that this provision does not eliminate the liability of the
director (i) for any breach of the director's duty of loyalty to the Corporation
or its shareholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 1053 of the Oklahoma General Corporation Act, or (iv) for any
transaction from which the director derived an improper personal benefit. For
purposes of the prior sentence, the term "damages" shall, to the extent
permitted by law, include without limitation, any judgment, fine, amount paid in
settlement, penalty, punitive damages, excise or other tax assessed with respect
to an employee benefit plan, or expense of any nature (including, without
limitation, counsel fees and disbursements). Each person who serves as a
director of the Corporation while this Article IX is in effect shall be deemed
to be doing so in reliance on the provisions of this Article IX, and neither the
amendment or repeal of this Article IX, nor the adoption of any provision of
this Certificate of Incorporation inconsistent with this Article IX, shall apply
to or have any effect on the liability or alleged liability of any director or
the Corporation for, arising out of, based upon, or in connection with any acts
or omissions of such director occurring prior to such amendment, repeal, or
adoption of an inconsistent provision. The provisions of this Article IX are
cumulative and shall be in addition to and independent of any and all other
limitations on or eliminations of the liabilities of directors of the
Corporation, as such, whether such limitations or eliminations arise under or
are created by any law, rule, regulation, bylaw, agreement, vote of shareholders
or disinterested directors, or otherwise.
If the Oklahoma General Corporation Act is amended to further limit or
eliminate liability of the Corporation's directors for breach of fiduciary duty,
then a director of this Corporation shall not be liable for any such breach to
the fullest extent permitted by the Oklahoma General Corporation Act as so
amended. If the Oklahoma General Corporation Act is amended to increase or
expand liability of the Corporation's directors for breach of fiduciary duty, no
such amendment shall apply to or have any effect on the liability or alleged
liability of any director of this Corporation for or with respect to any acts or
omissions of such director occurring prior to the time of such amendment or
otherwise adversely affect any right or protection of a director of this
Corporation existing at the time of such amendment.
ARTICLE X
Compromise or Arrangement by
Corporation With Creditors or Shareholders
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its shareholders or any class of them, any court of equitable
jurisdiction within the State of Oklahoma, on the application in a summary way
of this Corporation or of any creditor or shareholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 1106 of the Oklahoma General Corporation Act or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 1100 of the Oklahoma
General Corporation Act, may order a meeting of the creditors or class of
creditors, and/or of the shareholders or class of shareholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths (3/4) in value of
the creditors or class of creditors, and/or of the shareholders or class of
shareholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a consequence of
such compromise or arrangement, the 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 shareholders or class of shareholders, of this Corporation, as the case
may be, and also on this Corporation.
ARTICLE XI
Actions By Written Consent
No action that is required or permitted to be taken by the shareholders
of the Corporation at any annual or special meeting of shareholders may be
effected by written consent of shareholders in lieu of a meeting of
shareholders, unless the action to be effected by written consent of
shareholders and the taking of such action by such written consent have
expressly been approved in advance by the Board.
<PAGE>
In addition to any affirmative vote required by applicable law and in
addition to any vote of the holders of any series of Preferred Stock provided
for or fixed pursuant to the provisions of Article VI of this Certificate of
Incorporation, any alteration, amendment or repeal relating to this Article XI
must be approved by the affirmative vote of the holders of at least two-thirds
of the Voting Power, voting together as a single class.
FOURTH: That each one share of common stock, $.01 par value ("Pre-Split
Common Stock"), of the Corporation issued and outstanding or held by the
Corporation as treasury stock, immediately prior to the time this Amended and
Restated Certificate of Incorporation is filed with the Secretary of State of
the State of Oklahoma, shall be and are hereby automatically reclassified and
changed (without any further act) into two (2) fully-paid and nonassessable
shares of common stock, $.01 par value ("Post-Split Common Stock"), of the
Corporation. Neither certificates nor scrip for fractional shares of Post-Split
Common Stock will be issued, but the Corporation shall issue and deliver to the
holders of Pre-Split Common Stock, whole shares of Post-Split Common Stock
taking into account any fractional shares created by reason of such
reclassification by rounding up to the next highest number.
FIFTH: This Amended and Restated Certificate of Incorporation was duly
adopted in accordance with Sections 1077 and 1080 of the Oklahoma General
Corporation Act, after being proposed by the directors and adopted by the
shareholders in the manner and by the vote prescribed in Section 1073A of the
Oklahoma General Corporation Act.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
signed by its President and attested to by its Secretary this ___ day of
____________________, 2000.
CATALOG.COM, INC.
By:__________________________________
Robert W. Crull, President
ATTEST:
-------------------------------
Douglas A. Branch, Secretary
Catalog.com\corpdoc\amdcertinc
AMENDED AND RESTATED BYLAWS
OF
CATALOG.COM, INC.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of Catalog.com, Inc. (the
"Corporation") shall be in the State of Oklahoma, at 14000 Quail Springs
Parkway, Suite 3600, Oklahoma City, Oklahoma County, Oklahoma, 73134.
SECTION 2. OTHER OFFICES. The Corporation may also have offices at such
other places both within and without the State of Oklahoma as the Board of
Directors may from time to time determine as the business of the Corporation may
require.
ARTICLE II
SHAREHOLDERS
SECTION 2.1. ANNUAL MEETING. An annual meeting of shareholders for the
purpose of electing directors and of transacting such other business as may come
before it shall be held each year at such date, time, and place, either within
or without the State of Oklahoma, as may be specified by the Board of Directors.
SECTION 2.2. SPECIAL MEETINGS. Unless otherwise proscribed by law,
special meetings of shareholders for any purpose or purposes may be held at such
time and place either within or without the State of Oklahoma as may be stated
in the notice (as described herein at Section 2.3) and may be called by (i) a
majority of the Board of Directors; or (ii) holders of a majority of the
Corporation's shares of stock entitled to vote at the proposed special meeting.
SECTION 2.3. NOTICE OF MEETINGS. (a) Unless waived, a notice of each
annual or special meeting, stating the date, hour and place and the purpose or
purposes for which the meeting is called, shall be given to each shareholder of
record entitled to vote or entitled to notice, not more than sixty (60) days nor
less than ten (10) days before the date of any such meeting, unless a different
period is proscribed by law. If mailed, such notice shall be directed to a
shareholder at his or her address as the same appears on the records of the
Corporation. If a meeting is adjourned to another time or place and such
adjournment is for thirty (30) days or less and no new record date is fixed for
the adjourned meeting, no further notice as to such adjourned meeting need be
given if the time and place to which it is adjourned are fixed and announced at
such meeting. In the event of a transfer of shares after notice has been given
and prior to the holding of the meeting, it shall not be necessary to serve
notice on the transferee. If the adjournment is for more than thirty (30) days,
or 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.
(b) A written waiver of any such notice signed by the person entitled
thereto, 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 the 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. Business transacted at any special meeting of shareholders shall be
limited to the purposes stated in the notice.
SECTION 2.4. LIST OF SHAREHOLDERS. The officer who has charge of the
stock ledger of the Corporation shall prepare and make available, at least ten
(10) days before every meeting of shareholders, a complete list of the
shareholders entitled to vote at the 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 (10) 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 2.5. QUORUM. Except as otherwise provided by law or in the
Certificate of Incorporation or these Bylaws, at any meeting of shareholders,
the holders of a majority of shares issued and outstanding of each class
entitled to vote, shall be present or represented by proxy in order to
constitute a quorum for the transaction of business. If, however, such quorum
shall not be present or represented at any meeting of the shareholders, a
majority in voting interest of the shareholders present in person or represented
by proxy, or, in the absence of a decision by the majority, any officer entitled
to preside at such meeting, shall have power to adjourn the meeting from time to
time, without notice other than an announcement at the meeting of the time and
place of the adjourned meeting, until a quorum shall be present or represented.
At any such adjourned meeting at which a quorum is present, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty (30) 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 2.6. ORGANIZATION. The Chairman of the Board, if any, or, in
his absence, the Vice Chairman, if any, or, in their absence, the President,
shall call to order meetings of shareholders and shall act as Chairman of such
meetings. The Board of Directors or, if the Board fails to act, the shareholders
may appoint any shareholder, director, or officer of the Corporation to act as
Chairman of any meeting in the absence of the Chairman of the Board, the Vice
Chairman, or the President. The Secretary of the Corporation, or, if the
Secretary of the Corporation not be present, the Assistant Secretary, or if the
Secretary and the Assistant Secretary not be present, any person whom the
Chairman of the meeting shall appoint, shall act as Secretary of the meeting.
SECTION 2.7. ORDER OF BUSINESS AND PROCEDURE. The order of business at
all meetings of the shareholders and all matters relating to the manner of
conducting the meeting shall be determined by the Chairman of the meeting.
Meetings shall be conducted in a manner designed to accomplish the business of
the meeting in a prompt and orderly fashion and to be fair and equitable to all
shareholders, but it shall not be necessary to follow any manual of
parliamentary procedure.
SECTION 2.8. VOTING. Except for the election of directors, at any
meeting duly called and held at which a quorum is present, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any questions brought before such meeting,
unless the question is one upon which by express provision of law or of the
Certificate of Incorporation or these Bylaws, a greater vote is required in
which case such express provision shall govern and control the decision of such
question. At any meeting duly called and held for the election of directors at
which a quorum is present, directors shall be elected by a plurality of the
votes cast by the holders (acting as such) of shares of stock of the Corporation
entitled to elect such directors.
SECTION 2.9. INSPECTORS. The Board of Directors in advance of any
shareholders' meeting may appoint one or more inspectors to act at the meeting
or any adjournment thereof. If inspectors are not so appointed, the person
presiding at a shareholders' meeting may, and on the request of any shareholder
entitled to vote thereat shall, appoint one or more inspectors. In case any
person appointed as inspector fails to appear or act, the vacancy may be filled
by the Board of Directors in advance of the meeting or at the meeting by the
person present thereat. Each inspector, before entering upon the discharge of
his duties, shall take and sign an oath faithfully to discharge the duties of
inspector at such meeting with strict impartiality and according to the best of
his ability.
SECTION 2.10. PROXIES. Unless otherwise provided in the Certificate of
Incorporation, each shareholder shall at every meeting of the shareholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such shareholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
SECTION 2.11. NO ACTION BY CONSENT. No action that is required or
permitted to be taken by shareholders of the Corporation at any annual or
special meeting of shareholders may be effected by written consent of
shareholders in lieu of a meeting of shareholders, unless the action to be
effected by written consent of shareholders and the taking of such action by
such written consent have expressly been approved in advance by the Board of
Directors. Except as otherwise provided herein, no action shall be taken by
shareholders except at an annual or special meeting of shareholders.
SECTION 2.12. ADVANCE NOTICE OF SHAREHOLDERS' PROPOSALS. (a) At an
annual or special meeting of the shareholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before a meeting, business must be (i) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors, (ii) brought before the meeting by or at the direction of the Board
of Directors, (iii) properly brought before an annual meeting by a shareholder
or (iv) if, and only if, the notice of a special meeting provides for business
to be brought before the meeting by shareholders, properly brought before the
meeting by a shareholder. For business to be properly brought before the meeting
by a shareholder, the shareholder must have given timely notice thereof in
writing to the Secretary of the Corporation. To be timely, a shareholder's
notice must be delivered to or mailed by first class United States mail, postage
prepaid, and received at the principal executive offices of the Corporation not
less than forty (40) days prior to the meeting; provided, however, that in the
event less than forty-five (45) days' notice or prior public disclosure of the
date of the meeting is given or made to shareholders, notice by the shareholder
to be timely must be so received no later than the tenth day following the day
on which such notice of the date of the meeting was mailed or such disclosure
was made, but not less than five (5) days prior to the meeting.
(b) A shareholder's notice to submit business to a meeting of
shareholders shall set forth (i) the name and address, as they appear on the
Corporation's books, of the shareholder proposing such business, (ii) the class
and number of shares of the Corporation which are beneficially owned by the
shareholder, (iii) a representation that the shareholder intends to appear at
the meeting in person or by proxy to submit the business specified in such
notice, (iv) any material interest of the shareholder in such business, and (v)
a brief description of the business desired to be brought before the meeting and
the reasons for conducting such business at the meeting, including the complete
text of any resolutions to be presented at the annual meeting, and the reasons
for conducting such business at the meeting. In addition, the shareholder making
such proposal shall promptly provide any other information reasonably requested
by the Corporation. Notwithstanding anything in the Bylaws to the contrary, no
business shall be conducted at a meeting except in accordance with the
procedures set forth in this Section 2.12.The Chairman of a meeting shall, if
the facts warrant, determine that business was not properly brought before the
meeting and in accordance with the provisions of this Section 2.12, and, if he
should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
(c) In addition to the information required above to be given by a
shareholder who intends to submit business to a meeting of shareholders, if the
business to be submitted is the nomination of a person or persons for election
to the Board of Directors then such shareholder's notice must also set forth, as
to each person whom the shareholder proposes to nominate for election as a
director, (i) the name, age, business address and, if known, residence address
of such person, (ii) the principal occupation or employment of such person,
(iii) the class and number of shares of stock of the Corporation which are
beneficially owned by such person, (iv) any other information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors or is otherwise required by the rules and regulations of the
Securities and Exchange Commission promulgated under the Securities Exchange Act
of 1934, as amended, (v) the written consent of such person to be named in the
proxy statement as a nominee and to serve as a director if elected and (vi) a
description of all arrangements or understandings between such shareholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by such
shareholder. Nominations other than those made by the Board of Directors or its
designated committee must comply with the procedures set forth in this Section
2.12, and no person nominated by a shareholder shall be eligible for election as
a director unless nominated in accordance with the terms of this Section 2.12.
The Chairman of a meeting shall, if the facts warrant, determine that a
nomination was not properly made in accordance with the foregoing procedures of
this Section 2.12, and, if he should so determine, he shall so declare to the
meeting and the defective nomination disregarded.
(d) Notwithstanding the foregoing provisions of this Section 2.12, a
shareholder who seeks to have any proposal included in the Corporation's proxy
statement shall comply with the requirements of Regulation 14A under the
Securities Exchange Act of 1934, as amended.
ARTICLE III
DIRECTORS
SECTION 3.1. GENERAL POWERS OF BOARD. The business of the Corporation
shall be managed by or under the direction of its Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
Bylaws directed or required to be exercised or done by the shareholders.
SECTION 3.2. NUMBER OF DIRECTORS AND TERM OF OFFICE. The Board of
Directors shall consist of at least three (3) and not more than thirteen (13)
directors; provided, however, that the Board of Directors, by resolution adopted
by vote of a majority of the then authorized number of directors, may increase
or decrease the number of directors within such minimum and maximum limitations.
The Board of Directors shall be divided into three classes, as nearly equal in
number as reasonably possible, with the terms of office of the first class to
expire at the 2001 annual meeting of shareholders, the term of office of the
second class to expire at the 2002 annual meeting of shareholders and the term
of office of the third class to expire at the 2003 annual meeting of
shareholders. At each annual meeting of shareholders following such initial
classification and election, directors elected to succeed those directors whose
terms expire shall be elected for a term of office to expire at the third
succeeding annual meeting of shareholders after their election. Directors need
not be shareholders nor residents of the United States or the State of Oklahoma.
SECTION 3.3. ELECTION OF DIRECTORS. The directors shall be elected by
the holders of shares entitled to vote thereon at the annual meeting of
shareholders, and each shall serve as provided herein and until his respective
successor has be elected and qualified. At each meeting of the shareholders for
the election of directors, the persons receiving the greatest number of votes
shall be the directors.
SECTION 3.4. NOMINATIONS OF DIRECTORS. Nomination of persons for
election to the Board of Directors may be made by the Board of Directors or any
committee designated by the Board of Directors or by any shareholder entitled to
vote for the election of directors at the applicable meeting of shareholders.
Such nominations, if not made by the Board of Directors, shall be made by timely
notice in writing to the Secretary of the Corporation and comply with the
provisions of Section 2.12.
SECTION 3.5. CHAIRMAN OF THE BOARD. The Board of Directors may elect
one of their members to be Chairman of the Board. The Chairman of the Board
shall be subject to the control of and may be removed by the Board of Directors.
If he is present, the Chairman of the Board shall preside at all meetings of the
Board of Directors and of the shareholders, and he shall have and perform such
other duties as from time to time may be assigned to him by the Board of
Directors.
SECTION 3.6. RESIGNATIONS. Any director of the Corporation may resign
at any time by giving written notice to the Chairman of the Board, if any, or
the Secretary of the Corporation. Such resignation shall take effect at the time
specified therein, and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
SECTION 3.7. VACANCIES. In the event that any vacancy shall occur in
the Board of Directors, whether because of death, resignation, removal, newly
created directorships resulting from any increase in the authorized number of
directors, the failure of the shareholders to elect the whole authorized number
of directors, or any other reason, such vacancy may be filled by the vote of a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office for the
remainder of the full term of the class in which the vacancy occurred or until
their successors are duly elected and shall qualify, unless sooner displaced. If
there are no directors in office, then an election of directors may be held in
the manner provided by statute.
SECTION 3.8. REMOVAL OF DIRECTORS. Any director may be removed at any
annual or special shareholders' meeting only for cause and shall receive a copy
of the notice of such meeting, delivered to him personally or by mail at his
last known address at least ten (10) days prior to the date of the shareholders'
meeting.
SECTION 3.9. REGULAR MEETINGS. The Board of Directors of the
Corporation may hold meetings, both regular and special, either within or
without the State of Oklahoma. Regular meetings of the Board of Directors may be
held without notice at such time and at such place as shall from time to time be
determined by the Board of Directors. After such determination and notice
thereof has been once given to each person then a member of the Board of
Directors, regular meetings may be held at such intervals and time and place
without further notice being given.
SECTION 3.10. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board or the President or by a
majority of directors then in office and shall be held at such time and place as
shall be designated in the notice of the meeting.
SECTION 3.11. NOTICE. Notice of each special meeting or, where
required, each regular meeting, of the Board of Directors shall be given to each
director either by being mailed on at least the third day prior to the date of
the meeting or by being telegraphed, faxed or given personally or by telephone
on at least 24 hours notice prior to the date of meeting. Such notice shall
specify the place, date and hour of the meeting and, if it is for a special
meeting, the purpose or purposes for which the meeting is called. At any meeting
of the Board of Directors at which every director shall be present, even though
without such notice, any business may be transacted. Any acts or proceedings
taken at a meeting of the Board of Directors not validly called or constituted
may be made valid and fully effective by ratification at a subsequent meeting
which shall be legally and validly called or constituted. Notice of any regular
meeting of the Board of Directors need not state the purpose of the meeting and,
at any regular meeting duly held, any business may be transacted. If the notice
of a special meeting shall state as a purpose of the meeting the transaction of
any business that may come before the meeting, then at the meeting any business
may be transacted, whether or not referred to in the notice thereof. A written
waiver of notice of a special or regular meeting, signed by the person or
persons entitled to such notice, whether before or after the time stated therein
shall be deemed the equivalent of such notice, and attendance of a director at a
meeting shall constitute a waiver of notice of such meeting except when the
director attends the meeting and prior to or at the commencement of such meeting
protests the lack of proper notice.
SECTION 3.12. QUORUM AND ORGANIZATION OF MEETINGS. At all meetings of
the Board of Directors, a majority shall constitute a quorum for the transaction
of business, and the act of a majority of the directors present at any meeting
at which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specially provided by statute or by the Certificate of
Incorporation. If a quorum shall not be present at the meeting of the Board of
Directors, a majority of the directors present may adjourn the meeting to
another time and place, and the meeting may be held as adjourned without further
notice or waiver other than an announcement at the meeting, until a quorum shall
be present. Meetings shall be presided over by the Chairman of the Board, if
any, or, in his absence, by the Vice Chairman, if any, or, in the absence of
both, the President. The Secretary of the Corporation shall act as secretary of
the meeting, but, in his absence, the, the Chairman of the meeting may appoint
any person to act as secretary of the meeting.
SECTION 3.13. ACTION BY UNANIMOUS CONSENT. Unless otherwise restricted
by the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting, if all members of the Board
of Directors or committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
of Directors or committee.
SECTION 3.14. TELEPHONIC PARTICIPATION. Unless otherwise restricted by
the Certificate of Incorporation or these Bylaws, members of the Board of
Directors may participate in a meeting of the Board of Directors, or any
committee, by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at the
meeting.
SECTION 3.15. COMMITTEES OF DIRECTORS. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of a
committee, the member or members 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 the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all the power or 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 in reference
to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the shareholders a dissolution of the Corporation
or a revocation of a dissolution, or amending the Bylaws of the Corporation;
and, unless the resolution or the Certificate of Incorporation expressly so
provides, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock. Such committee or committees
shall have such name or names as may be determined from time to time by
resolution adopted by the Board of Directors.
SECTION 3.16. MINUTES OF COMMITTEE MEETINGS. Each committee shall keep regular
minutes of its meetings
and report the same to the Board of Directors when required.
SECTION 3.17. COMPENSATION OF DIRECTORS. No stated salary shall be paid
directors as such for their services, but by resolution of the Board of
Directors, a fixed sum may be allowed for attendance at regular or special
meetings of the Board of Directors; provided, however, that nothing herein
contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. The
Corporation may reimburse directors for out-of-pocket expenses for attendance at
regular or special meetings of the Board of Directors.
ARTICLE IV
NOTICES
SECTION 4.1. METHOD. Whenever, unless the provisions of any statutes or
of the Certificate of Incorporation or of these Bylaws provide otherwise, notice
is required to be given to any director or shareholder, it shall be construed to
mean personal notice, but such notice may be given in writing, by mail,
addressed to such director or shareholder, at his address as it appears on the
records of the Corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail or delivered to the custody of a commercial courier service. Notice
to directors may also be given by telephone or facsimile.
SECTION 4.2. WAIVER. Whenever any notice is required to be given under
the provisions of any statute or of the Certificate of Incorporation or of these
Bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
SECTION 5.1. ELECTION. The officers of the Corporation shall be chosen
by the Board of Directors. Each officer shall hold office for such term as may
be prescribed by the Board of Directors from time to time. It shall not be
necessary for any officer to be a director, and any number of offices may be
held by the same person.
SECTION 5.2. PRESIDENT. The President shall be the chief executive
officer of the Corporation, shall preside at all meetings of the shareholders
and the Board of Directors (unless the Chairman of the Board shall attend such
meeting, in which event the Chairman of the Board shall preside), shall have
general and active management of the business of the Corporation and shall see
that all orders and resolutions of the Board of Directors are carried into
effect. He shall execute bonds, mortgages and other contracts requiring a seal,
under the seal of the Corporation, except where required or permitted by law to
be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the Corporation.
SECTION 5.3. VICE PRESIDENTS. In the absence of the President or in the
event of his inability or refusal to act, the Vice President, if any (or in the
event there be more than one Vice President, the Vice Presidents in the order
designated by the Board of Directors, or in the absence of any designation, then
in the order of their election), shall perform the duties of the President, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. The Vice Presidents shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
SECTION 5.4. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all monies and other valuable effects in the same and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of all his transactions as
treasurer and of the financial condition of the Corporation. If required by the
Board of Directors, he shall give the Corporation a bond (which shall be renewed
every six years) in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
SECTION 5.5. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the shareholders and record all the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the shareholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or president, under whose supervision he shall be. He shall have
custody of the seal of the Corporation and he, or an assistant secretary, shall
have authority to affix the same to any instrument requiring it and when so
affixed, it may be attested by his signature or by the signature of such
assistant secretary. The Board of Directors may give general authority to any
other officer to affix the seal of the Corporation and to attest the affixing by
his signature.
SECTION 5.6. COMPENSATION. The salaries and other compensation of all
officers and agents of the
Corporation shall be fixed by the Board of Directors.
ARTICLE VI
CAPITAL STOCK
SECTION 6.1. CERTIFICATES. Every holder of stock in the Corporation
shall be entitled to have a certificate signed by, or in the name of the
Corporation by, the Chairman or Vice-Chairman of the Board of Directors, or the
President or a Vice President and the Treasurer, or an Assistant Treasurer, or
the Secretary or an Assistant Secretary of the Corporation, certifying the
number of shares owned by him in the Corporation. If the Corporation shall be
authorized to issue more than one class of stock or more than one series of any
class, the powers, designations, preferences and relative, participating, option
or other special rights of each class of stock or series thereof and the
qualification, limitations or restrictions of such preferences and/or rights
shall be set forth in full or summarized on the face or back of the certificates
which the Corporation shall issue to represent such class or series of stock,
provided that, except as otherwise provided under the General Corporation Act of
Oklahoma, in lieu of the foregoing requirements, there may be set forth on the
face or back of the certificate which the Corporation shall issue to represent
such class or series of stock, a statement that the Corporation will furnish
without charge to each shareholder who so requests the powers, designations,
preferences and relative, participating, option or other special rights of each
class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
SECTION 6.2. FACSIMILE SIGNATURES. The signatures of the officers upon
the certificate may be facsimiles if the certificate is countersigned by a
Transfer Agent or registered by a registrar other than the Corporation or its
employee. 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 6.3. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may
in its discretion, appoint one or more banks or trust companies in such city or
cities as the Board of Directors may deem advisable, from time to time, to act
as Transfer Agents and Registrars of the shares of stock of the Corporation;
and, upon such appointments being made, no certificate representing shares shall
be valid until countersigned by one of such Transfer Agents and registered by
one of such Registrars.
SECTION 6.4. LOST CERTIFICATES. In case any certificate representing
shares shall be lost, stolen or destroyed, the Board of Directors, or any
officer or officers authorized by the Board of Directors, may authorize the
issue of a substitute certificate in place of the certificate so lost, stolen or
destroyed, and, if the Corporation shall have a Transfer Agent and Registrar,
may cause or authorize such substitute certificate to be countersigned by the
appropriate Transfer Agent and registered by the appropriate Registrar. In each
such case, the applicant for a substitute certificate shall furnish to the
Corporation and to such of its Transfer Agents and Registrars as may require the
same, evidence to their satisfaction, in their discretion, of the loss, theft or
destruction of such certificate and of the ownership thereof, and also such
security or indemnity as may by them be required.
SECTION 6.5. TRANSFER OF SHARES. Transfers of shares shall be made on
the books of the Corporation only by the person named in the certificate or by
his attorney lawfully constituted in writing, and upon surrender and
cancellation of a certificate or certificates of a like number of shares, with
duly executed assignment and power of transfer endorsed thereon or attached
thereto, and with such proof of the authenticity of the signatures as the
Corporation or its agents may reasonably require. Upon the surrender to the
Corporation or the transfer agent of the Corporation of a certificate for shares
duly endorsed or accompanied by proper evidence of succession, assignation, or
authority to transfer, it shall issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
SECTION 6.6. FIXING RECORD DATE. 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 to receive payment of any dividend or
other distribution or allotment of any rights, or 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 (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action. 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 date for the adjourned
meeting.
SECTION 6.7. REGISTERED SHAREHOLDERS. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares (a) to receive dividends, (b) to vote as such owner, and (c) to
be held liable for calls and assessments. The Corporation shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the law.
ARTICLE VII
INDEMNIFICATION
Section 7.1. ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a shareholder, 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 or as a member of any committee or similar
body, against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not create, of itself, a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, that he had
reasonable cause to believe that his conduct was unlawful.
Section 7.2. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a shareholder, director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
shareholder, director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or as a member of any
committee or similar body, against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interest of the Corporation, except
that the Corporation shall make no indemnification in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable
for negligence or misconduct in the performance of his duty to the Corporation
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
Section 7.3. DETERMINATION OF RIGHT OF INDEMNIFICATION. The Corporation
shall indemnify a person under Section 7.1 or Section 7.2 (unless ordered by a
court order) only upon a determination in the specific case that the director,
officer, employee or agent has met the applicable standard of conduct set forth
in Section 7.1 or Section 7.2. Such determination shall be made by: (a) the
Board of Directors, by a majority vote of a quorum of directors not a party to
the action, suit or proceeding; (b) absent a quorum or at the direction of a
quorum of disinterested directors, independent legal counsel, by a written
opinion; or (c) the shareholders of the Corporation.
Section 7.4. INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding the other provisions of this Article VII, to the extent that a
shareholder, director, officer, employee or agent of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 7.1 or Section 7.2 of these Bylaws, or in
defense of any claim, issue or matter therein, the Corporation shall indemnify
him against expenses (including attorneys' fees) which he actually and
reasonably has incurred in connection therewith.
Section 7.5. ADVANCE OF EXPENSES. Expenses incurred by any person who
may have a right of indemnification under this Article VII in defending an
action or proceeding may be paid in advance of the final disposition of such
action or proceeding upon specific authorization by the Board and upon his
delivery to the Board of an undertaking by or on behalf of such person to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified under this Article VII.
Section 7.6. OTHER RIGHTS AND REMEDIES. The indemnification provided by
this Article VII shall not be deemed exclusive and is declared expressly to be
nonexclusive of any other rights to which those seeking indemnification may be
entitled under the Certificate of Incorporation or any bylaw, agreement, vote of
shareholders or disinterested directors or otherwise, both as to actions in his
official capacity and as to actions in another capacity while holding such
office. In addition, the indemnification, provided by this Article VII shall
continue as to any 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 a person.
Section 7.7. INSURANCE. Upon resolution passed by the Board, 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 shareholder, director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise or as a member of any committee or similar body, 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 to indemnify him against such liability under the provisions of this
Article VII.
Section 7.8. CONSTITUENT CORPORATIONS. For the purposes of this Article
VII, references to "the Corporation" include in addition to the resulting
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 and 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 or as a member of any committee or similar body, shall
stand in the same position under the provisions of this Article VII with respect
to the resulting or surviving corporation as he would have with respect to such
constituent corporation if its existence had continued.
Section 7.9. OTHER INSURANCE. The Corporation shall reduce the amount
of the indemnification of any person pursuant to the provisions of this Article
VII by the amount which such person collects as indemnification (a) under any
policy of insurance which the Corporation purchased and maintained on his behalf
or (b) from another corporation, partnership, joint venture, trust or other
enterprise.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1. DIVIDENDS. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors as and when they deem expedient
at any regular or special meeting, out of funds legally available thereof
pursuant to law. Dividends may be paid in cash, in property, or in shares of the
Corporation's capital stock, subject to the provisions of the Certificate of
Incorporation.
SECTION 8.2. RESERVES. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meeting contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the directors shall think conducive to the interest of
the Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
SECTION 8.3. CHECKS. All checks or demands for money, notes or other
evidence of indebtedness of the Corporation shall be signed by such officer or
officers or such other person or persons as the Board of Directors may from time
to time designate by resolution.
SECTION 8.4. EXECUTION OF PROXIES. The Chairman of the Board or the
President, or in the absence or disability of the Chairman of the Board and the
President, a Vice President, may authorize from time to time the signature and
issuance of proxies to vote upon shares of stock of other corporations standing
in the name of the Corporation or authorize the execution of consents to action
taken or to be taken by such other corporation. All such proxies and consents
shall be signed in the name of the Corporation by the Chairman of the Board or
the President or a Vice President and by the Secretary or an Assistant
Secretary.
ARTICLE IX
AMENDMENTS
SECTION 9.1. AMENDMENTS. These Bylaws may be altered, amended or
repealed, and new Bylaws may be adopted by the Board of Directors. The
shareholders of the Corporation may not adopt, amend or repeal these Bylaws
other than by the affirmative vote of more than two-thirds (2/3) of the combined
voting power of all outstanding voting securities of the Corporation entitled to
vote generally in the election of directors of the Board of Directors of the
Corporation, voting together as a single class.
IN WITNESS WHEREOF, these Amended and Restated Bylaws, having been duly
adopted by the Board of Directors of the Corporation in accordance with the
provisions of the General Corporation Act of the State of Oklahoma, has been
executed this __th day of May, 2000.
CATALOG.COM, INC.
By:_______________________________________
Robert W. Crull, Chief Executive Officer
Common Common
Stock Stock
LOGO TO COME
Number Shares
CATALOG.COM, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF OKLAHOMA
THIS CERTIFICATE IS TRANSFERABLE IN SEE REVERSE FOR CERTAIN DEFINITIONS
KANSAS CITY, MISSOURI OR NEW YORK, NEW YORK CUSIP
THIS CERTIFIES THAT
Is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES
OF THE COMMON STOCK, PAR VALUE
$0.01 PER SHARE OF CATALOG.COM,
INC.
transferable on the books of the Corporation in person or by attorney upon
surrender of the Certificate properly endorsed or accompanied by a proper
assignment. This Certificate shall not be valid unless countersigned by the
Transfer Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation and signatures of its
duly authorized officers.
DATED:
COUNTERSIGNED AND REGISTERED:
PRESIDENT UMB BANK, N.A.
(KANSAS CITY, MISSOURI)
TRANSFER AGENT AND REGISTRAR
BY:
AUTHORIZED SIGNATURE
AMERICAN BANK NOTE COMPANY PRODUCTION COORDINATOR:
55TH STREET AT SANSOM STREET BELINDA BECK: 215-764-8619
PHILADELPHIA, PA 19139 F OF MAY 19, 2000 CATALOG.COM,INC.
(215)
764-8600 H 66473 back
SALES: M.GARRETT: 214-823-2700
OPERATOR eg
/NET/BANKNOTE/HOME 16/CATALOG.COM/H66473 NEW
CATALOG.COM, INC.
1999 STOCK OPTION PLAN
ARTICLE I
PURPOSE
1. Purposes of the Plan. The purposes of Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company's business. Options
granted under this Plan may be Incentive Stock Options or Non-Qualified Stock
Options, as determined by the Committee at the time of grant.
ARTICLE II
DEFINITIONS
2. Definitions. As used herein, the following definitions shall apply:
(a) "Applicable Laws" means the requirements relating to the
administration of stock option plans under state corporate laws, Federal and
state securities laws, the Code, any stock exchange or quotation system on which
the Common Stock is listed or quoted and the applicable laws of any other
country or jurisdiction where Options are granted under this Plan.
(b) "Cause" shall mean, with respect to a Participant's Termination of
Service, unless otherwise determined by the Committee at grant, or, if no rights
of the Participant are reduced, thereafter, termination due to a Participant's
dishonesty, fraud, insubordination, willful misconduct, refusal to perform
services (for any reason other than illness or incapacity) or materially
unsatisfactory performance of his or her duties for the Company as determined by
the Committee in its sole discretion. With respect to a Director's Termination
of Service, Cause shall mean an act or failure to act that constitutes "cause"
for removal of a director under applicable state corporate law.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the Board or any of its Committees as shall be
administering this Plan in accordance with Section 4 hereof.
(f) "Common Stock" means the Common Stock, $.0001 par value, of the
Company.
(g) "Company" means Catalog.com, Inc., an Oklahoma corporation.
(h) "Consultant" means any person who is engaged by the Company or any
Subsidiary to render consulting or advisory services to such entity.
(i) "Director" means a member of the Board of Directors of the Company.
(j) "Disability" means total and permanent disability as defined
in Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Subsidiary of the Company. A person shall not
cease to be an Employee in the case of (i) any leave of absence approved by the
Company or (ii) transfers between locations of the Company or between the
Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive
Stock Options, no such leave may exceed ninety days, unless reemployment upon
expiration of such leave is guaranteed by statute or contract. If reemployment
upon expiration of a leave of absence approved by the Company is not so
guaranteed, on the 181st day of such leave any Incentive Stock Option held by
the Participant shall cease to be treated as an Incentive Stock Option and shall
be treated for tax purposes as a Non-Qualified Stock Option. Neither service as
a Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(m) "Good Reason" shall mean, with respect to a Participant's
Termination of Service unless otherwise determined by the Committee at grant,
or, if no rights of the Participant are reduced, thereafter, a voluntary
termination due to "good reason," as the Committee, in its sole discretion,
decides to treat as a Good Reason termination.
(n)"Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Committee deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Committee.
(o) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(p) "Non-Qualified Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(q) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "Option" means a stock option granted pursuant to this Plan.
(s) "Option Agreement" means a written or electronic agreement between
the Company and a Participant evidencing the terms and conditions of an
individual Option grant. The Option Agreement is subject to the terms and
conditions of this Plan.
(t) "Option Exchange Program" means a program whereby outstanding
Options are exchanged for Options with a lower exercise price.
(u) "Optioned Stock" means the Common Stock subject to an Option.
(v) "Participant" means the holder of an outstanding Option granted
under this Plan.
(w) "Plan" means this 1999 Stock Option Plan.
(x) "Section 16(b)" means Section 16(b) of the Securities Exchange Act
of 1934, as amended.
(y) "Service Provider" means an Employee or Consultant.
(z) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 below.
(aa) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
(bb) "Termination of Service" shall mean:
(i) with respect to a Consultant, that the Consultant is
no longer acting as a Consultant to
the Company or a Subsidiary.
(ii) with respect to a non-employee Director, that the
non-employee Director has ceased to be a Director of the Company.
(iii) with respect to an Employee, except as provided in the
next sentence, (i) a termination of service (for reasons other than a military
or personal leave of absence granted by the Company) of a Participant from the
Company or a Subsidiary; or (ii) when an entity which is employing a Participant
ceases to be a Subsidiary, unless the Participant thereupon becomes employed by
the Company or another Subsidiary.
The Committee may otherwise define Termination of Service in the Option grant
or, if no rights of the Participant are reduced, may otherwise define
Termination of Service thereafter, including, but not limited to, defining
Termination of Employment with regard to entities controlling, under common
control with or controlled by the Company rather than just the Company and its
Subsidiaries and/or entities that provide substantial services to the Company or
its Subsidiaries to which the Participant has transferred directly from the
Company or its Subsidiaries at the request of the Company.
ARTICLE III
SHARES UNDER PLAN
3. Stock Subject to this Plan. Subject to the provisions of Section 12
of this Plan, the maximum aggregate number of Shares which may be issuable under
this Plan is 170,000 Shares. The Shares may be authorized but unissued, or
reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under this Plan (unless the Plan has terminated). However, Shares
that have actually been issued under the Plan upon exercise of an Option shall
not be returned to the Plan and shall not become available for future
distribution under the Plan.
ARTICLE IV
ADMINISTRATION
4. Administration of the Plan.
(a) Committee. The Plan shall be administered by the Board or a
Committee appointed by the Board, which Committee shall be constituted to comply
with Applicable Laws.
(b) Powers of the Committee. Subject to the provisions of the Plan and,
in the case of a Committee, the specific duties delegated by the Board to such
Committee, and subject to the approval of any relevant authorities, the
Committee shall have the authority in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers and Directors to
whom Options may from time to time be granted hereunder;
(iii) to determine the number of Shares to be covered by each
such award granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, of any Option
granted hereunder. Such terms and conditions include, but are not limited to,
the exercise price, the time or times when Options may be exercised (which may
be based on performance criteria), any forfeiture provisions, any vesting
acceleration or waiver of forfeiture provisions, and any restriction or
limitation regarding any Option or the Common Stock relating thereto, based in
each case on such factors as the Committee, in its sole discretion, shall
determine;
(vi) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(e) instead of Common Stock;
(vii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted;
(viii) to initiate an Option Exchange Program;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to allow Participants to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option that number of Shares having a Fair Market
Value equal to the amount required to be withheld. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined. All elections by Participants to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Committee may deem necessary or advisable; and
(xi) To establish other terms and conditions of Options, which
shall not be inconsistent with any of the foregoing terms of the Plan, as the
Committee shall deem appropriate including, without limitation, permitting
"reloads" such that the same number of Options are granted as the number of
Options exercised, shares used to pay for the exercise price of Options or
shares used to pay withholding taxes ("Reloads"); with respect to Reloads, the
exercise price of the new Option shall be the Fair Market Value on the date of
the "reload" and the term of the Option shall be the same as the remaining term
of the Options that are exercised, if applicable, or such other exercise price
and term as determined by the Committee; and
(xi) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan.
(c) Effect of Committee's Decision. All decisions, determinations
and interpretations of the Committee
-------------------------------
shall be final and binding on all Participants.
ARTICLE V
ELIGIBILITY
5. Eligibility.
(a) Non-Qualified Stock Options may be granted to Service Providers
(whether or not Employees) and non-employee Directors. Incentive Stock Options
may be granted only to Employees.
(b) Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Non-Qualified Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Participant during any calendar year
(under all plans of the Company and any Subsidiary) exceeds $100,000, such
Options shall be treated as Non-Qualified Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(c) Neither the Plan nor any Option shall confer upon any Participant
any right with respect to continuing the Participant's relationship as a Service
Provider a Director of the Company, nor shall it interfere in any way with his
or her right or the Company's right to terminate such relationship at any time,
with or without cause.
ARTICLE VI
TERM
6. Term of Plan. The Plan shall become effective upon its adoption
by the Board. It shall continue in effect for a term of ten (10) years
unless sooner terminated under Section 14 hereof.
ARTICLE VII
TERM OF OPTIONS
7. Term of Options. The term of each Option shall be stated in the
Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. In the case of an Incentive Stock
Option granted to a Participant who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Subsidiary, the term of the Option shall
be five (5) years from the date of grant or such shorter term as may be provided
in the Option Agreement.
ARTICLE VIII
OPTION EXERCISE PRICE
8. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to
be issued upon exercise of an Option
--------------
shall be such price as is determined by the Committee, but shall be subject to
the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of grant of such Option,
owns stock representing more than ten percent (10%) of the voting power of
all classes of stock of the Company or any Subsidiary, the exercise price
shall be no less than
110% of the Fair Market Value per Share on the date of grant;
(B) granted to any other Employee, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of
grant.
(ii) In the case of a Non-Qualified Stock Option granted to
any Service Provider, the per Share exercise price shall be no less than 85% of
the Fair Market Value per Share on the date of grant, and in the case of a
Director, shall be no less than 100% of the Fair Market Value per Share on the
date of grant.
(iii) Notwithstanding the foregoing, Options may be granted
with a per Share exercise price other than as required above pursuant to a
merger or other corporate transaction.
(b) Consideration. The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment, shall be
determined by the Committee (and, in the case of an Incentive Stock Option,
shall be determined at the time of grant). Such consideration may consist of (1)
cash, (2) check, (3) promissory note, (4) other Shares which (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Participant
for more than six months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which such Option shall be exercised, (5) consideration received by
the Company under a cashless exercise program implemented by the Committee in
connection with this Plan, or (6) any combination of the foregoing methods of
payment. In making its determination as to the type of consideration to accept,
the Committee shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
ARTICLE IX
OPTION EXERCISE
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable according to the terms hereof at such times and
under such conditions as determined by the Committee and set forth in the Option
Agreement. Options shall become exercisable at a rate of no less than 20% per
year over five (5) years from the date the Options are granted. Unless the
Committee provides otherwise, vesting of Options granted hereunder shall be
tolled during any unpaid leave of absence. An Option may not be exercised for a
fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Committee and permitted by the Option Agreement and this Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Participant or, if
requested by the Participant, in the name of the Participant and his or her
spouse. Until the Shares are issued (as evidenced by the appropriate entry on
the books of the Company or of a duly authorized transfer agent of the Company),
no right to vote or receive dividends or any other rights as a shareholder shall
exist with respect to the Shares, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 12 hereof.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares thereafter available, both for purposes of this Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Buyout Provisions. The Committee may at any time offer to buy out
for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Committee shall establish and communicate to the
Participant at the time that such offer is made.
ARTICLE X
TERMINATION OF PARTICIPANT
10. Termination of Participants.
(a) Involuntary Termination Without Cause or Voluntary Termination for
Good Reason. If a Service Provider's Termination of Service is by involuntary
termination without Cause or for Good Reason, any Option held by such
Participant, unless otherwise determined by the Committee at grant or, if no
rights of the Participant are reduced, thereafter, may be exercised, to the
extent exercisable at termination, by the Participant at any time within a
period of ninety (90) days from the date of such termination, but in no event
beyond the expiration of the stated term of such Option.
(b) Voluntary Termination Without Good Reason. If a Service Provider's
Termination of Service is voluntary but without Good Reason and occurs prior to,
or more than ninety (90) days after, the occurrence of an event which would be
grounds for Termination of Service by the Company for Cause (without regard to
any notice or cure period requirements), any Option held by such Participant,
unless otherwise determined by the Committee at grant or, if no rights of the
Participant are reduced, thereafter, may be exercised, to the extent exercisable
at termination, by the Participant at any time within a period of thirty (30)
days from the date of such termination, but in no event beyond the expiration of
the stated term of such Option.
(c) Other Termination. Unless otherwise determined by the Committee at
grant or, if no rights of the Service Provider are reduced, thereafter, if a
Service Provider's Termination of Service is for any reason other than death,
Disability, Retirement, Good Reason, involuntary termination without Cause or
voluntary termination as provided in subsection (b) above, any Option held by
such Service Provider shall thereupon terminate and expire as of the date of
termination, provided that (unless the Committee determines a different period
upon grant or, if no rights of the Service Provider are reduced, thereafter) in
the event the termination is for Cause or is a voluntary termination without
Good Reason within ninety (90) days after occurrence of an event which would be
grounds for Termination of Service by the Company for Cause (without regard to
any notice or cure period requirement), any Option held by the Service Provider
at the time of occurrence of the event which would be grounds for Termination of
Service by the Company for Cause shall be deemed to have terminated and expired
upon occurrence of the event which would be grounds for Termination of Service
by the Company for Cause.
(d) Disability of Service Provider. If a Participant ceases to be a
Service Provider as a result of the Service Provider's Disability, the Service
Provider may exercise his or her Option within such period of time as is
specified in the Option Agreement (of at least six (6) months) to the extent the
Option is vested on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Option Agreement). In
the absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Service Provider's termination.
If, on the date of termination, the Service Provider is not vested as to his or
her entire Option, the Shares covered by the unvested portion of the Option
shall revert to the Plan. If, after termination, the Service Provider does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(e) Death of Service Provider. If a Participant dies while a Service
Provider, the Option may be exercised within such period of time as is specified
in the Option Agreement (of at least six (6) months) to the extent that the
Option is vested on the date of death (but in no event later than the expiration
of the term of such Option as set forth in the Option Agreement) by the Service
Provider's estate or by a person who acquires the right to exercise the Option
by bequest or inheritance. In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Service Provider's termination. If, at the time of death, the Service
Provider is not vested as to the entire Option, the Shares covered by the
unvested portion of the Option shall immediately revert to the Plan. If the
Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(f) Termination of Directorship. The following rules apply with regard
to Options upon the Termination
----------------------------
of Directorship:
(i) Death, Disability or Otherwise Ceasing to be a Director
Other than for Cause. Except as otherwise provided herein, upon the
Termination of Directorship, on account of Disability, death,
Retirement, resignation, failure to stand for reelection, failure to be
renominated or failure to be reelected or otherwise other than as set
forth in (b) below, all outstanding Options then exercisable and not
exercised by the Participant prior to such Termination of Directorship
shall remain exercisable, to the extent exercisable at the Termination
of Directorship, by the Participant or, in the case of death, by the
Participant's estate or by the person given authority to exercise such
Options by his or her will or by operation of law, for the remainder of
the stated term of such Options.
(ii) Cause. Upon removal or failure to be renominated for
Cause, or if the Company obtains or discovers information after
Termination of Directorship that such Participant had engaged in
conduct that would have justified a removal for Cause during such
directorship, all outstanding Options of such Participant shall
immediately terminate and shall be null and void.
(iii) Cancellation of Options. No Options that were not
exercisable during the period such person serves as a Director shall
thereafter become exercisable upon a Termination of Directorship for
any reason or no reason whatsoever, and such Options shall terminate
and become null and void upon a Termination of Directorship.
<PAGE>
ARTICLE XI
NON-TRANSFERABILITY OF OPTIONS
11. Non-Transferability of Options. Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Participant, only by the Participant.
ARTICLE XII
ADJUSTMENTS
12. Adjustments Upon Changes in Capitalization, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under this Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company. The conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Committee shall notify each
Participant as soon as practicable prior to the effective date of such proposed
transaction. The Committee in its discretion may provide for a Participant to
have the right to exercise his or her Option until fifteen (15) days prior to
such transaction as to all of the Optioned Stock covered thereby, including
Shares as to which the Option would not otherwise be exercisable. In addition,
the Committee may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an
Option will terminate immediately prior to the consummation of such proposed
action.
(c) Merger or Asset Sale. In the event of a merger of the Company with
or into another corporation, or the sale of substantially all of the assets of
the Company, each outstanding Option shall be assumed or an equivalent option or
right substituted by the successor corporation or a Subsidiary of the successor
corporation. In the event that the successor corporation refuses to assume or
substitute for the Option, the Participant shall fully vest in and have the
right to exercise the Option as to all of the Optioned Stock, including Shares
as to which it would not otherwise be vested or exercisable. If an Option
becomes fully vested and exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, the Committee shall notify the
Participant in writing or electronically that the Option shall be fully
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option shall terminate upon the expiration of such period. For the purposes
of this paragraph, the Option shall be considered assumed if, following the
merger or sale of assets, the option or right confers the right to purchase or
receive, for each Share of Optioned Stock subject to the Option immediately
prior to the merger or sale of assets, the consideration (whether stock, cash,
or other securities or property) received in the merger or sale of assets by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Committee may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option, for each Share
of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
ARTICLE XIII
TIME OF GRANTING OPTIONS
13. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Committee makes the determination
granting such Option, or such other date as is determined by the Committee.
Notice of the determination shall be given to each Employee to whom an Option is
so granted within a reasonable time after the date of such grant.
ARTICLE XIV
PLAN AMENDMENT AND TERMINATION
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or terminate this Plan.
-------------------------
(b) Shareholder Approval. The Board shall obtain shareholder approval
of any Plan amendment to the --------------------- extent necessary and
desirable to comply with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of this Plan shall impair the rights of any
Participant, unless mutually agreed otherwise between the Participant and the
Committee, which agreement must be in writing and signed by the Participant and
the Company. Termination of this Plan shall not affect the Committee's ability
to exercise the powers granted to it hereunder with respect to Options granted
under the Plan prior to the date of such termination.
ARTICLE XV
CONDITIONS UPON ISSUANCE OF SHARES
15. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) Investment Representations. As a condition to the exercise of an
Option, the Committee may require the person exercising such Option to represent
and warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation is
required.
ARTICLE XVI
REGULATORY APPROVAL
16. Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
ARTICLE XVII
RESERVATION OF SHARES
17. Reservation of Shares. The Company, during the term of this Plan,
shall at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
ARTICLE XVIII
SHAREHOLDER APPROVAL
18. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the
Plan is adopted. Such shareholder approval shall be obtained in the degree
and manner required under Applicable Laws.
ARTICLE XIX
INFORMATION TO PARTICIPANTS
19. Information to Participants. The Company shall provide to each
Participant, not less frequently than annually during the period such
Participant or purchaser has one or more Options outstanding, copies of annual
financial statements. The Company shall not be required to provide such
statements to key employees whose duties in connection with the Company assure
their access to equivalent information.
ETHOS COMMUNICATIONS CORP. 1997 STOCK OPTION PLAN
1. Purpose. The purposes of the Ethos Communications Corp. 1997 Stock
Option Plan are to enable the Company to attract and retain the services of
employees and directors and to provide them with increased motivation and
incentive to exert their best efforts on behalf of the Company by enlarging
their personal stake in the Company's success.
2. Definitions. As used in the Plan, the following definitions apply
to the terms indicated below: "Board" means the Board of Directors of the
Company. "Change in Control" means (i) the execution by the Company of an
agreement to merge or consolidate with another corporation (other than a
corporation 50% or more of which is controlled by, or is under common
control with, the Company), or (ii) the execution of an agreement by
shareholders of the Company to sell or transfer an amount of Shares equal
to or greater than 50% of the outstanding Shares of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time. "Company" means Ethos Communications Corp., an Oklahoma
corporation. "Fair Market Value" of a Share on a given day means, if Shares
are listed on an established stock exchange or exchanges, the highest
closing sales price of a Share as reported on such stock exchange or
exchanges; or if not so reported, the average of the bid and asked prices,
as quoted on the Nasdaq Stock Market, Nasdaq Small-Cap Market, the Nasdaq
National Association Bulletin Board, or by the National Quotations Bureau.
If the Shares shall not be so quoted, the Fair Market Value shall be
determined by the Board taking into account all relevant facts and
circumstances.
"Incentive Stock Option" means an Option that qualifies as an
incentive stock option within the meaning of Section 422 of the Code and which
is identified as an Incentive Stock Option in the agreement by which it is
evidenced.
"Option" means a right to purchase Shares under the terms and
conditions of the Plan as evidenced by an option agreement in such form not
inconsistent with the Plan, as the Board may adopt for general use or for
specific cases from time to time.
"Nonqualified Stock Option" means an Option that is not an
Incentive Stock Option and which is identified as a Nonqualified Stock Option in
the agreement by which it is evidenced.
"Participant" means an employee or director, eligible to
participate in the Plan under Section 5 hereof, to whom an Option is granted
under the Plan.
<PAGE>
"Plan" means the Ethos Communications Corp. 1997 Stock Option Plan,
including any amendments thereto.
"Shares" means shares of the Company's Common Stock, $.01 par
value, now or hereafter owned by the Company as treasury stock or authorized but
unissued shares of the Company's Common Stock, subject to adjustment as provided
in the Plan.
"Subsidiary" means any corporation, now or hereafter existent,
in which the Company owns, directly or indirectly, stock comprising fifty
percent (50%) or more of the total combined voting power of all classes of stock
of such corporation.
3. Plan Adoption and Term.
A. The Plan shall become effective upon its adoption by the
Board, and Options may be issued upon such adoption and from time to time
thereafter; provided, however, that the Plan shall be submitted to the Company's
shareholders for their approval at the next annual meeting of shareholders, or
prior thereto at a special meeting of shareholders expressly called for such
purpose, or by written consent of the holders of a majority of the issued and
outstanding shares of Common Stock; and provided further, that the approval of
the Company's shareholders shall be obtained within twelve (12) months of the
date of adoption of the Plan. If the Plan is not approved at the annual meeting
or special meeting by the affirmative vote of a majority of all shares voting at
such meeting, or by or by written consent of the holders of a majority of the
issued and outstanding shares of Common Stock, then the Plan and all Options
then outstanding hereunder shall forthwith automatically terminate and be of no
force and effect.
B. Subject to the provisions hereinafter contained relating to
amendment or discontinuance, the Plan shall continue in effect for ten (10)
years from the date of its adoption by the Board. No option may be granted
hereunder after such ten-year period.
<PAGE>
4. Administration of the Plan. The Plan shall be administered by the
Board. Except as otherwise expressly provided in the Plan, the Board shall have
sole and final authority to interpret the provisions of the Plan and the terms
of any Option issued under it and to promulgate and interpret such rules and
regulations relating to the Plan and Options as it may deem necessary or
desirable for the administration of the Plan. Without limiting the foregoing,
the Board shall, subject to Section 5 and to the extent and in the manner
contemplated herein, determine who shall receive Options under the Plan and how
many Shares shall be subject to each such Option. The Board may correct any
defect in the Plan or any Option in the manner and to the extent it shall deem
expedient to carry the Plan into effect and shall be the sole and final judge of
such expediency.
No member of the Board shall be liable for any action taken or
omitted or any determination made by him in good faith relating to the Plan, and
the Company shall indemnify and hold harmless each member of the Board and each
other director or employee of the Company to whom any duty or power relating to
the administration or interpretation of the Plan has been delegated against any
cost or expense (including counsel fees) or liability (including any sum paid in
settlement of a claim with the approval of the Board) arising out of any act or
omission in connection with the Plan, unless arising out of such person's own
fraud or bad faith.
5. Eligibility. The employees of the Company and its Subsidiaries, who,
in the opinion of the Board, have a capacity for contributing in a substantial
measure to the success of the Company and its Subsidiaries, shall be eligible to
participate in the Plan. Directors of the Company, who need not be employees,
shall also be eligible to participate in the Plan. No options intended to
qualify as Incentive Stock Options shall be granted under the Plan to any person
who, before or after the grant or exercise of any Option, owns or would own,
directly or indirectly, more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company, or its parent or any Subsidiary,
or who is not an employee of the Company.
6. Stock Subject to the Plan. Subject to adjustment as provided in
Section 13 hereof, Options may be granted pursuant to the Plan with respect to a
number of Shares that, in the aggregate, does not exceed One Hundred Thousand
(100,000) Shares. If, prior to the termination of the Plan, an Option shall
expire or terminate for any reason without having been exercised in full, the
unpurchased Shares subject thereto shall again be available for the purposes of
the Plan.
7. Options.
A. All Options granted under the Plan shall be clearly
identified either as Incentive Stock Options or as Nonqualified Stock Options.
All Options granted under the Plan shall be evidenced by agreements in such
form, not inconsistent with the Plan, as the Board may adopt for general use or
for specific use from time to time. An Option shall be deemed "granted" under
the Plan on the date on which the Board, by appropriate action, awards the
Option to a Participant, or on such subsequent date as the Board may designate.
<PAGE>
B. (i) The aggregate Fair Market Value of Shares with respect
to which Incentive Stock Options granted under the Plan are exercisable for the
first time by a Participant during any calendar year under the Plan and any
other stock option plan of the Company (and its parent and subsidiary
corporations as those terms are used in Section 422 of the Code) shall not
exceed $100,000. Such Fair Market Value shall be determined as of the date on
which each such Incentive Stock Option is granted. To the extent that the
aggregate Fair Market Value of Shares with respect to such Incentive Stock
Options exceeds $100,000, such Incentive Stock Options shall be treated as
Nonqualified Options, but all other terms and provisions of such Incentive Stock
Options shall remain unchanged.
(ii) Subparagraph (i) of this Paragraph B shall be applied by taking
Options into account in the order in which they were granted.
8. Option Price. The price per share at which Shares may be purchased
pursuant to any Option granted under the Plan shall be not less than 100%
of the Fair Market Value of a Share on the date the Option is
granted.
9. Duration of Options. No Option granted hereunder shall be
exercisable after the expiration of ten (10) years from the date such
Option was granted. All Options shall be subject to earlier termination as
provided elsewhere in the Plan.
10. Conditions Relating to Exercise of Options.
A. The Board may, at its discretion, provide that an Option
may not be exercised in whole or in part for any period or periods of time
specified in the Option agreement. Except as provided in the Option agreement,
an Option may be exercised in whole or in part at any time during its term. No
Option may be exercised for a fractional share of stock.
B. No Option shall be transferable by a Participant otherwise
than by will or the laws of descent and distribution and Options shall be
exercisable during the lifetime of a Participant only by such Participant.
C. An Option shall be exercised by the delivery to the Company
of a written notice signed by the Participant, which specifies the number of
Shares with respect to which the Option is being exercised and the date of the
proposed exercise. Such notice shall be delivered to the Company's principal
office, to the attention of its Secretary, no less than three (3) business days
in advance of the date of the proposed exercise and shall be accompanied by the
applicable option certificate evidencing the Option. A Participant may withdraw
such notice at any time prior to the close of business on the proposed date of
exercise, in which case the option certificate evidencing the Option shall be
returned to the Participant.
<PAGE>
D. Payment for Shares purchased upon exercise of an Option
shall be made at the time of exercise either in cash, by certified check or bank
cashier's check or in Shares owned by the Participant and valued at their Fair
Market Value on the date of exercise, or partly in Shares with the balance in
cash or by certified check or bank cashier's check. Any payment in Shares shall
be effected by their delivery to the Secretary of the Company, endorsed in blank
or accompanied by stock powers executed in blank.
E. Certificates for Shares purchased upon exercise of Options
shall be issued and delivered as soon as practicable following the date the
Option is exercised. Certificates for Shares purchased upon exercise of Options
shall be issued in the name of the Participant.
F. Notwithstanding any other provision in the Plan, no Option
may be exercised unless and until the Shares to be issued upon the exercise
thereof have been registered under the Securities Act of 1933 and applicable
state securities laws, or are, in the opinion of counsel to the Company, exempt
from such registration. The Company shall not be under any obligation to
register under applicable federal or state securities laws any Shares to be
issued upon the exercise of an Option granted hereunder, or to comply with an
appropriate exemption from registration under such laws in order to permit the
exercise of an Option and the issuance and sale of the Shares subject to such
Option. If the Company chooses to comply with such an exemption from
registration, the Shares issued under the Plan may, at the discretion of the
Board, bear an appropriate restrictive legend restricting the transfer or pledge
of the Shares represented thereby, and the Board may also give appropriate
stop-transfer instructions to the transfer agent to the Company.
G. Any person exercising an Option or transferring or
receiving Shares shall comply with all regulations and requirements of any
governmental authority having jurisdiction over the issuance, transfer, or sale
of capital stock of the Company, and as a condition to receiving any Shares,
shall execute all such instruments as the Company in its sole discretion may
deem necessary or advisable.
H. Notwithstanding Paragraph A of this Section 10, the Board
may, in its sole discretion, accelerate the date on which any Option granted
under the Plan, and outstanding at such time, shall become exercisable.
<PAGE>
I. In the event of termination of a Participant's employment
by reason of such Participant's retirement in accordance with an applicable
retirement plan, any outstanding Option held by such Participant shall be or
immediately become fully exercisable as to the total number of Shares subject
thereto (whether or not exercisable to that extent prior to termination of
employment) and shall remain so exercisable but only for a period of three
months after commencement of such retirement, at the end of which time it shall
terminate (unless such Option expires earlier by its terms).
J. In the event of termination of a Participant's employment
by reason of such Participant's disability within the meaning of Section
22(e)(3) of the Code, any outstanding Option held by such Participant shall be
or immediately become fully exercisable as to the total number of Shares subject
thereto (whether or not exercisable to that extent prior to termination of
employment) and shall remain so exercisable but only for a period of one year
after termination of employment for such disability, at the end of which time it
shall terminate (unless such Option expires earlier by its terms).
K. In the event of the death of any Participant (including
death during an approved leave of absence or following a Participant's
retirement or disability), any Option then held by him which shall not have
lapsed or terminated prior to his death shall be or immediately become fully
exercisable by the executors, administrators, legatees, or distributees of his
estate, as may be appropriate, as to the total number of Shares subject thereto
(whether or not exercisable to that extent at the time of death) and shall
remain so exercisable but only for a period of one year after death, at the end
of which time it shall terminate (unless such Option expires earlier by its
terms).
L. In the event of the termination of the Participant's
employment otherwise than as described in paragraphs I, J, and K, any
outstanding Option held by such Participant shall, to the extent exercisable at
the time of such event, remain so exercisable but only for a period of ninety
(90) days following such event, at the end of which time it shall terminate
(unless such Option expires earlier by its terms). Whether an authorized leave
of absence, or absence in military or government service, shall constitute
termination of employment shall be determined by the Board.
M. Notwithstanding Paragraph A of this Section 10, upon the
occurrence of a Change in Control, any Option granted under the Plan and
outstanding at such time shall become fully and immediately exercisable and
shall remain exercisable until its expiration or termination as provided in the
Plan.
11. No Employment Rights. Nothing contained in the Plan or any Option
shall confer upon any Participant any right with respect to the continuation of
his employment by the Company or interfere in any way with the right of the
Company, subject to the terms of any separate employment agreement to the
contrary, at any time to terminate such employment or to increase or decrease
the compensation of the Participant from the rate in existence at the time of
the grant of an Option.
<PAGE>
12. Rights of a Shareholder. No person shall have any rights with
respect to any Shares covered by or relating to any grant hereunder of an Option
until the date of issuance of a certificate to him evidencing such Shares.
Except as otherwise expressly provided in the Plan, no adjustment to any Option
shall be made for dividends or other rights for which the record date occurs
prior to the date such certificate is issued.
13. Adjustment Upon Changes in Capital Stock.
A. If the capital stock of the Company shall be subdivided or
combined, whether by reclassification, stock dividend, stock split, reverse
stock split or other similar transaction, then the number of Shares authorized
under the Plan, the number of Shares then subject to or relating to unexercised
Options granted hereunder and the exercise price per Share will be adjusted
proportionately. A stock dividend shall be treated as a subdivision of the whole
number of Shares equal to such whole number of Shares so outstanding plus the
number of Shares issued as a stock dividend.
B. In the case of any capital reorganization or any
reclassification of the capital stock of the Company (except pursuant to a
transaction described in Paragraph A of this Section 13) (a "Reorganization"),
appropriate adjustment may be made by the Board in the number and class of
shares authorized to be issued under the Plan and the number and class of shares
subject to or relating to Options awarded under the Plan and outstanding at the
time of such Reorganization.
C. Each Participant will be notified of any adjustment made pursuant
to this Section 13 and any such adjustment, or the failure to make such
adjustment, shall be binding on the Participant.
D. Except as expressly set forth herein, the number and kind
of Shares subject to Options, shall not be affected by any transaction
(including, without limitation, any merger, recapitalization, stock split, stock
dividend, issuance of stock or similar transaction) affecting the capital stock
of the Company and no Participant shall be entitled to any additional Options on
account thereof.
14. Withholding Taxes.
A. Whenever Shares are to be issued upon the exercise of an
Option, the Company shall have the right to require the Participant to remit to
the Company in cash an amount sufficient to satisfy federal, state and local
withholding tax requirements, if any, prior to the delivery of any certificate
or certificates for such Shares.
<PAGE>
B. Notwithstanding Paragraph A of this Section 14, at the
election of a Participant, subject to the approval of the Board, when Shares are
to be issued upon the exercise of an Option, the Participant may tender to the
Company a number of Shares, or the Company shall withhold a number of such
shares, the Fair Market Value of which is sufficient to satisfy the federal,
state and local tax requirements, if any, attributable to such exercise or
occurrence. The Board hereby grants its approval to any election made pursuant
to this Paragraph B, but reserves the right, in its absolute discretion, to
withdraw such approval in case of any such election effective upon its delivery
of notice thereof to the Participant.
C. Notwithstanding Paragraph E of Section 10 hereof, if a
Participant subject to the provisions of Section 16(b) of the Exchange Act who
has not made an election pursuant to Section 83(b) of the Code, makes an
election described in Paragraph B of this Section 14 to have Shares withheld
with respect to an Option, then the Company shall hold as custodian for the
Participant certificates evidencing the total number of Shares required to be
issued pursuant to the exercise of the Option until the expiration of six (6)
months following the date of such exercise. Upon the expiration of such
six-month period, the Company shall deliver to such Participant certificates
evidencing such Shares minus a number of such Shares, the Fair Market Value of
which on the date on which such period expires is sufficient to satisfy the
federal, state and local tax requirements attributable to such exercise.
D. Notwithstanding any other provisions of the Plan, a
individual who is subject to Section 16(b) of the Exchange Act, may not make
either of the elections described in Paragraph B of this Section 14 prior to the
expiration of six (6) months after the date on which the applicable Option was
granted. Such elections must be made either (i) during the 10-day window period
described in Section (e)(3)(iii) of Rule 16b-3 promulgated under such Section
16(b) of the Exchange Act, or (ii) at least six months prior to the date as of
which the income attributable to the exercise of the related Option is
recognized under the Code. Such elections shall be irrevocable and shall be made
by the delivery to the Company's principal office, to the attention of its
Secretary, of a written notice signed by Participant.
15. Amendment of the Plan.
A. The Board may at any time and from time to time suspend,
discontinue, modify or amend the Plan in any respect whatsoever except that the
Board may not suspend, discontinue, modify or amend the Plan so as to adversely
affect the rights of a Participant with respect to any grants that have
theretofore been made to such Participant without such Participant's approval.
B. No amendment to or modification of the Plan which: (i)
materially increases the benefits accruing to Participants; (ii) except as
provided in Sections 6 and 13 hereof, increases the number of Shares that may be
issued under the Plan; or (iii) modifies the requirements as to eligibility for
participation under the Plan shall be effective without shareholder approval.
<PAGE>
16. Resolution of Disputes. The following provisions shall apply to any
controversy between the Company and its Subsidiaries and the Participant
(including any director, officer, employee, agent or affiliate of the Company
and its Subsidiaries) relating to this Plan or any Option granted pursuant to
this Plan.
A. The parties first shall use their reasonable efforts to discuss and
negotiate a resolution of the controversy. B. If the efforts to negotiate a
resolution do not succeed, the parties shall resolve the controversy by
final and binding arbitration in accordance with the Rules for Commercial
Arbitration (the "Rules") of the American Arbitration Association in effect
at the time of the adoption of this Plan and pursuant to the following
additional provisions:
(i) The Federal Arbitration Act (the "Federal Act"),
as supplemented by the Oklahoma Arbitration Act (to the extent not
inconsistent with the Federal Act), shall apply to the arbitration and
all procedural matters relating to the arbitration.
(ii) The parties shall select one arbitrator within
ten days after filing of a demand and submission in accordance with the
Rules. If the parties fail to agree on an arbitrator within that ten
day period or fail to agree to an extension of that period, the
arbitration shall take place before an arbitrator selected in
accordance with the Rules.
(iii) The arbitration shall take place in Oklahoma
City, Oklahoma, and the arbitrator shall issue any award at the place
of arbitration. The arbitrator may conduct hearings and meetings at any
place agreeable to the parties or, upon the motion of a party,
determined by the arbitrator as necessary to obtain significant
testimony or evidence.
(iv) The arbitrator shall have the power to authorize
all forms of discovery (including depositions, interrogatories and
document production) upon the showing of (a) a specific need for the
discovery, (b) that the discovery likely will lead to material evidence
needed to resolve the controversy, and (c) that the scope, timing and
cost of the discovery is not excessive.
(v) Authority of Arbitrator. The arbitrator shall not
have the power (a) to alter, modify, amend, add to, or subtract from
any term or provision of this Plan or any Option; (b) to rule upon or
grant any extension, renewal or continuance of this Plan or any Option;
or (c) to grant interim injunctive relief prior to the award.
<PAGE>
(vi) Enforcement of Award. The prevailing party shall
have the right to enter the award of the arbitrator in any court having
jurisdiction over one or more of the parties or their assets. The
parties specifically waive any right they may have to apply to any
court for relief from the provisions of this Agreement or from any
decision of the arbitrator made prior to the award.
B. Attorneys' Fees and Costs. The prevailing party to the
arbitration shall have the right to an award of its reasonable attorneys' fees
and costs (including the cost of the arbitrator) incurred after the filing of
the demand and submission. If the Company prevails, the award shall include an
amount for that portion of the administrative overhead reasonably allocable to
the time devoted by the in-house legal staff of the Company.
C. Other Rights. The provisions of this Section 16 shall not prevent
the Company, its Subsidiaries, or the Participant from exercising any of
their rights under this Plan, any Option, or under the common law,
including (without limitation) the right to terminate any agreement between
the parties or to end or change the party's legal relationship.
17. Miscellaneous.
A. It is expressly understood that the Plan grants powers to
the Board but does not require their exercise; nor shall any person, by reason
of the adoption of the Plan, be deemed to be entitled to the grant of any
Option; nor shall any rights be deemed to accrue under the Plan except as
Options may be granted hereunder.
B. All rights hereunder shall be governed by and construed in
accordance with the laws of Oklahoma.
C. All expenses of the Plan, including the cost of maintaining
records, shall be borne by the Company.
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made this 25th
day of August, 1999, by and among Catalog.com, Inc., an Oklahoma corporation
(the "Corporation"), and the persons listed on Schedule I hereto (collectively,
the "Holders," each a "Holder"), each of whom has executed a signature page
hereto.
W I T N E S S E T H:
WHEREAS, the execution of this Agreement by the Corporation and the
Holders is a condition to the purchase by the Holders of Series B Convertible
Preferred Stock, $.01 par value (the "Preferred Stock"), pursuant to the terms
of that certain Series B Convertible Preferred Stock Purchase Agreement of even
date herewith (the "Stock Purchase Agreement"); and
WHEREAS, on February 26, 1996, Ethos Communication Corp., an Oklahoma
corporation, the predecessor to the Corporation, and BancFirst Investment
Corp., an Oklahoma corporation ("BIC") entered into that certain
Registration Rights Agreement (the "Original Agreement");
NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms shall
have the following -------------------- respective meanings:
"Commission" shall mean the Securities and Exchange
Commission, or any other federal agency at the time administering the
Securities Act.
"Common Stock" shall mean the Common Stock, $.01 par value, of
the Corporation, as constituted as of the date of this Agreement.
"Corporation" shall have the meaning given to such term in the
preamble hereto.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in
effect at the time.
"Holder" or "Holders" shall have the meaning given such term
in the preamble hereto.
"Preferred Stock" shall have the meaning given in the recitals
hereto.
"Registrable Securities" shall mean the shares of Common Stock
held by a Holder or issuable upon conversion of the Preferred Stock
held by the Holders, as adjusted for events under Section 8, but
excluding securities which have been: (a) registered under the
Securities Act pursuant to an effective registration statement filed
thereunder and disposed of in accordance with the registration
statement covering them or (b) publicly sold pursuant to Rule 144 under
the Securities Act.
<PAGE>
12
"Registration Expenses" shall mean the expenses so described
in Section 6.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the
time.
"Selling Expenses" shall mean the expenses so described in
Section 4.
2. Notice of Proposed Transfer. Prior to any proposed transfer of any
Registrable Securities (other than under the circumstances described in Sections
3 or 4), the Holder thereof shall give written notice to the Corporation of its
intention to effect such transfer. Each such notice shall describe the manner of
the proposed transfer and, if requested by the Corporation, shall be accompanied
by an opinion of counsel satisfactory to the Corporation to the effect that the
proposed transfer may be effected without registration under the Securities Act
and any applicable state securities laws, whereupon the Holder shall be entitled
to transfer such stock in accordance with the terms of its notice; provided,
however, that no such opinion of counsel shall be required for a transfer to an
affiliated corporation, partnership, limited liability companpy or limited
liability partnership. Each certificate for Shares transferred as above provided
shall bear an appropriate restrictive legend required under the Securities Act,
except that such certificate shall not bear such legend if: (i) such transfer is
in accordance with the provisions of Rule 144 (or any other rule permitting
public sale without registration under the Securities Act); or (ii) the opinion
of counsel referred to above is to the further effect that the transferee and
any subsequent transferee (other than an affiliate of the Corporation) would be
entitled to transfer such securities in a public sale without registration under
the Securities Act. The restrictions provided for in this Section 2 shall not
apply to securities which are not required to bear such legend.
3. Required Registration. (a) At any time, or from time to time
following the earlier to occur of: (i) six (6) months following the closing of
an initial public offering, or (ii) the fourth anniversary of this Agreement,
the Holders constituting at least 50% of the total Registrable Securities then
outstanding may request the Corporation to register under the Securities Act all
or any portion of the Registrable Securities held by the requesting Holders for
sale in the manner specified in such notice, provided that the number of
Registrable Securities for which registration has been requested shall
constitute at least 20% of the total Registrable Securities originally issued to
the requesting Holders if the requesting Holders shall request the registration
of less than all shares of Registrable Securities then held by them (or any
lesser percentage if the reasonably anticipated aggregate price to the public of
such public offering would exceed $10,000,000); provided, however, such
registration shall be required only if the aggregate offering price of such
offering exceeds $15,000,000. The only securities which the Corporation shall be
required to register pursuant hereto shall be shares of Common Stock, provided,
however, that, in any underwritten public offering contemplated by this Section
3 or Section 4, the Holders of Preferred Stock shall be entitled to sell such
Preferred Stock to the underwriters for conversion, exercise and sale of the
shares of Common Stock issued upon conversion or exercise thereof.
Notwithstanding anything to the contrary contained herein, no request may be
made under this Section 3 within 120 days after the effective date of a
registration statement filed by the Corporation covering a firm commitment
underwritten public offering in which the requesting Holders shall have been
entitled to join pursuant to Section 4 and in which there shall have been
effectively registered all Registrable Securities as to which registration shall
have been requested.
<PAGE>
(b) Following receipt of notice under Section 3(a), the
Corporation shall immediately notify all Holders of Registrable Shares from whom
notice has not been received and shall use its best efforts to register under
the Securities Act, for public sale in accordance with the method of disposition
specified in such notice from requesting Holders, the number of Registrable
Securities specified in such notice (and in all notices received by the
Corporation from other Holders within 30 days after the giving of such notice by
the Corporation). If such method of disposition shall be an underwritten public
offering, the requesting Holders of a majority of Registrable Securities to be
sold in such offering may designate the managing underwriter of such offering,
subject to the approval of the Corporation, which approval shall not be
unreasonably withheld or delayed. The Corporation shall be obligated to register
Registrable Securities pursuant to Section 3(a) on two occasions only, provided,
however, that such obligation shall be deemed satisfied only when a registration
statement covering all Registrable Securities specified in notices received as
aforesaid, for sale in accordance with the method of disposition specified by
the requesting Holders, shall have become effective and, if such method of
disposition is a firm commitment underwritten public offering, all such shares
shall have been sold pursuant thereto.
(c) If at any time during one six (6) month period (i) a
Holder or Holders request that the Corporation file a registration statement on
Form S-3 or any successor thereto for a public offering of all or any portion of
the shares of Registrable Securities held by such requesting Holder or Holders,
the reasonable anticipated aggregate price to the public of which would exceed
$15,000,000 (net of allowances, discounts, and underwriting expenses); and (ii)
the Corporation is a registrant entitled to use Form S-3 or any successor
thereto to register such shares, then the Corporation shall use its best efforts
to register under the Securities Act on Form S-3 or any successor thereto for
public sale in accordance with the method of disposition specified in such
notice, the number of shares of Registrable Securities specified in such notice.
Whenever the Corporation is required by this Section 3(c) to use its best
efforts to effect the registration of Registrable Securities, each of the
procedures and requirements of this Section 3 (including but not limited to the
requirement that the Corporation notify all Holders of Registrable Securities
from whom notice has not been received and provide them with the opportunity to
participate in the offering) shall apply to such registration, provided,
however, that there shall be no limitation on the number of registrations on
Form S-3 which may be requested and obtained under this Section 3(c), and
provided, further, however, that the requirements contained in the first
sentence of Section 3(a) shall not apply to any registration on Form S-3 which
may be requested and obtained under this Section 3(c).
(d) The Corporation shall be entitled to include in any
registration statement referred to in this Section 3, for sale in accordance
with the method of disposition specified by the requesting Holder, shares of
Common Stock to be sold by the Corporation for its own account, except as and to
the extent that, in the opinion of the managing underwriter (if such method of
disposition shall be an underwritten public offering), such inclusion would
adversely affect the marketing of the shares to be sold. Except for registration
statements on Form S-4, S-8 or any successor forms thereto, the Corporation will
not file with the Commission any other registration statement with respect to
its Common Stock, whether for its own account or that of other shareholders,
from the date of receipt of a notice from requesting holders pursuant to this
Section 3 until the completion of the period of distribution of the registration
contemplated thereby.
<PAGE>
4. Incidental Registration. If the Corporation at any time (other than
pursuant to Section 3) proposes to register any of its securities under the
Securities Act for sale to the public, whether for its own account or for the
account of other security holders or both (except with respect to registration
statements on Forms S-4, S-8 or another form not available for registering the
Registrable Securities for sale to the public), each such time it will give
written notice to the Holders at least 30 days prior to such filing of its
intention to do. Upon the written request of any such Holder, received by the
Corporation within 30 days after the giving of any such notice by the
Corporation, to register any of its Registrable Securities, the Corporation will
use its best efforts to cause the Registrable Securities as to which
registration shall have been so requested to be included in the securities to be
covered by the registration statement proposed to be filed by the Corporation,
all to the extent requisite to permit the sale or other disposition by the
Holders of the Registrable Securities so registered. In the event that any
registration pursuant to this Section 4 shall be, in whole or in part, an
underwritten public offering of Common Stock, the number of Registrable
Securities to be included in such an underwriting may be reduced (pro rata among
the requesting Holders based upon the number of Registrable Securities owned by
such Holders) if and to the extent that the managing underwriter shall be of the
opinion that such inclusion would adversely affect the marketing of the
securities to be sold by the Corporation therein, provided, however, (i) such
number of Registrable Securities shall not be reduced if any Registrable
Securities are to be included in such underwriting for the account of any person
other than the Corporation or the requesting Holders; (ii) the shares held by
officers of the Corporation shall be reduced before any held by Holders are
reduced; and (iii) in no event may less than 30% of the total number of shares
of Common Stock to be sold in such underwriting be made available for
Registrable Securities held by the requesting Holders. Notwithstanding the
foregoing provisions, the Corporation may withdraw any registration statement
referred to in this Section 4 without thereby incurring any liability to the
Holders.
5. Registration Procedures. If and whenever the Corporation is
required by the provisions of ------------------------ Sections 3 or 4 to
use its best efforts to effect the registration of any shares of
Registrable Securities under the Securities Act, the Corporation will, as
expeditiously as possible:
(a) prepare and file with the Commission a registration
statement (which, in the case of an underwritten public offering pursuant to
Section 3(a) shall be on Form S-1 or other form of general applicability
satisfactory to the managing underwriter selected as therein provided) with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective for the period of the distribution
contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in paragraph (a) above and comply with the provisions of
the Securities Act with respect to the disposition of all Registrable Securities
covered by such registration statement in accordance with the Holders' intended
method of disposition set forth in such registration statement for such period;
(c) furnish to each Holder and to each underwriter such number
of copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons reasonably may request
in order to facilitate the public sale or other disposition of the Registrable
Securities covered by such registration statement;
(d) use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Holders or, in the
case of an underwritten public offering, the managing underwriter, reasonably
shall request, provided, however, that the Corporation shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction;
(e) use its best efforts to list the Registrable Securities
covered by such registration statement with any securities exchange on which the
Common Stock of the Corporation is then listed;
<PAGE>
(f) immediately notify each Holder and each underwriter under
such registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
of which the Corporation has knowledge as a result of which the prospectus
contained 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
light of the circumstances then existing;
(g) if the offering is underwritten and at the request of a
Holder, use its best efforts to furnish on the date that Registrable Securities
are delivered to the underwriters for sale pursuant to such registration: (i) an
opinion dated such date of counsel representing the Corporation for the purposes
of such registration, addressed to the underwriters and to the Holders, stating
that such registration statement has become effective under the Securities Act
and that (A) to the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the Securities Act, (B) the
registration statement, the related prospectus and each amendment or supplement
thereof comply as to form in all material respects with the requirements of the
Securities Act (except that such counsel need not express any opinion as to
financial statements contained therein) and (C) to such other effects as
reasonably may be requested by counsel for the underwriters or by such seller or
its counsel; and (ii) a letter dated such date from the independent public
accountants retained by the Corporation, addressed to the underwriters and the
Holders, stating that they are independent public accountants within the meaning
of the Securities Act and that, in the opinion of such accountants, the
financial statements of the Corporation included in the registration statement
or the prospectus, or any amendment or supplement thereof, comply as to form in
all material respects with the applicable accounting requirements of the
Securities Act, and such letter shall additionally cover such other financial
matters (including information as to the period ending no more than five
business days prior to the date of such letter) with respect to such
registration as such underwriters reasonably may request; and
(h) make available for inspection by each Holder, any
underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by any Holder or
underwriter, all financial and other records, pertinent corporate documents and
properties of the Corporation, and cause the Corporation's officers, directors
and employees to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement.
For purposes of Section 5(a) and 5(b), the period of distribution of
Registrable Securities in a firm commitment underwritten public offering shall
be deemed to extend until each underwriter has completed the distribution of all
securities purchased by it, and the period of distribution of Registrable
Securities in any other registration shall be deemed to extend until the earlier
of the sale of all Registrable Securities covered thereby and 120 days after the
effective date thereof.
In connection with each registration hereunder, each Holder will
furnish to the Corporation in writing such information with respect to it and
the proposed distribution by it as reasonably shall be necessary in order to
assure compliance with federal and applicable state securities laws.
In connection with each registration pursuant to Sections 3 and 4
covering an underwritten public offering, the Corporation and each Holder agree
to enter into a written agreement with the managing underwriter selected in the
manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Corporation's size and investment stature.
<PAGE>
6. Expenses. All expenses incurred by the Corporation in complying with
Sections 3 and 4, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Corporation, fees and expenses (including Corporation
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, fees of the National Association of Securities Dealers, Inc.,
transfer taxes, fees of transfer agents and registrars, costs of insurance and
fees and disbursements of one counsel for the Holders, but excluding any Selling
Expenses, are called "Registration Expenses." All underwriting discounts and
selling commissions applicable to the sale of Shares are called "Selling
Expenses".
The Corporation will pay all Registration Expenses in connection with
each registration statement under Sections 3 or 4. All Selling Expenses in
connection with each registration statement under Sections 3 or 4 shall be borne
by the Holders in proportion to the number of shares sold by them to the number
of shares sold by participating sellers other than the Corporation (except to
the extent the Corporation shall be a seller) as they may agree.
7. Indemnification and Contribution. (a) In the event of a registration
of any of the Registrable Securities under the Securities Act pursuant to
Sections 3 or 4, the Corporation will indemnify and hold harmless each Holder,
each underwriter of such Registrable Securities thereunder and each other
person, if any, who controls each such Holder or such underwriter within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such seller, underwriter or controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
Registrable Securities was registered under the Securities Act pursuant to
Sections 3 or 4, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each such Holder, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that the Corporation will not be liable
in any such case if and to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished by such Holder, any such underwriter or any such controlling person in
writing specifically for use in such registration statement or prospectus.
<PAGE>
(b) In the event of a registration of any of the Registrable
Securities under the Securities Act pursuant to Sections 3 or 4, each Holder
will indemnify and hold harmless the Corporation, each person, if any, who
controls the Corporation within the meaning of the Securities Act, each officer
of the Corporation who signs the registration statement, each director of the
Corporation, each underwriter and each person who controls any underwriter
within the meaning of the Securities Act, against all losses, claims, damages or
liabilities, joint or several, to which the Corporation or such officer,
director, underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the registration statement under which such Registrable Securities was
registered under the Securities Act pursuant to Sections 3 or 4, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the Corporation and
each such officer, director, underwriter and controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
that such Holder will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
such Holder, as a seller, furnished in writing to the Corporation by such Holder
specifically for use in such registration statement or prospectus, and provided,
further, however, that the liability of such Holder hereunder shall be limited
to the proportion of any such loss, claim, damage, liability or expense which is
equal to the proportion that the public offering price of the shares sold by
such Holder under such registration statement bears to the total public offering
price of all securities sold thereunder, but not in any event to exceed the
proceeds received by such Holder from the sale of Registrable Securities covered
by such registration statement.
(c) Promptly after receipt by the indemnified party of notice
of the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 7 and shall only relieve it
from any liability which it may have to such indemnified party under this
Section 7 if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 7 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected, provided,
however, that, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be reasonable defenses available to it which are
different from or additional to those available to the indemnifying party or if
the interests of the indemnified party reasonably may be deemed to conflict with
the interests of the indemnifying party, the indemnified party shall have the
right to select a separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the expenses and
fees of such separate counsel and other expenses related to such participation
to be reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which either (i) a
Holder, or any controlling person thereof, makes a 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
this Section 7 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of such Holder or any such
controlling person in circumstances for which indemnification is provided under
this Section 7; then, and in each such case, the Corporation and such Holder
will contribute to the aggregate losses, claims, damages or liabilities to which
they may be subject (after contribution from others) in such proportion so that
such Holder is responsible for the portion represented by the percentage that
the public offering price of its Registrable Securities offered by the
registration statement bears to the public offering price of all securities
offered by such registration statement, and the Corporation is responsible for
the remaining portion; provided, however, that, in any such case, (A) such
Holder will not be required to contribute any amount in excess of the public
offering price of all such Registrable Securities offered by it pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
<PAGE>
8. Changes in Capital Stock. If, and as often as, there is any change
in the Common Stock of the Corporation by way of a stock split, stock dividend,
combination or reclassification, or through a merger, consolidation,
reorganization or recapitalization, or by any other means, appropriate
adjustment shall be made in the provisions hereof so that the rights and
privileges granted hereby relative to the Registrable Securities shall continue
with respect to the Common Stock as so changed.
9. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Registrable Securities to the public without registration, at all
times after 90 days after any registration statement covering a public offering
of securities of the Corporation under the Securities Act shall have become
effective, the Corporation agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Corporation under
the Securities Act and the Exchange Act; and
(c) furnish to each Holder forthwith upon request a written
statement by the Corporation as to its compliance with the reporting
requirements of such Rule 144 and of the Securities Act and the Exchange Act, a
copy of the most recent annual or quarterly report of the Corporation, and such
other reports and documents so filed by the Corporation as such holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing such Holder to sell any Registrable Securities without
registration.
10. Representations and Warranties of the Corporation. The Corporation
represents and warrants to
---------------------------------------------------
each Holder as follows:
(a) The execution, delivery and performance of this Agreement
by the Corporation have been duly authorized by all requisite corporate action
and will not violate any provision of law, any order of any court or other
agency of government, the Certificate of Incorporation or Bylaws of the
Corporation or any provision of any indenture, agreement or other instrument to
which it or any or its properties or assets is bound, conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any such indenture, agreement or other instrument or result in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of the Corporation.
(b) This Agreement has been duly executed and delivered by the
Corporation and constitutes the legal, valid and binding obligation of the
Corporation, enforceable in accordance with its terms.
11. Miscellaneous.
-------------
(a) All covenants and agreements contained in this Agreement
by or on behalf of any of the parties hereto shall bind and inure to the benefit
of the respective successors and assigns of the parties hereto (including
without limitation transferees of any Registrable Securities), whether so
expressed or not.
(b) Any notice relating to this Agreement shall be deemed
sufficiently given and served for all purposes if given by a telegram filed,
charges prepaid, or a writing deposited in the United States mail, postage
prepaid and registered or certified within the Continental United States,
addressed as follows:
<PAGE>
If to the Corporation: Catalog.com, Inc.
14000 Quail Springs Parkway, Suite 3600
Oklahoma City, Oklahoma 73134
Attn: Robert W. Crull
If to a Holder: To the Address Set Forth on Schedule I
Any notice so duly send by mail shall be deemed given two (2) days
after deposit in a proper governmental mailing facility and any notice given by
telegram shall be deemed given on the day such notice is delivered to the
telegram company, charges paid.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of Oklahoma.
(d) This Agreement may not be amended or modified, and no
provision hereof may be waived, without the written consent of the Corporation
and the Holders who hold a majority of the Registrable Securities at the time of
such waiver.
<PAGE>
(e) 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 and the same instrument.
(f) If requested in writing by the underwriters for the
initial underwritten public offering of securities of the Corporation, each
Holder shall agree not to sell publicly any Registrable Securities (other than
Registrable Securities being registered in such offering), without the consent
of such underwriters, for a period of not more than 180 days following the
effective date of the registration statement relating to such offering;
provided, however, that all persons entitled to registration rights with respect
to shares of Common Stock who are not parties to this Agreement, all other
persons selling shares of Common Stock in such offering, all persons holding in
excess of 1% of the capital stock of the Corporation on a fully diluted basis
and all executive officers and directors of the Corporation shall also have
agreed not to sell publicly their Common Stock under the circumstances and
pursuant to the terms set forth in this Section 11(f).
(g) Notwithstanding the provisions of Section 3(a), the
Corporation's obligation to file a registration statement, or cause such
registration statement to become and remain effective, shall be suspended for a
period not to exceed 60 days in any 24-month period if there exists at the time
material non-public information relating to the Corporation which, in the
reasonable opinion of the Corporation, should not be disclosed.
(h) The Corporation shall not grant to any third party any
registration rights more favorable than or inconsistent with any of those
contained herein, so long as any of the registration rights under this Agreement
remains in effect.
(i) The rights of any Holder hereunder may be assigned to (i)
any transferee who acquires 50,000 shares of Registrable Securities; (ii) a
successor entity; (iii) to an entity pursuant to a reorganization or
recapitalization of a Holder; or (iv) to a partner of a Holder.
(j) For any Registrable Securities held by any Holders, the
provisions of Sections 3 and 4 hereof shall terminate at such time as such
Registrable Securities may be sold within any three (3) month period pursuant to
Rule 144. Further, the provisions of Section 3(a) shall terminate on the fifth
anniversary of this Agreement.
(k) If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first written above.
CATALOG.COM, INC.
By:__________________________________________
Robert W. Crull
Chief Executive Officer
<PAGE>
RICHMONT OPPORTUNITY FUND, L.P.
By: Richmont Opportunity Management Partners, L.P.,
its General Partner
By: Richmont Investment Management,L.L.C.,
its General Partner
By: /s/ J. Brett Robertson
- --------------------------
Title: President
RICHMONT OPPORTUNITY PARTNERS, LTD.
By: Richmont Opportunity Management Partners,
L.P., its Attorney-in-Fact
By: Richmont Investment Management,L.L.C.,
its General Partner
By: /s/ J. Brett Robertson
- --------------------------
Title: President
BANCFIRST INVESTMENT CORPORATION
By:_____________________________________
T. Kent Faison, President
- -----------------------------------------
Gaylan D. Yates
- ----------------------------------------
Brad Kurtz
- -------------------------------------------
Dean Kurtz
- -------------------------------------------
Rodric M. Phillips, Jr., M.D.
- ---- -----------------------------------
Richard A. Ruffin
<PAGE>
- ------------------------------------------
William J. Perkins
- --------------------------------------------
James M. Odor
- --------------------------------------------
Randel W. Green
- --------------------------------------------
*William Brown
- --------------------------------------------
*Steven Kregg Jodie
- ---------------------------
*William John Philip Rochon
- ---------------------------
*William H. Randall
- ---------------------------
*Anton Whiley
- ---------------------------
*Caleb Hayhoe
RICHMONT TRADING ASIA-PACIFIC LIMITED
By:______________________________________________
- ------------------------------------------
*Timothy H. Mitchell
- ----------------------------------------------
<PAGE>
Alan W. Tompkins
---------------------------------------------
J. Brett Robertson
- ---------------------------------
*By J. Brett Robertson, Attorney-in-Fact
<PAGE>
SCHEDULE I
HOLDERS OF SERIES B CONVERTIBLE PREFERRED STOCK
Richmont Opportunity Fund, L.P.
c/o J. Brett Robertson
16251 Dallas Parkway, 7th Floor
Addison, TX 75001
Richmont Opportunity Partners, Ltd.
c/o J. Brett Robertson
16251 Dallas Parkway, 7th Floor
Addison, TX 75001
Gaylan D. Yates
3201 N.W. 206th
Edmond, Oklahoma 73003-9034
Brad Kurtz
22784 Wild Irishman Rd.
Rapid City, South Dakota 57702
Dean Kurtz
6149 Timberline Rd. West
Rapid City, South Dakota 57702
Rodric M. Phillips, M.D.
1649 Saratoga Way
Edmond, Oklahoma 73003
Richard A. Ruffin
1502 Drury Lane
Oklahoma City, Oklahoma 73116
William J. Perkins
19500 N. Indian Meridian Road
Luther, Oklahoma 73054
James M. Odor
3433 N.W. 56th
Oklahoma City, Oklahoma 73112
Randel W. Green
7017 N.W. 129th
Oklahoma City, Oklahoma 73142
William Brown
16251 Dallas Parkway, 7th Floor
Addison, Texas 75001
Steven Kregg Jodie
16251 Dallas Parkway, 7th Floor
Addison, Texas 75001
<PAGE>
William John Philip Rochon
17855 Dallas Parkway, 2nd Floor
Dallas, Texas 75287
William H. Randall
4300 Westgrove Drive
Addison, Texas 75001
Anton Whiley
4300 Westgrove Drive
Addison, Texas 75001
Caleb Hayhoe
4300 Westgrove Drive
Addison, Texas 75001
Richmont Trading Asia-Pacific Limited
4300 Westgrove Drive
Addison, Texas 75001
Timothy H. Mitchell
4300 Westgrove Drive
Addison, Texas 75001
Alan W. Tompkins
6979 Bob O Link Drive
Dallas, Texas 75214
J. Brett Robertson
16251 Dallas Parkway, 7th Floor
Addison, Texas 75001
AMENDED AND RESTATED
SHAREHOLDER AGREEMENT
THIS AMENDED AND RESTATED SHAREHOLDER AGREEMENT (the "Agreement") is
entered into this 25th day of August, 1999, by and among Catalog.com, Inc., an
Oklahoma corporation (the "Company"), and (i) the holders of Series B
Convertible Preferred Stock, $.01 par value ("Series B Preferred Stock") named
in Schedule I; and (ii) the holders of Common Stock (as hereafter defined)
listed on Schedule I. This Agreement amends and restates that certain
Shareholder Agreement dated February 29, 1996, and as amended on April 2, 1999.
W I T N E S S E T H:
WHEREAS, the Company has issued shares of Series B Preferred Stock
pursuant to the terms of that certain Series B Convertible Preferred Stock
Purchase Agreement (the "Series B Stock Purchase Agreement") of even date
herewith, and the effectiveness of this Agreement is a condition to the closing
of the transactions contemplated by the Series B Stock Purchase Agreement;
NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Certain Definitions. As used herein, the following terms
shall have the respective meanings indicated:
(a) "Common Stock" means the Company's common stock, $.01 par value.
(b) "Common Shareholders" means the holders of Common Stock listed on
Schedule I.
----------
(c) "Disposition" means any sale, transfer, encumbrance, gift,
donation, assignment, pledge, hypothecation or other disposition by a Common
Shareholder, whether voluntary or involuntary, during a Common Shareholder's
lifetime.
(d) "Disposition Notice" shall have the meaning given such term in
Section 2 of this Agreement.
(e) "Offered Shares" shall have the meaning given such term in Section
2 of this Agreement.
(f) "Preferred Shareholder" means a holder of Preferred Stock listed
on Schedule I. ----------
(g) "Preferred Stock" means shares of Series B Convertible Preferred
Stock, $.01 par value.
(h) "Pro Rata Part" means, in any particular instance, the proportion
which the number of shares of Underlying Common Stock owned by a Preferred
Shareholder bears to the aggregate number of shares of Underlying Common
Stock owned by all Preferred Shareholders.
(i) "Public Offering" shall have the meaning given such term in
Section 6 of this Agreement.
(j) "Remaining Offered Shares" shall have the meaning given such term
in Section 2 of this
Agreement.
<PAGE>
9
(k) "Shares" means (i) any shares of Common Stock owned,
either beneficially or of record, by any Common Shareholder; (ii) any shares of
Common Stock issuable upon the exercise of stock options granted or which may be
granted in the future to a Common Shareholder under the Catalog.com, Inc. 1997
Stock Option Plan, the Catalog.com, Inc. 1999 Stock Option Plan, or any other
stock option or stock purchase plan of the Company which may be adopted in the
future, or (iii) any shares of Common Stock which may be acquired in the future
by a Common Shareholder.
(l) "Shareholder" means each Common Shareholder and Preferred
Shareholder who has executed this Agreement or a counterpart of this Agreement,
whether such counterpart is executed on the date hereof or some earlier or later
date.
(m) "Stock" means all shares of Common Stock and Preferred Stock.
(n) "Third Party" means any person or entity not a Common Shareholder
at the time of determination.
(o) "Transferee" shall have the meaning given such term in Section 2
of this Agreement.
(p) "Underlying Common Stock" means (i) shares of Common Stock now or
in the future issuable or issued upon conversion of the Preferred Stock;
and (ii) all shares of Common Stock now or in the future issued or issuable
in respect of such Common Stock and the Common Stock referred to in clause
(i) by reason of stock splits, stock dividends, combinations, mergers,
exchanges or other reclassifications or recapitalizations.
2. Right of First Offer by Common Shareholders.
(a) Each time a Common Shareholder proposes to make any
Disposition of all or any portion of his Shares, such Common Shareholder (the
"Selling Common Shareholder") shall so inform the Company by notice (the
"Disposition Notice") stating the number of Shares that are the subject of such
proposed Disposition (the "Offered Shares"), and the other terms and conditions
of such proposed Disposition, including the consideration proposed to be
received for the Offered Shares (and, if the proposed Disposition is to be
wholly or partly for consideration other than money, the Disposition Notice
shall state the proposed price as being equal to the amount of the monetary
consideration, if any, plus the fair market value of the other consideration).
By giving the Disposition Notice, the Selling Common Shareholder shall be deemed
to have granted to the Company a first option to purchase the Offered Shares for
the price and upon the terms set forth hereafter and in the Disposition Notice.
(b) Within ten (10) days after the date of any Disposition
Notice, the Company shall notify the Selling Common Shareholder of the number of
Offered Shares, if any, that the Company elects to purchase.
(c) If the Company notifies the Selling Common Shareholder
that it will exercise such option for none or less than all of the Offered
Shares, it shall simultaneously notify the Preferred Shareholders of such fact
and shall deliver a copy of the Disposition Notice to the Preferred
Shareholders. The Preferred Shareholders shall thereupon have an option to
purchase all (but not less than all) of the Offered Shares which the Company
does not elect to purchase (the "Remaining Offered Shares"). If such option is
exercised by all of the Preferred Shareholders, each of them shall purchase his
or its Pro Rata Part of the Remaining Offered Shares; however, if one or more of
the Preferred Shareholders elect to purchase none or less than all of his or its
Pro Rata Part of the Remaining Offered Shares or fail to give notice with regard
thereto, the Preferred Shareholders electing to purchase at least their Pro Rata
Part shall also be required to make up the difference and purchase, pro rata,
all Remaining Offered Shares which otherwise would not be purchased.
<PAGE>
(d) Within thirty (30) days after the date of receiving any
Disposition Notice pursuant to Section 2(a) hereof, each of the Preferred
Shareholders shall give notice to the Selling Common Shareholder as to the
number or proportion of the Remaining Offered Shares (if any) such Preferred
Shareholder is willing to purchase. Failure by any Preferred Shareholder to give
such notice shall be deemed an election by him or it not to purchase. Unless one
or more of the Preferred Shareholders elect in such notices to purchase all of
the Remaining Offered Shares, the Selling Common Shareholder shall be free
(subject to the provisions of Section 2 hereof), for a period of ninety (90)
days from the date of such failure to elect to purchase, to make a Disposition
of the Offered Shares to a Third Party (the "Transferee") on terms and
conditions no more favorable to the Transferee than those set forth in the
Disposition Notice, provided that each Transferee shall, prior to a Disposition
to such Transferee, execute and deliver to the Company a valid and binding
agreement to the effect that any Shares so disposed of shall continue to be
subject to all of the provisions of this Agreement. Any Shares not so disposed
of within the period provided herein shall also remain subject to all of the
provisions of this Agreement.
(e) Shares purchased by the Company and/or Preferred
Shareholders pursuant to this Section 2 shall be purchased for the same
consideration and upon the same terms and conditions as are set forth in the
Disposition Notice. (If the Disposition Notice refers to a non-monetary
consideration in whole or in part, the purchaser or purchasers shall pay in cash
the fair market value of the non-monetary consideration.) Any Shares purchased
by a Preferred Shareholder pursuant to this Section 2 shall no longer be
considered Shares or subject to this Section 2 or Section 3.
(f) The closing of a purchase by the Company and/or Preferred
Shareholders shall take place on the nearest business day preceding the 45th day
after the date of the Disposition Notice to the Company. Such closing shall take
place at 10:00 a.m. (Central Time) in the Company office, or at such other date
and at such other time and place that may be agreed to by the parties who are
purchasing and selling the Offered Shares. At the closing the parties shall take
all action necessary to transfer the Offered Shares in accordance with this
Agreement.
3. Right of Co-Sale.
(a) No Common Shareholder may make a Disposition of Shares
pursuant to a Disposition Notice unless such Common Shareholder provides (either
by a purchase by such Common Shareholder or by the Transferee) for a
simultaneous sale of Underlying Common Stock by each Preferred Shareholder of up
to its Pro Rata Part of the number of shares of Common Stock which such Selling
Common Shareholder proposes to sell to such Transferee, for the same price and
on the same terms and conditions which appear in the Disposition Notice.
(b) Within thirty (30) days after receipt of any Disposition
Notice, each Preferred Shareholder shall notify the Selling Common Shareholder
of its intention to sell all or part of his or its Underlying Common Stock for
the price and on the terms and conditions set forth in the Disposition Notice.
If a Preferred Shareholder does not elect to sell its Pro Rata Part of its
Underlying Common Stock pursuant to this Section 3(b), then such Offered Shares
may be disposed of by such a Selling Common Shareholder to the prospective
Transferee named in the Disposition Notice (subject to the provisions of Section
2 hereof), for the price and on the terms and conditions set forth in the
Disposition Notice, at any time within ninety (90) days after each Preferred
Shareholder receives the Disposition Notice, provided that each Transferee
shall, prior to a Disposition to such Transferee, execute and deliver to the
Company a valid and binding agreement to the effect that any Shares so disposed
of shall continue to be subject to all of the provisions of this Agreement. Any
Shares not so disposed of within the period provided herein shall also remain
subject to all of the provisions of this Agreement.
(c) Notwithstanding any other provision hereof, each Preferred
Shareholder may, at its sole option, elect to exercise either its rights
pursuant to Section 2 hereof or its right of co-sale pursuant to Section 3
hereof.
<PAGE>
4. After-Acquired Shares. Whenever a Common Shareholder shall hereafter
acquire any additional Shares, such shares so acquired shall be held subject to
all the terms and conditions of this Agreement.
5. Failure to Comply. If any Disposition is purported to be made or
suffered without the giving of notice required by this Agreement, such purported
Disposition shall be void, and the Shares which are the subject thereof shall be
deemed to have been offered to the Company and an option to purchase such shares
granted to the Company and to each holder of Preferred Stock pursuant to this
Agreement as of the date the Company first learns of such purported Disposition,
and thereafter the provisions of this Agreement shall be fully applicable to
such shares as if such offer had actually been made or such options had actually
been granted. Further, if any Shares are the subject of a Disposition not in
accordance with the terms and conditions of this Agreement, such Disposition
shall be void ab initio. In enforcing this provision, the Company may hold and
refuse to transfer any Shares or any certificate therefor tendered to it for
transfer in addition to, and without prejudice to, any and all other rights or
remedies which may be available to it.
6. Termination. This Agreement shall automatically terminate upon the
happening of any of the following events:
(a) permanent cessation of the Company's business activities;
(b) bankruptcy, receivership or dissolution of the Company;
(c) the voluntary agreement of each of: (i) the holders of a majority
of the issued and outstanding shares of Preferred Stock and Underlying
Common Stock; (ii) the holders of a majority of the Shares held by Common
Shareholders; and (iii) the Company; or
(d) the issuance by the Company of its securities in a registered
public offering in which the aggregate offering price to the public (prior
to the deduction of underwriting commissions and expenses) is at least
Fifteen Million Dollars ($15,000,000), and which results in the market
equity capitalization of the Company being equal to or in excess of Fifty
Million Dollars ($50,000,000) and the listing of the Company's securities
on a national securities exchange or on The Nasdaq National Market System
(a "Public Offering").
7. Exceptions.
(a) Notwithstanding anything to the contrary set forth herein, the
provisions of this Agreement shall not apply to any of the following:
(i) Transfers by a Common Shareholder of his or its Shares or any
portion thereof by bequest or inheritance.
(ii) Transfers by a Common Shareholder to members of his immediate
family or in trust for the benefit of such persons. For purposes of the
Agreement, a Common Shareholder's immediate family shall be defined as such
person's spouse, children and grandchildren.
(iii) Transfers by a Common Shareholder to the Company.
(b) For purposes of this Section 7, with respect to any transfers
pursuant to (a)(i) or (a)(ii) above, the transferrees thereof shall take
such Shares as Common Shareholder and the provisions of Section 4 shall
apply to such transfer.
<PAGE>
8. Board of Directors. The Shareholders agree to vote their shares of
Stock such that the Board of Directors of the Company will consist of five (5)
members as follows: (i) three (3) persons elected by the holders of Common Stock
(the "Common Directors"), voting as a single class; (ii) two (2) persons elected
by the holders of Preferred Stock, voting as a single class. Any vacancy,
however created, shall be filled by the person elected by the class of voting
stock which elected the Director whose death, incapacity, resignation or removal
caused the vacancy.
<PAGE>
9. Right of First Refusal by the Company. The Company shall, prior to
any issuance by the Company of any of its securities (other than debt securities
with no equity feature), offer to each holder of Series B Preferred Stock (the
"New Issuance Offerees"), by written notice the right, for a period of thirty
(30) days, to purchase all of such securities for cash at an amount equal to the
price or other consideration for which such securities are to be issued;
provided, however, that the first refusal rights of the New Issuance Offerees
pursuant to this Section 9 shall not apply to securities issued (A) upon
conversion of any of the shares of Preferred Stock outstanding on the date of
this Agreement or upon conversion of any of the shares of Series B Preferred
issued subsequently pursuant to the Series B Agreement, (B) as a stock dividend
or upon any subdivision of shares of Common Stock, provided that the securities
issued pursuant to such stock dividend or subdivision are limited to additional
shares of Common Stock, (C) pursuant to subscriptions, warrants, options,
convertible securities, or other rights which are listed in Schedule II as being
outstanding on the date of this Agreement, (D) solely in consideration for the
acquisition (whether by merger or otherwise) by the Company or any of its
subsidiaries of all or substantially all of the stock or assets of any other
entity, (E) pursuant to a firm commitment underwritten public offering, (F)
pursuant to the exercise of options to purchase Common Stock granted to
directors, officers, employees or consultants of the Company in connection with
their service to the Company, not to exceed in the aggregate 270,000 shares
(appropriately adjusted to reflect stock splits, stock dividends, combinations
of shares and the like with respect to the Common Stock) less the number of
shares (as so adjusted) issued pursuant to subscriptions, warrants, options,
convertible securities, or other rights outstanding on the date of this
Agreement and listed in Schedule II pursuant to clause (C) above (the shares
exempted by this clause (F) being hereinafter referred to as the "Reserved
Employee Shares"), (G) capital stock or warrants or options to purchase capital
stock, issued to financial institutions or lessors in connection with commercial
credit arrangements, equipment financings or similar transactions, and (H) upon
the exercise of any right which was not itself in violation of the terms of this
Section 9. The Company's written notice to the New Issuance Offerees shall
describe the securities proposed to be issued by the Company and specify the
number, price and payment terms. Each New Issuance Offeree may accept the
Company's offer as to the full number of securities offered to it or any lesser
number, by written notice thereof given by it to the Company prior to the
expiration of the aforesaid thirty (30) day period, in which event the Company
shall promptly sell and such New Issuance Offeree shall buy, upon the terms
specified, the number of securities agreed to be purchased by such New Issuance
Offeree. Notwithstanding the foregoing, if the New Issuance Offerees agree, in
the aggregate, to purchase more than the full number of securities offered by
the Company, then each New Issuance Offeree accepting the Company's offer shall
first be allocated the lesser of: (i) the number of securities which such New
Issuance Offeree agreed to purchase; and (ii) that number of securities equal to
the full number of securities offered by the Company multiplied by a fraction,
the numerator of which shall be the number of shares of Common Stock held by
such New Issuance Offeree as of the date of the Company's notice of offer
(treating such New Issuance Offeree, for the purpose of such calculation, as the
holder of the number of shares of Common Stock which would be issuable to such
New Issuance Offeree upon conversion, exercise or exchange of all securities
(including but not limited to the Preferred Stock) held by such New Issuance
Offeree on the date such offer is made, that are convertible, exercisable or
exchangeable into or for (whether directly or indirectly) shares of Common
Stock) and the denominator of which shall be the aggregate number of shares of
Common Stock (calculated as aforesaid) held on such date by all New Issuance
Offerees who accepted the Company's offer, and the balance of the securities (if
any) offered by the Company shall be allocated among the New Issuance Offerees
accepting the Company's offer in proportion to their relative equity ownership
interests in the Company (calculated as aforesaid), provided that no New
Issuance Offeree shall be allocated more than the number of securities which
such New Issuance Offeree agreed to purchase and provided further that in cases
covered by this sentence all New Issuance Offerees shall be allocated among them
the full number of securities offered by the Company. The Company shall be free
at any time prior to ninety (90) days after the date of its notice of offer to
the New Issuance Offerees, to offer and sell to any third party or parties the
number of such securities not agreed by the New Issuance Offerees to be
purchased by them, at a price and on payment terms no less favorable to the
Company than those specified in such notice of offer to the New Issuance
Offerees. However, if such third party sale or sales are not consummated within
such ninety (90) day period, the Company shall not sell such securities as shall
not have been purchased within such period without again complying with this
Section 9.
10. Compliance with Laws. Each Shareholder agrees that any certificates
representing Shares may be legended to comply with federal and state securities
or other laws and to assure the enforceability of this Agreement, by the giving
of notice of this Agreement or otherwise.
11. References. All references to "Sections" and "Subsections"
contained herein are, unless specifically indicated otherwise, references to
sections and subsections of this Agreement. Whenever herein the singular number
is used, the same shall include the plural where appropriate, and words of any
gender shall include each other gender where appropriate.
12. Captions. The captions, headings and arrangements used in this
Agreement are for convenience only and do not in any way affect, limit,
amplify or modify the terms and provisions hereof.
13. Notices. Whenever this Agreement requires or permits any consent,
approval, notice, request or demand must be in writing to be effective and
shall be deemed to have been given when actually received by the party to
whom notice is sent.
14. Governing Law. The substantive laws of the State of Oklahoma shall
govern the validity, construction, enforcement and interpretation of this
Agreement.
15. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Shareholders and the Company and their successors
and assigns, including, but not limited to, any Transferee hereunder. This
Agreement shall be binding upon and inure to the benefit of each individual
signatory hereto and his or her respective heirs, personal representatives and
assigns, and any receiver, trustee in bankruptcy or representative of the
creditors of each such person. Should a Common Shareholder ever cease to be the
owner of Shares, he, she or it shall automatically cease to be a party to this
Agreement and shall have no rights hereunder unless and until he, she or it
again becomes an owner of Shares.
16. Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under present or future laws effective
during the term of this Agreement, such provision shall be fully severable; this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of this Agreement; and the
remaining provisions of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance from this Agreement. Furthermore, in lieu of each such illegal,
invalid or unenforceable provision there shall be added automatically as a part
of this Agreement a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
17. Amendments. This Agreement may be amended at any time and from time
to time, in whole or in part, or may be terminated by an instrument in writing
setting forth the particulars of such amendment or termination, as the case may
be, duly executed by the Company, the holders of a majority of Underlying Common
Stock held by the Preferred Shareholders and the holders of a majority of the
Shares who are Common Shareholders at the time of such amendment or termination.
<PAGE>
18. Multiple Counterparts. This Agreement may be executed in a number
of identical counterparts, each of which for all purposes is to be deemed an
original, and all of which constitute collectively one Agreement; but in making
proof of this Agreement, it shall not be necessary to produce or account for
more than one such counterpart. It is not necessary that each Shareholder
execute the same counterpart, so long as identical counterparts are executed by
the Company and each Shareholder.
19. Enforcement. It is specifically agreed and understood that monetary
damages will not adequately compensate the breach of this Agreement and this
Agreement shall therefore be specifically enforceable, and any breach or
threatened breach of this Agreement shall be the proper subject of a temporary
or permanent injunction or restraining order. Further, each party hereto and
their successors, heirs, representatives and assigns waive any claim or defense
that there is an adequate remedy at law for such breach or threatened breach.
EXECUTED on the date indicated above and binding on each party from and
after the date such party executes this Agreement or a counterpart hereof.
THE COMPANY: CATALOG.COM, INC.
By:
Robert W. Crull, Chief Executive Officer
COMMON SHAREHOLDERS:
ROBERT W. CRULL
RODRIC M. PHILLIPS, JR.
BILL C. MILLER
BANCFIRST INVESTMENT CORP.
By:
Kent T. Faison, President
<PAGE>
PREFERRED SHAREHOLDERS: RICHMONT OPPORTUNITY FUND, L.P.
By: Richmont Opportunity Management Partners, L.P.,
its General Partner
By: Richmont Investment Management,L.L.C.,
its General Partner
By:________________________________
Title:____________________________
RICHMONT OPPORTUNITY PARTNERS, LTD.
By: Richmont Opportunity Management Partners, L.P., its
Attorney-in-Fact
By: Richmont Investment Management,L.L.C., its General Partner
By:________________________________ Title:____________________________
GAYLAN D. YATES
----------------------------------------------
BRAD KURTZ
------------------------------------------
DEAN KURTZ
----------------------------------------------
RODRIC M. PHILLIPS, JR., M.D.
----------------------------------------------
<PAGE>
RICHARD A. RUFFIN
----------------------------------------------
WILLIAM J. PERKINS
----------------------------------------------
JAMES M. ODOR
----------------------------------------------
RANDEL W. GREEN
----------------------------------------------
WILLIAM BROWN
*______________________________________________
STEVEN KREGG JODIE
*______________________________________________
WILLIAM JOHN PHILIP ROCHON
*______________________________________________
WILLIAM H. RANDALL
*______________________________________________
<PAGE>
ANTON WHILEY
*______________________________________________
CALEB HAYHOE
*______________________________________________
RICHMONT TRADING ASIA-PACIFIC LIMITED
By:______________________________________________
TIMOTHY H. MITCHELL
*______________________________________________
ALAN W. TOMPKINS
----------------------------------------------
J. BRETT ROBERTSON
----------------------------------------------
---------------------------------
*By J. Brett Robertson, Attorney-in-Fact
<PAGE>
SCHEDULE I
HOLDERS OF SERIES B CONVERTIBLE PREFERRED STOCK
Richmont Opportunity Fund, L.P.
Richmont Opportunity Partners, Ltd.
Gaylan D. Yates
Brad Kurtz
Dean Kurtz
Rodric M. Phillips, M.D.
Richard A. Ruffin
William J. Perkins
James M. Odor
Randel W. Green
William Brown
Steven Kregg Jodie
William John Philip Rochon
William H. Randall
Anton Whiley
Caleb Hayhoe
Richmont Trading Asia-Pacific Limited
Timothy H. Mitchell
Alan W. Tompkins
J. Brett Robertson
COMMON SHAREHOLDERS
Robert W. Crull
Bill C. Miller
Rodric M. Phillips, Jr.
BancFirst Investment Corp.
<PAGE>
SCHEDULE II
SECURITIES NOT SUBJECT TO THE RIGHT OF FIRST REFUSAL
1. Warrants issuable to Southwest Securities, Inc., pursuant to that
certain Letter Agreement dated February 24, 1999, to purchase
shares of Series B Convertible Preferred Stock at a purchase price
of $9.00 per share.
2. Warrants issuable to Net Me Up, a sole proprietorship of Patricia and
Jeremy Schofield, to purchase 2,500 shares of common stock of the
Company at a purchase price of $9.00 per share.
3. Warrants issuable to Interactive Applications Group, Inc., to
purchase 10,000 shares of common stock of
the Company, at a purchase price of $9.00 per share.
4. Warrants issuable to Pro Silver Star, Ltd., to purchase 11,111
shares of common stock at a purchase price of $9.00 per share.
5. Warrants issuable to Richmont Opportunity Management Partners, L.P.,
to purchase 11,111 shares of common stock at a purchase price of
$9.00 per share.
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is made July 31
-------
199k between the Borrower
and Lender identified in the attached Authorization issued by the U.S.
Small Business Administration ("SBA")to Lender, dated July 15 1998
("Authorization")
-------
SBA has authorized a guaranty of a loan from Lender to Borrower for the amount
and under the terms stated in the attached Authorization (the "Loan").
In consideration of the promises in this Agreement and for other good and
valuable consideration, Borrower and Lender agree as follows:
1. Subject to the terms and conditions of the Authorization and SBA's
Participating Lender Rules as defined in the Guarantee Agreement
between Lender and SBA, Lender agrees to make the Loan if Borrower:
a. Provides Lender with all certifications, documents, or other
information Lender is required by the
Authorization to obtain from Borrower or any third party;
b. Executes a note and any other documents required by Lender; and
c. Does everything necessary for Lender to comply with the terms and
conditions of the Authorization
("Borrower's Obligations").
2. The terms and conditions of this Agreement:
a. Are binding on Borrower and Lender and their successors and
assigns;
b. Will remain in effect after the closing of the Loan,
3 Failure to abide by any of the Borrower's Obligations or terms of the
Authorization that pertain to the Borrower nstitute an eve of default under
er the note and other loan documents.
<PAGE>
Lender:
BancFirst Commercial Capital
101 N. Broadway, Suite 460
Oklahoma City, OK 73102
SBA approves, under Section 7(a) of the Small Business Act as amended,
Lender's application, received 7-8-98, for SBA to guarantee 75% of a loan
("Loan') in the amount of $l,000,000,00 to assist:
Borrower:
I. Ethos communications Corp. 14516 Lisa Lane
Edmond, OK 73013
A. THE GUARANTEE FEE IS $25,937.50. Lender must pay the guarantee fee
within 90 days of the date of this Authorization or immediately after
initial disbursement, whichever comes first. The 90-day deadline may not
be extended. Lender must send the guarantee fee to the Small Business
Administration, Denver, CO 80259-0001. Lender may collect this fee from
Borrower after initial disbursement of Loan. Borrower may use Loan
proceeds to pay the fee. No part of the guarantee fee is refundable if
Lender has made any disbursement.
B. ONGOING SERVICING FEE - Lender agrees to pay an ongoing fee equal
to one-half of one percent per year of the guaranteed portion of the
outstanding balance. Lender may not charge this fee to Borrower.
C. IT IS LENDER'S SOLE RESPONSIBILITY TO:
1. Close the Loan in accordance with the terms and conditions of this
Authorization.
2. Obtain valid and enforceable Loan documents, including obtaining
the signature or written consent of any obligor's spouse if such
consent or signature is necessary to bind the marital community or
create a valid lien on marital property.
3. Retain all Loan closing documents. Lender must submit these
documents, along with other required documents, to SBA for review if Lender
requests SBA to honor its guarantee on the Loan, or at anytime SBA requests
the documents for review.
<PAGE>
i. Lender may use its own forms except as otherwise instructed in this
AuthOriZatiOn. Lender must use the
following SBA forms for the Loan:
SBA Form 147, Note
SBA Form 1050, Settlement Sheet, for each disbursement SBA Form 159,
Compensation Agreement, for each representative SBA Form 2004, Lender's
Certification SBA Form 722, Equal Opportunity Poster SBA Form 793, Notice to New
Borrowers SBA Form 148, Guarantee
2. Lender may use computer-generated versions of mandatory SBA Forms,
as long as these versions are exact reproductions.
3. Lenders must submit completed SBA Forms 159 and 2004 for non-PLP
loans to the SBA immediately after
final disbursement.
E. CONTINGENCIES - SBA issues this Authorization in reliance on representations
in the Loan application, including supporting documents. The guarantee Is
contingent upon Lender:
i. Complying with the current SBA Standard Operating Procedures (SOP)
and SBA Loan Guarantee Agreement (SBA Form 750, dated 7-2-90), and any
supplemental agreements, between Lender and SBA;
2. Making initial disbursement of the Loan no later than 12 months, and
completing disbursement no later than 12 months, from the date of this Author
zation, unless SBA extends the time in writing;
3. Having no evidence since the date of the Loan application, or any
preceding disbursement, of any unremedied adverse change in the financial
condition, organization, operations. or fixed assets of Borrower which
would warrant withholding or not making any further disbursement, and;
4 satisfying all of the conditions in this Authorization.
F. NOTE TERMS:
i. Maturity: This Note will mature in 7 year(s) from date of Note.
2 Repayment Terms: Lender must insert onto SBA Note, Form 147, to be executed by
Borrower, the following repayment terms, without modification. Lender must
complete all blank terms on the Note at time of closing:
The interest rate on this Note will fluctuate. The initial interest rate is 11%
per year. This initial rate is the prime rate on the date SBA received the loan
application, plus 2.5%.
Borrower must pay principal and interest payments of SI 7,123.00 every month,
beginning one month from the month of this Note; payments must be made on the 31
st calendar day in the months they are due.
Lender will apply each installment payment first to pay interest accrued to the
day Lender receives the payment, then to bring principal current, then to pay
any late fees, and will apply any remaining balance to reduce pnncipal.
Lender may adjust the interest rate for the first time no earlier than the first
calendar day of the first month after initial disbursement. The interest rate
will then be adjusted quarterly (the "change period').
The `Prime Rate" is the prime rate published in the Wall Street Journal, in
effect on the first business day of the month in which a change occurs.
The adjusted interest rate will be 2.5% above the Prime Rate. Lender will adjust
the interest rate on the first calendar day of each change period. The change in
interest rate is effective on that day whether or not Lender gives Borrower
notice of the change.
Lender must adjust the payment amount at least annually as needed to amortize
principal over the remaining term of the note.
If SBA purchases the guaranteed portion of the unpaid principal balance, the
interest rate becomes fixed at the rate in effect at the time of the earliest
uncured payment default. If there is no uncured payment default, the rate
becomes fixed at the rate in effect at the time of purchase.
All remaining principal and accrued interest is due and payable 7 year(s) from
date of Note.
Borrower agrees that if default occurs on this Note or on any other outstanding
SBA or SBA-guaranteed loan, Lender has the option to make this Note and such
other loans immediately due and payable.
G. USE OF PROCEEDS
I. Si ,000,000.00 to purchase the business known as Ethos Communications Corp.,
according to the executed Purchase Agreement dated 6-1 1-98.
All amounts listed above are approximate, Lender may not disburse Loan proceeds
solely to pay the guarantee fee. Lender may disburse to Borrower, as working
capital only, funds not spent for the listed purposes as long as these funds do
not exceed 10% of the specific purpose authorized or S 10,000.00, whichever is
less. An Eligible Passive Company may not receive working capital funds.
Lender must complete SBA Form 1050, Settlement Sheet, for each disbursement and
retain these forms in its Loan file. Lender must document that Borrower used the
loan proceeds for the purposes stated in this Authorization
Lender must obtain a lien on 100% of the interests in the following collateral
and properly perfect all lien positions:
First Perfected Security Interest, subject to no other liens, in the following
personal property, whether now owned or later acquired, wherever located, and
the proceeds therefrom: Equipment; Fixtures; Inventory; Accounts; Instruments;
Chattel Paper; General Intangibles;
a. Lender must obtain a written agreement from all Lessors (including
sublessors) agreeing to: (1) Subordinate to Lender Lessor's interest, if any, in
this property; (2) Provide Lender written notice of default and reasonable
opportunity to cure the default; and (3) Allow Lender the right to take
possession and dispose of or remove the collateral.
b. Lender must obtain a list of all equipment and fixtures that are collateral
for the Loan. For items with a unit value of $500 or more, the list must include
a description and serial number, if applicable.
c. Lender must obtain an appropriate Uniform Commercial Code lien search
evidencing all required lien positions. If UCC search is not available, another
type of lien search may be substituted.
2. Guarantee on SBA Form 148, by Robert W. Crull, resident in
Oklahoma.
The following language must appear in all lien instruments including Mortgages,
Deeds of Trust, and Security Agreements:
"The Loan secured by this lien was made under a United States Small Business
Administration (SBA) nationwide program which uses tax dollars to assist small
business owners. If the United Slates is seeking to enforce this document, then
under SBA regulations.
a) When SBA is the holder of the Note, this document and all documents
evidencing or securing this Loan will be construed in accordance with federal
law.
b) Lender or SBA may use local or state procedures for purposes such as filing
papers, recording documents, giving notice, foreclosing liens, and other
purposes. By using these procedures, SBA does not waive any federal immunity
from local or state control, penalty, tax or liability. No Borrower or Guarantor
may claim or assert against SBA any local or state law to deny any obligation of
Borrower, or defeat any claim of SBA with respect to this Loan.
ADDITIONAL CONDITIONS
Insurance Requirements
Prior to disbursement, Lender must require Borrower to obtain the following
insurance coverage and maintain this coverage for the life of Loan:
a. Flood Insurance. If FEMA Form 81-93 reveals that any portion of the
collateral is located in a special flood hazard zone, Federal flood insurance or
other appropriate special hazard insurance in amounts equal to the lesser of the
insurable value of the property or the maximum limit of coverage available is
required. (Borrower will be ineligible for any future SBA disaster assistance or
business loan assistance if Borrower does not maintain flood insurance for the
entire term of the Loan.)
b. Personal Property Hazard Insurance coverage on all equipment, fixtures or
inventory that is collateral for the Loan, in the amount of full replacement
costs. If full replacement cost insurance is not available, coverage should be
for maximum insurable value. This policy must contain a LENDERS LOSS PAYABLE
CLAUSE in favor of Lender. This clause must provide that any act or neglect of
the debtor or owner of the insured property will not invalidate the interest of
Lender. The policy or endorsements must provide for at least 10 days prior
written notice to Lender of policy cancellation.
c. Life Insurance, satisfactory to Lender: (1) on the life of Robert W. Crull in
the amount of $1,000,000.00.
Lender must obtain a collateral assignment of each policy with Lender as
assignee which provides that Insurer will give Lender at least 30 days written
notice of payment default and a right to cure. Lender must also obtain
acknowledgment of the assignment by the Home Office of the Insurer.
2.Borrower, Guarantor and Operating Company Documents
a.Prior to closing, Lender must obtain from Borrower, Guarantor and Operating
Company a current copy of each of the following as appropriate: (1)Corporate
Documents - Articles or Certificate of Incorporation (with amendments), any
By-laws, Certificate of Good Standing (Or equivalent), Corporate Borrowing
Resolution, and, if a foreign corporation, current authority to do business
within this state.
(2)LImited Liability Company (LLC) Documents - Articles of Organization (with
amendments), Fact Statement or Certificate of Existence, Operating Agreement,
Borrowing Resolution, and evidence of any state-required registration.
(3) General Partnership Documents
(6) Trustee Certification - A Certificate from the trustee warranting that:
(a) The trust will not be revoked or substantially amended for the term of the
Loan without the consent of SBA; (b) The trustee has authority to act; (c) The
trust has the authority to borrow funds, guarantee loans, and pledge trust
assets, (d) If the trust is an Eligible Passive Company, the trustee has
authority to lease the property to the
Operating Company;
(e) There is nothing in the trust agreement that would prevent Lender from
realizing on any security interest in trust assets;
(f) The trustee has provided accurate, pertinent language from the trust
agreement confirming the above; and (g) The trustee has provided and will
continue to provide SBA with a true and complete list of all trustors and
donors.
3. Operating Information
Prior to any disbursement of Loan proceeds, Lender must obtain:
a. Verification of Financial Information.. Lender must submit IRS Form 4506 to
the Internal Revenue Service to obtain federa] income tax information on
Borrower for the last three (3) years (unless Borrower is a startup business).
If the business has been operating for less than 3 years Lender must obtain the
information for all years in operation. This requirement does not include tax
information for the most recent fiscal year if the fiscal year-end is within 6
months of the application date. Lender must compare the tax data received from
the IRS with the financial data or tax returns submitted with the Loan
application, and relied upon in approving the loan. Borrower must resolve any
significant differences to the satisfaction of Lender and SBA before Lender
disburses Loan proceeds.
b.Trade Name - Evidence Borrower has complied with state requirements for
registration of Borrower's trade name (or fictitious name),
c.Authority to Conduct Business - Evidence that the Borrower has an Employer
Identification Number and all insurance, licenses, permits and other
approvals necessary to lawfully operate the business.
d. Flood Hazard Determination - A completed Standard Flood Hazard Determination
(FEMA Form 81-93).
e. Lease - Current lease(s) on all business premises where collateral is located
with term, including options, at least as long as the term of the Loan,
4. Certifications and Agreements
Lender must require Borrower to certify:
a.Child Support - That no principal who owns at least 50% of the voting
Interest of the company is delinquent more than 60 days under the terms of
any (I) administrative order, (2) court order, or (3) repayment agreement
requiring payment of child support.
b. Current Taxes - Borrower is current on all federal, state, and local
taxes, including but not limited to income taxes, payroll taxes, real
estate taxes, and sales taxes.
c. That Borrower will: (1) Reimbursable Expenses- Reimburse Lender for expenses
incurred in the making and administration of the Loan. (2) Books, Records, and
Reports- (a) Keep proper books of account in a manner satisfactory to Lender;
(b) Furnish year-end statements to Lender within 60 days of fiscal year end; (c)
Furnish additional financial statements or reports whenever Lender requests
them; (d)Allow Lender or SBA, at Borrower's expense, to:
Inspect and audit books, records and papers relating to Borrower's financial or
business condition; and Inspect and appraise any of Borrower's assets; and
Allow all government authorities to furnish reports of examinations, or any
records pertaining to Borrower, upon request by Lender or SBA.
(3)Equal Opportunity - Post SBA Form 722, Equal Opportunity Poster, where it is
clearly visible to employees, applicants for employment and the general public,
and comply with the requirements of SBA Form 793, Notice to New SBA Borrowers.
(4)American-made Products - To the extent feasible, purchase only American-made
equipment and products with the proceeds of the Loan.
(5)Taxes - Pay all federal, state, and local taxes, including income, payroll,
real estate and sales taxes of the business when they come due.
d. That Borrower will not, without Lender's prior written consent:
(1)Distributions- Make any distribution of company assets that will adversely
affect the financial condition of Borrower.
(2)Ownership Changes - Change the ownership structure or interests in the
business during the term of the Loan.
(3)Transfer of Assets - Sell, lease, pledge, encumber (except by purchase
money liens on property acquired after the date of the Note), or otherwise
dispose of any of
Borrower's property or assets, except in the ordinary course of business.
Borrower acknowledges that:
I. Borrower has received a copy of this Authorization and SBA Form 793, Notice
to New SBA Borrower, from Lender.
2. SBA requires the above conditions to guarantee Loan. 3. This Authorization is
a commitment by Lender to make a loan to Borrower;
4. This Authorization is between Lender and SBA and creates no third party
rights or benefits to Borrower;
5. The Loan Note will require Borrower to give Lender prior notice of intent to
prepay.
6. If Borrower defaults on Loan, SBA may be required to pay Lender under the SBA
guarantee. SBA may then seek recovery of these funds from Borrower. Under SBA
regulations, 13 CFR Part 101, Borrower may not claim or assert against SBA any
immunities or defenses available under local law to defeat, modify or otherwise
limit Borrower's obligation to repay to SBA any funds advanced by Lender to
Borrower.
7. Payments by SBA to Lender under SBA's guarantee will not apply to the Loan
account of Borrower, or diminish the indebtedness of Borrower under its Note or
the obligations of any personal guarantor of the Note.
06/28/98
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") dated as of , 1998 by and
between Ethos Communications Corp. ("Buyer") an Oklahoma corporation located at
101 North Broadway, Suite 1140, Oklahoma City, Oklahoma 73102 and Mark K Lottor
("Seller"), doing business as "Network Wizards," a sole proprietorship, located
at 10 Cathy Place, Menlo Park, California 94025.
RECITALS
WHEREAS, Seller operates Internet web hosting services under the trade name
"Catalog.com" (the "Business"), with servers located in the GTE internetworking
Facility located at the San Jose Data Center Facility, 55 S. Market, San Jose,
California; and
WHEREAS, Buyer desires to acquire, and Seller desires to sell and transfer
assets and properties related to the Business upon the terms and conditions
contained in this agreement.
NOW, THEREFORE, in consideration of the acts and promises of the other, and for
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties hereby agree as follows:
Section 1. Acquisition and Transfer of Assets. Subject to the terms and
conditions set forth in this Agreement, Seller shall transfer and convey to
Buyer, and Buyer shall acquire from Seller, all of Seller's right, title and
interest in and to the following assets, both tangible and intangible, of Seller
used in the business (referred to collectively as the "Assets"):
(a) All computer equipment owned or used in connection with
operating the Business including all equipment specifically
listed on Schedule A.
(b) All computer software owned or licensed in connection with
operating the Business including but not limited to that
listed on Schedule B.
(c) All web hosting customers, customer accounts and lists,
support databases, billing databases, credit card database.
(d) The existing Genuity Master Service Agreement.
(e) The domain name "catalog.com" and any and all trade names,
trademarks, copyrights, trademark registrations, designs, web
pages or rights to use in relation to the name "Catalog.com".
(f) Copies of all books and records related to the Business.
Seller will provide timely access to those records necessary
for the ongoing operations of the Business at Buyer's request.
(g) All accounts receivable as of Closing.
(h) All payments made in the month of Closing for Services provided
after Closing. Example: If Closing takes place on July 31, 1998, Seller
shall pay Buyer in cash at Closing an amount equal to all payments received
for August, 1998 services.
Section 2. Excluded Assets. The sale and purchase contemplated by this Agreement
does not include any of the ---------------- following assets, collectively
referred to herein as the "Excluded Assets":
(a) Any computer or office equipment at the home of the Seller excluding spare
equipment identified in Schedule A.
(b) The router, csu/dsu's and friend's Sun Microsystems server located at the
Genuity data center.
(c) The two lease lines connecting to the Genuity data center used to connect
Mr. Lottor's residence and his friends residence in Reno, Nevada.
(d) All labor, employment and employee benefit contracts of Seller, including,
but not limited to, bonus, pension, profit sharing, retirement, stock purchase,
hospitalization, insurance or similar plans providing for employee benefits.
Section 3. Purchase Price: Manner of Payment.
-----------------------------------
(a) Closing Payment. At the Closing (as hereinafter defined), Buyer
shall pay to Seller the sum of Nine-Hundred Thousand Dollars ($900,000) in the
form of a cashiers check or wire transfer. In addition, the Buyer shall deliver
the sum of $300,000 to BancFirst, Oklahoma City, Oklahoma (the "Escrow Agent"),
by certified check.
(b) Escrow Deposit; Post-Closing Payments. The $300,000 to be deposited with the
Escrow Agent shall --------------------------------------- be held by the Escrow
Agent for the periods set forth herein after the Closing Date.
(1) Three months after the Closing Date, the Escrow Agent
shall pay Seller an amount calculated as follows: (i) the total number of Global
Commons, Inc. customers on "nw1.global-commons.com" and "tms.global-commons.com"
(the "Global Customers") at the end of the third month following the Closing
Date, shall be divided by (ii) 602 (representing Global Customers as of April
30, 1998). This quotient shall be then multiplied by One Hundred Fifty Thousand
Dollars ($150,000), and the payment at such time shall not to exceed $150,000.
Example: If there are 570 Global Customers at the end of the third month
following the Closing Date, then Buyer shall pay Seller $142,026. In the event
that not all of the $150,000 is earned at the end of three months, the unearned
portion shall not carry over to the payment calculation at six months. To be
counted as a Global Customer under (b)(1) and (2) hereof, each customer must
have been a customer for at least two months and must not be more than thirty
(30) days past due in the payment of such monthly fees.
(2) Six months after Closing, the Escrow Agent shall pay
Seller an amount calculated as follows: (i) the total number of Global Customers
at the end of the sixth month following the Closing Date, shall be divided by
(ii) 602 (representing Global Customers as of April 30, 1998). This quotient
shall be then multiplied by One Hundred Fifty Thousand Dollars ($150,000), and
the payment at such time shall not to exceed $150,000. Example: If there are 605
Global Customers at the end of the sixth month following the Closing Date, then
Buyer shall pay Seller $142,026.
(c) Escrow Procedures. Any portion of the $300,000 held by the Escrow
Agent which is not to be paid at either the third or sixth month after the
Closing Date in accordance with the terms of Section 3 shall be paid to the
Buyer. In determining its obligations under this Section 3, the Escrow Agent
shall rely completely upon a certificate to be prepared by Arthur Andersen LLP,
and shall not be required to make any payment until such certificate is
delivered to it. When such payment or payments are made, the obligations of the
Seller, the Buyer and the Escrow Agent shall terminate. Nothing in this Section
3(c) shall be construed as affecting or limiting the complete title in the Buyer
to the Assets to be purchased under this Agreement.
(d) Allocation of Purchase Price. The Purchase Price shall be allocated $20,000
to Hardware and ------------------------------ Software Assets, $1,170,000 to
Goodwill and $10,000 to the Non-competition Agreement provided for in Section 5.
Section 4. Clear Title and No Assumption of Liabilities. All of the Assets are
to be transferred and delivered pursuant to the terms of this Agreement, free
and clear of all liabilities, obligations, liens and other encumbrances except
for the liabilities to be assumed by Buyer, as described in Section 5(d) below
("Assumed Liabilities"). All accounts payable and all other liabilities incurred
by Seller up to the Closing including any business broker fees shall be paid by
Seller, and Seller shall indemnify and hold Buyer harmless against any and all
such liabilities, other than the Assumed Liabilities.
Section 5. Conditions Precedent. The obligation of Buyer to close this
transaction is subject to the
---------------------
satisfaction, at or before the Closing Date of the following conditions.
(a) Representations and Warranties; Performance of Obligations.
All of the representations and warranties of Seller contained
in this Agreement shall be true, correct, and complete on the
date of this Agreement and as of the Closing Date with the
same effect as though such representations and warranties had
been made as of the Closing Date; all of the terms, covenants,
agreements, and conditions of this Agreement to be complied
with, performed, or satisfied by Seller and on or before the
Closing Date shall have been duly complied with, performed, or
satisfied.
(b) Consents and Approvals. All the necessary consents and
approvals of and filings with any governmental entity or other
third person related to the consummation of the transactions
contemplated herein, and which may be necessary to assign or
to continue to effect all contracts, agreements, and rights of
Seller which are necessary in order to conduct the Business in
the ordinary and usual course, shall have been obtained and
made.
(e) Inspection of Assets. Buyer shall have the opportunity to make
a satisfactory inspection of the Assets to determine if the
Assets are in good condition at the Closing, with reasonable
wear and tear expected.
(f) Covenants Not to Compete. Buyer shall have received executed
Non-competition Agreements from
------------------------
Mark K. Lottor in the form of attached Exhibit C.
prohibiting Mark K. Lottor from competing
with Buyer for a period of two (2) years. This non-compete is
valid world-wide.
(g) Employment Agreements. Buyer shall have received the
Employee Agreement of Vivian Neou in the
----------------------
form attached as Exhibit D.
(h) Status of Customers. On the Closing Date, there will be at
least 1,800 customer accounts generating gross revenues of not
less than $55,000 per month and at least that amount for the
month of April 1998. This shall include, but shall not be
limited to, Global Customers. In calculating said figure, each
customer must have been a customer for at least two months and
must not be more than thirty (30) days past due in the payment
of such monthly fees.
(i) Financing. Buyer shall have secured financing, on terms
satisfactory to Buyer in its sole discretion, adequate to
satisfy Buyer's obligations under this Agreement.
Section 6. Closing. The acquisition and transfer of the Assets shall be
consummated at the closing (the "Closing") to be held on July 31, 1998 (the
"Closing Date") at 2pm, at the residence of Mark K. Lottor at 10 Cathy Place,
Menlo Park, CA 94025. The purchase and sale of such Assets shall be effective as
of the close of business on the Closing Date. As of the beginning of business on
the date following the Closing Date, Buyer shall be given full and complete
possession and exclusive control of the Assets being sold and shall immediately
thereafter have the right to commence its business operations with such Assets.
(a) Sellers Obligations at Closing. At the Closing, Seller shall, pursuant to
this Agreement,
--------------------------------
deliver or cause to be delivered to Buyer the following:
(i) Full possession and enjoyment of the Assets.
(ii) A Bill of Sale covering the Assets in the form
attached hereto as Exhibit E.
(iii) An executed Non-competition Agreement between buyer
and Mark K. Lottor in the
forms attached hereto as Exhibit C.
(iv) An executed Employee Agreement between Buyer and
Vivian Neou in the form attached hereto as Exhibit D.
(v) Pay Buyer for all payments received prior to Closing
("Prepayments") from customers for the services to be
performed after Closing. This shall include any
payments including wire transfers received for the
next month's services.
(b) Seller's Obligations after Closing. After the Closing, Seller
shall do the following:
-----------------------------------
(i) Forward the Network Wizards phone number when
requested by Buyer to Buyer's number at
1-800-646-8435 for a period of three months after
Closing. After this three month period and for a
period of one year thereafter, maintain a recording
that specifically says to call Buyer's number as
provided by Buyer for Catalog.com web hosting sales,
support or billing questions.
(ii) Continue to provide all current links from the
Network Wizards homepage to the catalog.com home page
for a period of one year.
(iii) Provide at least four hours per day of consulting
every day during the thirty days following Closing
for transition assistance. This transition assistance
consulting will be provided at Seller's expense to
expedite the transition. Seller shall provide a pager
number and return pages promptly.
(iv) Be available by pager within the continental United
States for three months after Closing for support.
Seller shall return pages within two hours.
(v) Transfer the domain name catalog.com to Buyer with
the identity information provided by Buyer.
(vi) Assist Buyer in updating DNS information on all
domain names served by Seller to be served by Buyer
as determined by Buyer.
(vii) Discontinue the use of the name "Catalog.com" in any manner.
(viii) Pay Buyer $300 per month for the right to connect the router with two
T1's to the Genuity Network. Seller agrees not to exceed 150kb/sec average
throughput per
day.
(ix) Forward the Genuity bill to buyer beginning with the payment for services
the month after closing.
(x) At Buyer's request send a letter to Genuity
requesting that the contract with Genuity be assigned
to Buyer.
(xi) Pay Buyer on a weekly basis all payments received for Catalog.com services
including accounts receivable.
(xii) Move the friend's Sun Microsystems computer from the
Genuity co-location facility within six months of
Closing.
(c) Buyer's Obligations after Closing. After the Closing, Buyer shall do the
following:
----------------------------------
(i) Maintain the Genuity contract for a period of six months. If Genuity refuses
to assign the contract to Buyer, Buyer shall make the payment for Seller.
(ii) For a period of six months after Closing, Buyer shall
operate the current Global Customers from the Genuity
data center.
(iii) Pay Mark Lottor $100 per hour for any consulting
hours requested by Buyer after the thirty days
following Closing. Buyer shall request a base of 8
hours of consulting beginning the second month after
Closing for a period of five months.
(iv) Email any phone or email messages received for
Network Wizards not related to Web Hosting to
[email protected] within two hours of receipt.
(v) Provide Mark K. Lottor with a license to use the
scripts, spam filtering and apache/ftp modifications
for the Network Wizards web server and the art.net
server so long as the scripts are not used for any
web hosting in any form whatsoever except for the non
profit art.net server and the Network Wizards web
server.
(vi) Provide Mark K. Lottor a copy of all invoices sent to
the Global Customers and confirmation and
documentation of payment received from the Global
Customers.
Section 7. Representations and Warranties of Seller. Seller hereby
represents and warrants to Buyer as follows.
-------------------------------------------
(a) Title. Seller has and will transfer to Buyer good and
marketable title to the Assets, free and clear of any claim,
liability, lien, security interest, or encumbrance. The
execution of this Agreement and performance of the covenants
herein contemplated do not result in any lien, charge or
encumbrance upon the Assets pursuant to any agreement or
instrument to which Seller is bound or by which the Assets may
be affected.
(b) Ordinary Course. Other than changes in the ordinary course of
business, there have been no material financial changes to the
Seller since the audit conducted by Buyer. Seller has
continued to conduct business in a normal and customary manner
consistent with prior practices in the business of the Seller,
and will continue to do so until the Closing Date.
(c) Status of Seller. Seller is a Sole Proprietorship of Mark K.
Lottor.
-----------------
(d) Authority. Seller has full power and authority to carry on
the Business as now being conducted
---------
and to own the Assets.
(e) Financial Statements. Seller has furnished to Buyer, and there are attached
hereto as Exhibit ---------------------- F, true and complete copies of the
following: (i) Schedule C's and Seller's individual income tax returns for the
years 1997, 1996, and 1995, (ii) copies of bank statements from January 1997
until Closing (iv) receivables aging, (v) summary of bad debt write-offs, (vi)
details of major expense categories, (vii) schedule of gross margin analysis for
the most recent twelve-month period prepared by Arthur Andersen LLP, (viii)
current customer counts, (ix) customer counts by pricing plan and (x) monthly
churn rate. The financial statements present fairly, in all material respects,
the financial position of the Business as of the dates indicated and the results
of operations for the periods indicated and have been prepared in accordance
with the accounting principles used by Seller in preparing financial statements
for the Business, which principles are summarized on Exhibit F hereto.
(f) Authorization and Absence of Restrictions. Seller has full
right, power, authority, and a capacity to enter into this
Agreement and to carry out this Agreement in all respects at
the date of Closing. Consummation of the transactions
contemplated by this Agreement will not result in a breach of
any term or provision of any contract, lease, judgment, order
or decree of any judicial or administrative body, or other
agreement to which the Seller is a party.
(g) Litigation. There is no litigation or proceeding pending, or
to the knowledge of the Seller threatened, against or relating
to the Seller or the Assets or Business, nor does the Seller
know or have reasonable grounds to know of any basis for an
such action, or of any governmental investigation relative to
the Seller's Assets or Business.
(h) Taxes. Seller has paid, or at the time of Closing will have
paid all withholding, sales, social security and unemployment
taxes which are due at the time of Closing and any and all
other taxes related to the Business which are due at the time
of Closing.
(i) Licenses, Government Regulation and Legal Compliance. All permits, licenses
and other ----------------------------------------------------------
authorizations required for the operation of the Business as now conducted are
in full force and effect and Seller has complied with, and is not in violation
of, any of the requirements, conditions, or limitations of any such permits,
licenses, or other authorizations or of any governmental regulations applicable
to such business. Seller has complied in all respects with the Fair Labor
Standards Act and any applicable state laws in respect of hours worked by, and
payments made to, its employees. Seller has complied with all other statutes,
ordinances, regulations and orders applicable to its business, including
building, fire, health and safety codes, statutes, ordinances, orders or
regulations.
(j) No Liabilities. Seller has no material liabilities (whether
contingent or absolute, matured or unmatured, known or
unknown, including, without limitation, unasserted claims
relating to the Assets of Seller) relating to the Business,
except for liabilities and obligations which were incurred in
the ordinary course of business since March 31, 1998.
(k) Disclosure. No representation or warranty by Seller in the
Agreement or any statement or certificate furnished or to be
furnished to the Buyer pursuant hereto, or in connection with
the transaction contemplated hereby, contains or will contain
any untrue statement of a material fact or omits or will omit
any statement of material fact necessary to make the
statements contained therein not misleading.
Section 9. Survival of Representations and Warranties. All representations,
warranties, and covenants made herein by Seller and Buyer, shall be effective as
of the Effective Date and the Closing Date and shall survive the Closing.
Section 10. Conduct of Seller Pending Closing. Seller covenants that,
between the date hereof and the date of
------------------------------------
Closing:
(a) Seller's business will be conducted only in the ordinary
course of business;.
(b) Except as otherwise requested by Buyer, Seller will preserve for Buyer the
goodwill of Seller's suppliers, customers and others having business relations
with Seller.
(c) Buyer, its agents, attorneys and representatives shall have
full access to the Assets for purposes of inspecting the same
or any part thereof at such times as they shall reasonably
request during normal business hours. Seller shall furnish to
Buyer all information with respect to the Assets or Business
of Seller as Buyer may from time to time request.
(d) As of the close of business on the Closing Date, Seller shall
terminate the employment off all of its employees, of which
Vivian Neou shall be hired by Buyer, and Seller shall bear all
liabilities, costs and expensed incident to the termination of
such employees including any fees by the employee leasing
company.
Section 11. Indemnification.
----------------
(a) Indemnification by Seller. Seller shall indemnify and hold harmless
Buyer from any and all claims, losses, liabilities, damages, legal proceedings,
recoveries, costs or expenses (including any interest and reasonable attorneys'
fees), collectively, a "Loss", resulting from or arising out of:
(i) Any misrepresentation, breach of warranty or failure
to fulfill any obligation of the part of Seller in or
under this Agreement or in or under any document
furnished by Seller to Buyer as required by this
Agreement;
(ii) Any claims, demands, suits, proceedings or actions by
any third party containing allegations which, if
true, would constitute a misrepresentation, breach of
warranty or failure to fulfill an obligation on the
part of Seller in or under this Agreement or in or
under any document furnished by Seller to Buyer; and
(iii) Any liability, expense or other obligation of, or
claims against Seller, other than relating to the
Assumed Liabilities.
Seller agrees that the payments required to be made under this Agreement may be
reduced by any amount of indebtedness of Seller to Buyer arising under this
Agreement or in any other manner whatsoever. Buyer shall promptly notify Seller
of any liability to which Seller's indemnification obligations may apply and
shall give Seller a reasonable opportunity to defend the same at his own cost
and expense with counsel of his own selection, provided that Buyer shall at all
times have the right to fully participate in the defense at its own expense. If
Seller shall, within a reasonable time after such notice, fail to defend, Buyer
shall have the right, but not the obligation, to undertake the defense of and to
compromise or settle the liability on behalf, for the account and at the risk
and expense of Seller, if Seller is later determined to be responsible for such
liability.
(b) Indemnification by Buyer. Buyer shall indemnify and hold harmless Seller
from any and all Losses resulting from or arising out of any liability or
obligation of or claims against Seller (whether absolute, accrued, contingent or
otherwise and whether contractual, tax or any other type of liability or
obligation or claim) relating to or resulting from the Assets or the operation
of the Business during the period from and after the date on which they are
conveyed to Buyer; notwithstanding the foregoing, in no event shall Buyer have
any indemnification obligation to Seller pursuant to this Section 11(b) for any
Losses otherwise indemnifiable hereunder to the extent that such Losses directly
relate to a liability, obligation or claim with regard to the failure to obtain
any waiver, consent or approval from any party to any contract that is required
in order to assign any such contract to Buyer; provided, however, that Buyer
shall remain liable for any other Losses indemnifiable pursuant to this Section
11(b) not directly relating to such a liability, obligation or claim. Seller
shall promptly notify Buyer of any liability to which Buyer's indemnification
obligations may apply and shall give Buyer a reasonable opportunity to defend
the same at his own cost and expense with counsel of his own selection, provided
that Seller shall at all times have the right to fully participate in the
defense at its own expense. If Buyer shall, within a reasonable time after such
notice, fail to defend, Seller shall have the right, but not the obligation, to
undertake the defense of and to compromise or settle the liability on behalf,
for the account and at the risk and expense of Buyer, if Buyer is later
determined to be responsible for such liability.
Section 12. Risk of Loss. The risk of loss or damage by fire or other casualty
or cause to the Assets or the Business prior to the date on which they are to be
conveyed to Buyer shall be upon Seller. In the event of such loss or damage
prior to such date, Seller shall promptly restore, replace or repair the damaged
Assets to their previous condition at the sole cost and expense of Seller. Buyer
shall have any and all remedies to enforce such obligations as may be available
at law or in equity or otherwise (including, without limitation, specific
performance).
Section 13. Brokerage. Seller is responsible for any and all brokerage fees
arising from the execution of this --------- agreement. Buyer has no agreement
with a brokerage that would result in any fees for the Seller or the Buyer.
Section 14. Termination.
-----------
(a) Termination. Subject to the provisions of paragraph (b) of
this Section 14, this Agreement may, by written notice given
at or prior to the Closing in the manner hereinafter provided,
be terminated at any time prior to the Closing:
(i) by mutual written consent of the parties hereto; or
(ii) by Seller, on the one hand, or by Buyer, on the other
hand, if the Closing shall not have occurred on or
before July 31, 1998; provided, that such failure to
close is not a result of a breach of this Agreement
by the party or parties seeking to terminate the
Agreement.
(b) Effect of Termination. In the event this Agreement is
terminated as provided in paragraph (a) of this Section 14,
this Agreement shall be deemed null, void and of no further
force or effect, and the parties hereto shall be released from
all future obligations hereunder. The parties hereto shall
have any and all remedies to enforce such obligations provided
at law or in equity or otherwise (including, without
limitation, specific performance).
Section 15. Mediation of Disputes
(a) In the event of a dispute between the parties to this
Agreement the following procedure will be used in a good faith
attempt to mediate and resolve the dispute prior to the
pursuit by either party of other available remedies.
(i) A meeting (the "Initial Meeting") shall promptly be
held at which all parties are present by individuals
with full decision making authority regarding the
matters in dispute.
(ii) If, within thirty (30) days following the Initial
Meeting, the parties have not resolved the dispute,
the dispute shall be submitted to mediation directed
by a mediator mutually agreeable to the parties (the
"Mediator). Each party shall bear its proportionate
share of the costs of the meditation, including the
Mediator's fee.
(iii) The parties agree to negotiate in good faith in the
Initial Meeting and in mediation conferences and use
reasonable efforts to resolve the dispute without the
need for litigation.
(b) If, after a period of sixty (60) days following the mediation
conferences or any adjournment thereof, and despite the good
faith efforts of the parties to negotiate and attempt to
resolve the dispute, the parties are unable to resolve the
dispute, either party may initiate arbitration upon ten (10)
days' prior written notice to the other party. The initiation
of arbitration, however, shall not eliminate the obligation of
the parties to continue to negotiate in good faith and attempt
to resolve the issue.
(c) In the event there is a failure of mediation pursuant to
paragraph (B) above, any controversy or claim arising out of
or relating to this Agreement or the breach thereof will be
settled by arbitration in Oklahoma City, Oklahoma before and
in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. The award rendered in that
arbitration will be binding on the parties hereto, and
judgment upon the award can be entered by any court having
jurisdiction thereof. Without detracting from the generality
of the foregoing, the following specific provisions will also
apply:
(i) The proceedings will beheld by a panel of three
arbitrators, each party having the right to select
one arbitrator, with the third to be selected in
accordance with the Rules of the American Arbitration
Association;
(ii) The parties, by mutual agreement, can also provide
that all or part of the arbitration proceedings be
held outside of Oklahoma City, Oklahoma; in this
event, the parties will equally bear any special
expenses resulting from that decision;
(iii) Before rendering their final decision, the
arbitrators will act as friendly, disinterested
parties for the purpose of helping the parties reach
compromise settlements on the points in dispute; and
(iv) The costs of the arbitration will be in the
discretion of the arbitrators, provided, however,
that no party is obliged to pay more than its own
costs, the costs of the arbitrator it has nominated,
and the cost of the third arbitrator.
Section 16. Miscellaneous Provisions.
(a) Governing Law, Venue. This Agreement shall be governed and
controlled in all respects by the laws of the state of
Oklahoma, including as to interpretation, enforceability,
validity, and construction, without regard to its conflicts of
laws principles. Any litigation arising out of or relating to
this Agreement shall be conducted solely and exclusively in
such court in Oklahoma County as shall have jurisdiction over
the subject matter hereof; and to the extent permitted by law,
all parties hereto consent to such jurisdiction and venue.
(b) Integration. This Agreement constitutes the entire
understanding between the parties with respect to the subject
matter of this Agreement and supersedes any prior discussions,
negotiations, agreements and understandings. The following
Exhibits shall constitute part of this Agreement.
Exhibit A - List of Equipment
Exhibit B - List of Licensed and Developed Software
Exhibit C - Form Non-competition Agreement
Exhibit D - Form Employment agreement
Exhibit E - Bill of Sale
Exhibit F - Financial Statements
(c) Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such a way as to be
effective and valid under applicable law. If any provision is
prohibited by or invalid under applicable law, it shall be
ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
(d) Amendment. The terms of this Agreement may not be varied, supplemented, or
modified in any
---------
manner, except in a subsequent writing executed by all parties
(e) Assignment. This Agreement shall not be assigned without the
prior written consent of all other parties to this Agreement.
In the event of a permitted assignment, this Agreement shall
be binding upon and insured to the benefit of the assignors
successors and assigns.
(f) Third Party Beneficiaries. This Agreement shall not confer any rights or
remedies upon any
---------------------------
third party other than the parties to this Agreement and their respective
successors and
permitted assign's.
(g) Notices. Any notice required or permitted under this Agreement
shall be in writing and must be delivered personally or by be
sent by facsimile, telex, or certified prepaid mail or
overnight express mail, addressed to the addressee's last
known address. Notices shall be deemed given three (3) days
after mailing in the case of mail or overnight service, or
upon proper and successful telex, facsimile, or personal
delivery, as the case may be.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as the
date first written above.
BUYER
Ethos Communications Corp.
By:__________________________
Robert W. Crull, President
SELLER
Mark K. Lottor
-------------------------------------------------
Mark K. Lottor
<PAGE>
Exhibit A.
Hardware List
- ----------------------------------------------------------------------
NS1
P-133. 98mb ram.
Buslogic scsi. 3C509 ethernet.
system/data on ST31055N (1gb)
- ----------------------------------------------------------------------
CATALOG
PPRO-200. 128mb ram.
DPT RAID PM3334UW controller, 3 channel ultra-wide scsi. overflow data and
backup disks on NCR pci scsi. Intel ether express 10/100 ethernet.
system on mirrored 2gb drives.
data on raid-5 array is 8 ST34371W (4gb each).
overflow data is IBM 0662S12 (1gb)
backup drive is ST423451W (23gb).
- ----------------------------------------------------------------------
MAIL
PPRO-200. 64mb ram.
BusLogic BT-946C scsi. 3C509 ethernet.
system/data on ST32550N (2gb)
backup drive on ST32550N (2gb)
- ----------------------------------------------------------------------
NW1
P-166. 64mb.
DPT RAID PM3334UW controller, 2 channel ultra-wide scsi. Backup drive on
ST423451N (23gb) 3C509 ethernet.
system on mirrored 4gb drives (seagate barracuda)
three 9gb drives
data on FUJITSU M2949E (9gb)
backup data on FUJITSU M2949E (9gb)
extra drive is FUJITSU (9gb)
- ----------------------------------------------------------------------
MISCELLANEOUS
NetGear ethernet switch 8 10mb ports, 2 100mb ports BEST rackmount UPS (approx
1000kva) PC video monitor PC keyboard
Spare hardware:
ps/2 style power supply
4gb seagate barracuda
<PAGE>
Exhibit B
Software List
COMMERCIAL SOFTWARE
BSDI O/S v3
4 licenses
RealAudio Server v4
2 60-stream licenses
Stydec Shopping Cart
2 binary licenses
Storemaker Shopping Cart
2 binary licenses and source license
Apache secure server - stronghold
binary license
IC-VERIFY
credit card processing software for DOS
/c/progs
addccinfo.c add cc expiration dates to /crs files
appendlf.c makes sure last line of a file has a lf
changepwd.c cgi: to change users login password
checkuser.c cgi: simple user access control
chkacct.c checks account setup information
configedit.c cgi: account info configuration editor
createcustlist.c creates customer email list
custedit.c cgi: billing info update handler
deposit.c generates bank deposit slip for last batch of checks
domsetup.c generates account/domain setup files
fd finds an account name from its domain name
fdi.c displays account info for given domain name
find.c cgi: file search program
findlate.c find user behind on payments
findlate.rc script to run findlate on all users
fm.c cgi: file manager
form.c cgi: old form processing script
form2.c cgi: new form processing script
fp finds an account by seaching user info for a string
gendiskusage.c reads du list, appends usage to users stats file
genftplogs.c process ftp server log files
geninvoice.c generates invoices
genlistings generates customer directory list (for web site)
genmonthlybills script run once a month to bill customers
genuserstatsnew.c generates usage stats for www and ftp for a user
genvmaillogs.c generate vmail stats for autoresponder usage
genwwwlogs.c process www log files, split out for each user
getadmin.c display admin email address for an account
listing.c generates customer directory listing data
logto.c cgi: logto and goto scripts
makehtml generates html files from html source files
mkacct builds directories for a new account
mkauthdb.c generates user/password database for auth server
mkdatafile.c gen default account config/data file for a user
mkpwdentry.c adds a new user to system password file
new script to build a new account
newfile.c ftp 'site exec' prog to backup and reset order files
newmsg generates email to send to new customer just built
newwebwhois.c cgi: to run whois command to InterNIC
nkf.c converts ascii to kanji (freeware) used by form2
notpaid.c processes declined cc charges
nuke script to delete an account
paid.c processes account payments
prevday.c returns a string yyyymmdd for previous day
prevdaymonth.c returns a string yyyymm for previous day
prevmonth.c returns a string yyyymm for previous month
processuserfiles nightly script to process www/ftp/etc log files
report.c generates user reports (email) for www/ftp statistics
rmall.c does "rm *" on directory arg given
rmallonfirst.c does "rm *" if the first day of the month
rmallontuesday.c does "rm *" if its a tuesday
service.c generates new account service description file
showacct.c cgi: show user account/billing info
sm.c cgi: web site manager
total.c totals a particular field for each line of a file
var.c cgi: var file processor
vmail.c mail forwarding handler
vmailrcpt.c looks up vmail forwarding entry (subroutine)
wildmat.c subroutine to do wildcard string matches
xfervmail.c moves copy of vmail files to mail server
/usr/local/src
ftpd.new ftp source and mods
httpd/vapache_1.1b4 apache with mods
mmd mail daeamon software
qpopper-2.2 POP server w/mods
storemaker shopping cart w/mods and bug fixes
/etc
mkpwd update password file
mkvmail update mailertable file
addmail add a new mailertable entry
Domain Server Software
/usr/local/etc/domain
genboots script to run gennamedboot gennamedboot.c make primary and secondary
boot files makealias make an aliased domain name zone file makezone make a
virtual host zone file makezonewww2 make a virtual host zone file with www only
entry nuke remove a domain
PC Billing Related Software
(to import/export data for use with IC-VERIFY)
doexplst export: generate cc expiration date list
mkbatch import: read charges, generate icverify batch file
redo generate list of charges to retry (temp failures)
and export list of charges that succeeded or failed
chargem run icverify over entire batch
charge run icverify in manual entry mode
<PAGE>
Exhibit C
Non-Competition Agreement
<PAGE>
Exhibit D
Employee Agreement
Exhibit E.
Bill of Sale
Exhibit F
Financial Statements
06/28/98
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT is made and entered into as of 1998, by
and between ----------------- ETHOS COMMUNICATIONS CORP., an Oklahoma
corporation ("Ethos"), and MARK K. LOTTOR ("Lottor"). W I T N E S S E T H:
WHEREAS, Lottor is the owner of Network Wizards, a sole proprietorship
(the "Business"), which conducts web hosting services under the trade name
"Catalog.com"; and
WHEREAS, Lottor has entered into that certain Asset Purchase Agreement
dated 1998 (the "Asset Purchase Agreement") with Ethos, pursuant to which Lottor
agreed to sell all of his right, title and interest in and to the assets of the
Business to Ethos (the "Asset Purchase"); and
WHEREAS, as a condition to the closing of the Asset Purchase Agreement,
Lottor has agreed to enter into this Agreement and to refrain from competing
with Ethos, as hereinafter provided, in order to induce Ethos to fulfill its
obligations under the Asset Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained, the mutual promises and agreements contained in the Asset
Purchase Agreement, and other good and valuable consideration, the adequacy of
which is hereby acknowledged, the parties hereby agree as follows:
1. Non-Competition.
1.1. Non-Competition. During the period expiring two (2) years
from the Closing Date (as defined in the Asset Purchase Agreement) of the Asset
Purchase (the "Non-competition Period"), Lottor will not (a) directly or
indirectly, own, manage, operate, join, control, be employed with, or
participate in the ownership, management, operation, or control of, or be
connected in any manner with, any business engaged in the design, operation or
management of Internet website hosting; (b) contact or attempt to contact,
directly or indirectly, any of the customers of the Business as of the Closing
Date, in order to sell for the benefit of anyone other than Ethos, any product
or products of a type similar to those sold by the Business as of the Closing
Date or provide services of a type similar to those provided by the Business as
of the Closing Date, nor will Lottor dissuade or attempt to dissuade any
customer of the Business as of the Closing Date from using services provided by
the Business at the Closing Date.
1.2. No Geographic Limitation. Lottor acknowledges and agrees
that due to the global nature of telecommunications and the ease with which a
business may enter the telecommunications industry, the conduct of an Internet
website hosting business is not limited by geographic location and that
companies may compete for customers in that business without being physically
situated in the same city, state, region or country. Consequently, the covenants
against competition contained herein shall not be subject to geographic boundary
and shall be a worldwide restriction on competition.
1.3. Severability of Covenants/Scope. Lottor acknowledges and
agrees that the covenants against competition contained herein are reasonable
and valid in geographical and temporal scope and in all other respects. If any
court determines that any of such covenants, or any part thereof, are invalid or
unenforceable, because of the duration or geographic scope of such provisions,
or for any other reason, the remainder of such covenants shall not thereby be
affected and shall be given full effect, without regard to the invalid portion.
Further, such court shall have the power to reduce the duration or scope of such
provisions as the case may be, and in its reduced form such provision shall then
be enforceable.
1.4. Excluded Activities. Notwithstanding the provisions of
this Section 1, Lottor shall be permitted to provide services for "art.net," a
not-for-profit business, in the provision of web-hosting services for artists,
provided that "art.net" does not provide virtual servers for artists or others
or web-hosting services for profit. In addition, Lottor shall be permitted to
provide general consulting services for companies so long as that consulting
assistance is not in any way related to setting up web hosting services,
providing programming assistance for operating or maintaining web site hosting
services or in any way related to web server operations including but not
limited to the back end accounting or operations of web site hosting.
2. Records and Information Confidential. The records of the Business,
including the names and addresses of its customers, to be acquired by Ethos
pursuant to the Asset Purchase Agreement, and any part of such records, whether
in original form or in computerized, duplicated, or copied form, and the names,
addresses, and other facts in such records, shall be the sole proprietary
information of Ethos and shall be treated by Lottor as confidential information,
shall be treated by Lottor as such, and shall not be transmitted verbally, in
writing, or in computerized form by Lottor. Lottor further agrees with respect
to the Assets, (a) to keep confidential all such information that is identified
as being of a confidential nature, (b) not to use such confidential information
on his own behalf, or on behalf of any other person, firm or entity and (c) not
to disclose such confidential information to any third party without the advance
written authorization of Ethos.
3. Termination. This Agreement shall terminate upon expiration of the
Non-Competition Period. Lottor may terminate this Agreement only in the event
that Ethos is in material breach of the Asset Purchase Agreement and such breach
has not been cured by Ethos as provided in the Asset Purchase Agreement.
Notwithstanding the foregoing, termination of this Agreement shall not terminate
the provisions of Section 2, which shall survive termination.
4. Other Provisions.
4.1. Notices. Any notice or other communication required or permitted hereunder
shall be ------- in writing and shall be delivered in accordance with the terms
of the Asset Purchase Agreement at such addresses as provided for therein.
4.2. Entire Agreement. This Agreement is one of several agreements contemplated
by the ----------------- Asset Purchase Agreement, constitutes the entire
agreement between the parties with respect to the subject matter hereof, and
supersedes all prior agreements, written or oral, with respect thereto.
4.3. Waivers and Amendments. This Agreement may be amended,
modified, superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving compliance. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any right, power or privilege hereunder, nor any single or partial exercise
of any right, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder.
4.4. Governing Law. This Agreement shall be governed and construed in accordance
with the -------------- laws of the State of Oklahoma applicable to agreements
made and to be performed entirely within such state.
4.5. Assignment. Neither party hereto may assign any rights hereunder without
the written ---------- consent of the other party hereto.
4.6. Counterparts. 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 and the same instrument.
4.7. Headings. The headings in this Agreement are for reference purposes only
and shall -------- not in any way affect the meaning or interpretation of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ETHOS:
-----
ETHOS COMMUNICATIONS CORP.
By:_______________________
Robert W. Crull, President
LOTTOR:
--------------------------
Mark K. Lottor
DAL02:136713.10
TABLE OF CONTENTS
Basic Lease Information
Page
Lease Date iii
Tenant iii
Tenant's Address iii
Tenant's Contact iii
Landlord iii
Landlord's Address iii
Landlord's Contact iii
Premises iii
Term iii
Basic Rental iii
Security Deposit iii
Rent iii
Permitted Use iii
Tenant's Proportionate Share iii
Construction Allowance iv
Comparable Buildings iv
Lease Agreement
Definitions and Basic Provisions 1
Lease Grant 1
Term 1
Rent 1
Security Deposit 2
Landlord's Obligations 2
Improvements; Alterations; Repairs; Maintenance 4
Use 5
Assignment and Subletting 6
Insurance; Waivers; Subrogation; Indemnity 7
Subordination; Attornment; Notice to Landlord's Mortgagee 7
Rules and Regulations 8
Condemnation 8
Fire or Other Casualty 9
Events of Defaul 9
Remedies 10
Payment; Non-Waiver 11
Landlord's Lien 11
Surrender of Premises 12
Holding Over 12
Certain Rights Reserved by Landlord 12
Substitution Space 13
Miscellaneous 14
Exhibits
Exhibit A Outline of the Premises
Exhibit A-1 Legal Description of the Land
Exhibit B Building Rules and Regulations
Exhibit C Operating Expenses
Exhibit D Tenant Finish Work: Plans
Exhibit D-1 Plans/Specifications
Exhibit E Renewal Option
Exhibit F Parking
Exhibit G Janitorial Specifications
Exhibit H Signage Criteria
List of Defined Terms
Page
ADA 4
Annual Electrical Cost Statement 1
Annual Operating Statement Exh. C
Basic Cost Exh. C
Basic Lease Information 1
BOMA iii
Building iii
Building Systems 3
Casualty 9
Commencement Date iii, 1
Comparable Buildings iv
Construction Hard Costs Exh. D
Construction Allowance iv, Exh. D
Controllable Expenses Exh. C
Damage Notice 9
Electrical Costs 1
Event of Default 9
Excess Exh. C
Expense Stop Exh. C
Initial Liability Insurance Amount 7
Land iii
Landlord iii, 1
Landlord's Mortgagee 8
Lease 1
Loss 6
Mortgage 7
Park iii
Parking Area Exh. F
Permitted Transfer 6
Premises iii
Primary Lease 7
Project iii
Rentable Square Feet iii
Rentable Square Foot iii
Security Deposit iv, 2
Shell Construction Exh. D
Substantial Completion Exh. D
Substitution Effective Date 12
Substitution Notice 12
Substitution Space 12
Taking 8
Taxes 2, Exh. C
Tenant iii, 1
Total Construction Costs Exh. D
Total Rentable Square Feet iii
Total Rentable Square Foot iii
Transfer 6
Work Exh. D
Working Drawings Exh. D
<PAGE>
BASIC LEASE INFORMATION
Lease Date: January________, 1999
Tenant: Ethos Communications Corp.
Tenant's Address: 6404 International Parkway, Suite
2200 Plano, Texas
75093
Contact: Robert W. Crull Telephone: 405-752-4473
Landlord: CB Parkway Business Center II, Ltd., a Texas limited
partnership
Landlord's Address: 2200 Ross Avenue, Suite 4800
West Dallas,
Texas 75201
Contact: Becky Rowland Telephone: (214)754-1751
Premises: Suite No.2200, in the office building (the "Building") located or to
be -------- located on the land described as International Business Park, Plano,
Collin County, Texas, and whose street address is 6404 International Parkway,
Plano, Texas 75093, as particularly described in Exhibit A-1 (the "Land"). The
- ---- Building and Land together comprise the "Project". The Premises are
outlined ------- on the plan attached to the Lease as Exhibit A and shall
contain approximately 3,349 square feet of rentable area ("Rentable Square Feet"
or singularly --------------------- "Rentable Square Foot"). The Building
contains approximately 117,654 of total --------------------- square feet of
rentable area ("Total Rentable Square Feet" or singularly
- -------------------------- "Total Rentable Square Foot"). As soon as reasonably
practicable, the --------------------------- rentable area shall be calculated
and confirmed by Landlord's architect utilizing the American National Standard
Method for Measuring Floor Area in Office Buildings, ANSI Z65.1 - 1996, as
adopted by the Building Owners and Managers Association International ("BOMA")
and the actual Rentable Square Feet, Total Rentable Square Feet and Tenant's
Proportionate Share shall be adjusted as necessary based upon such calculations.
In the event of any adjustment to Rentable Square Feet, Total Rentable Square
Feet or Tenant's Proportionate Share, Landlord and Tenant shall execute an
amendment to the Lease confirming the adjusted Rentable Square Feet, Total
Rentable Square Feet and Tenant's Proportionate Share.
Term: Commencing March 15, 1999 (the "Commencement Date"), and ending at 5:00
p.m. ----------------- March 31, 2005, subject to earlier termination and
extension as provided in the Lease.
<TABLE>
<S> <C> <C> <C>
Basic Rental: Months Annual Rate per Basic Monthly Rental
------ --------------------
Rentable Square Foot
1-72 $21.00 $5,860.75
</TABLE>
Security Deposit: $5,860.75 due upon execution of the Lease as referenced in
Section 5 of the Lease
Rent: Basic Rental, Tenant's share of Electrical Costs, Excess (if any), and all
other sums that Tenant may owe to Landlord under the Lease.
Permitted Use: General office use.
Tenant's 2.84648% (which is the percentage obtained by dividing the Rentable
Proportionate Share: Square Feet by the Total Rentable Square Feet; Tenant's
Proportionate Share is subject to adjustment upon confirmation of the Rentable
Square Feet and Total Rentable Square Feet as provided above)
Construction Allowance: Turn key per plans attached as Exhibit "D-1".
Comparable Buildings: As used herein or in the Lease,
the term "Comparable Buildings" shall mean
those low-rise garden style, multi-tenant,
commercial office buildings completed on or
after January 1, 1997, which are comparable
to the Building in size, design, quality,
use, and tenant mix, and which are located
in the same market area (i.e., Plano area
North of Frankford, East of I-35E, West of
Preston Road and South of State Hwy. 121).
The foregoing Basic Lease Information is incorporated into and made a part of
the related lease (the "Lease"). If any conflict exists between any Basic Lease
Information and the Lease, then the Lease shall control.
LANDLORD:
CB PARKWAY BUSINESS CENTER II, LTD.,
a Texas limited partnership
By: 14BCO, Inc., a Texas corporation, its
general partner
By:
Name:
Title:
TENANT:
ETHOS COMMUNICATIONS CORP.
By:
- ---
Name:
Title:
<PAGE>
THIS LEASE AGREEMENT (this "Lease") is entered into as of January
_____, 1999 between ----- CB PARKWAY BUSINESS CENTER II, LTD., a Texas
limited partnership ("Landlord"), and Ethos -------- Communications Corp.
("Tenant"). ------
DEFINITIONS 1. The definitions and basic provisions set forth in the Basic Lease
Information AND BASIC (the "Basic Lease Information") executed by Landlord and
Tenant contemporaneously
-----------------------
PROVISIONS herewith are incorporated herein by reference for all purposes. To
the extent of any conflict between the Basic Lease Information and any provision
contained in this Lease, this Lease shall control.
LEASE GRANT 2. Subject to the terms of this Lease, Landlord leases to Tenant,
and Tenant leases from Landlord, the Premises.
TERM 3. The Term shall commence March 15, 1999 (the "Commencement Date"), and
end at ----------------- 5:00 p.m. March 31, 2005 subject to adjustment due to
delays caused by Landlord as provided in Exhibit D or renewal as provided in
Exhibit E. Landlord shall deliver possession of the Premises to Tenant upon
execution hereof. By occupying the Premises, Tenant shall be deemed to have
accepted the Premises in their condition as of the date of such occupancy,
subject to Landlord's completion of any related punch-list items. Tenant shall
execute and deliver to Landlord, within ten (10) days after Landlord has
requested same, a letter confirming (1) the Commencement Date, (2) that Tenant
has accepted the Premises, and (3) that Landlord has performed all of its
obligations with respect to the Premises.
RENT 4. (a) Payment. Tenant shall timely pay to Landlord the Rent -------------
without deduction or set off (except as otherwise expressly provided herein), at
Landlord's Address (or such other address as Landlord may from time to time
designate in writing to Tenant). Basic Rental, adjusted as herein provided,
shall be payable monthly in advance. The first full monthly installment of Basic
Rental shall be payable contemporaneously with the execution of this Lease;
thereafter, monthly installments of Basic Rental shall be due on the first day
of each succeeding calendar month during the Term. Basic Rental for any partial
month at the beginning or end of the Term shall be prorated based upon the
number of days within the Term during the partial month multiplied by 1/365 of
the then current annual Basic Rental and shall be due on or before the fifth day
immediately preceding the Commencement Date, or first day of the last calendar
month of the Term, as applicable.
(b) Electrical Costs. Tenant shall pay to
Landlord an amount equal to the product of (1) the cost of all
electricity used by the Project ("Electrical Costs"),
multiplied by (2) Tenant's Proportionate Share. Such amount
shall be payable monthly based on Landlord's reasonable
estimate of the amount due for each month, and shall be due on
the Commencement Date and on the first day of each calendar
month thereafter.
(c) Annual Electrical Cost Statement. By
April 1 of each calendar year, or as soon thereafter as
practicable, Landlord shall furnish to Tenant a statement of
Landlord's actual Electrical Costs (the "Annual Electrical
Cost Statement") for the previous year adjusted as provided in
Section 4.(d), which shall include a reconciliation of the
actual amount Tenant owes for its share of Electrical Costs
against the estimated amount collected from Tenant. If such
reconciliation shows that Tenant paid more than owed, then
Landlord shall reimburse Tenant by check or cash for such
excess within thirty (30) days after delivery of the Annual
Electrical Cost Statement; conversely, if Tenant paid less
than it owed, then Tenant shall pay Landlord such deficiency
within thirty (30) days after delivery of the Annual
Electrical Cost Statement.
(d) Adjustments to Electrical Costs. With
respect to any calendar year or partial calendar year in which
the Building is not occupied to the extent of 95% of the
rentable area thereof, the Electrical Costs for such period
shall, for the purposes hereof, be increased to the amount
which would have been incurred had the Building been occupied
to the extent of 95% of the rentable area thereof.
(e) Delinquent Payment. If any payment required by Tenant under
------------------
this Lease is not paid when due, Landlord may charge Tenant a
fee equal to 5% of the delinquent payment to reimburse
Landlord for its cost and inconvenience incurred as a
consequence of Tenant's delinquency. In no event shall the
charges permitted under this section 4(e) or elsewhere in this
Lease, to the extent the same are considered to be interest
under applicable law, exceed the maximum lawful rate of
interest.
(f) Taxes. Tenant shall be liable for all
taxes levied or assessed against personal property, furniture,
or fixtures placed by Tenant in the Premises. If any taxes for
which Tenant is liable are levied or assessed against Landlord
or Landlord's property and Landlord elects to pay the same, or
if the assessed value of Landlord's property is increased by
inclusion of such personal property, furniture or fixtures and
Landlord elects to pay the taxes based on such increase, then
Tenant shall pay to Landlord, within ten (10) days of demand,
that part of such taxes for which Tenant is primarily liable.
(g) Excess. Tenant shall pay the Excess in the Basic Cost over
------
the Expense Stop as such terms are defined in Exhibit C.
SECURITY 5. Contemporaneously with the execution of this Lease, Tenant shall pay
to DEPOSIT Landlord, in immediately available funds, the Security Deposit, which
shall be held by Landlord without liability for interest and as security for
performance by Tenant of its obligations under this Lease. The Security Deposit
is not an advance payment of Rent or a measure or limit of Landlord's damages
upon an Event of Default (defined below). Landlord may, from time to time upon
notice to Tenant and without prejudice to any other remedy, use all or a part of
the Security Deposit to perform any obligation which Tenant was obligated, but
failed to perform hereunder. Following any such application of the Security
Deposit, Tenant shall pay to Landlord on demand the amount so applied in order
to restore the Security Deposit to its original amount. Within a reasonable time
after the expiration of the Term, as may have been extended, provided Tenant has
performed all of its obligations hereunder, Landlord shall return to Tenant the
balance of the Security Deposit not applied to satisfy Tenant's obligations. If
Landlord transfers its interest in the Premises, then Landlord may assign the
Security Deposit to the transferee and Landlord thereafter shall have no further
liability for the return of the Security Deposit.
LANDLORD'S 6. (a) Services; Maintenance. Landlord shall furnish to Tenant (1)
water
---------------------
OBLIGATIONS (hot and cold) at those points of supply provided for general use of
tenants of the Building; (2) heated and refrigerated air conditioning from 7
a.m. to 7 p.m. Monday through Friday and 7 a.m. to 1 p.m. on Saturday (except
for New Years Day. Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and the Friday following Thanksgiving Day and Christmas Day which days shall be
collectively referred to herein as Holidays) sufficient to maintain temperatures
during these hours in the range of from 70 degrees Fahrenheit to 78 degrees
Fahrenheit; (3) janitorial service to the Premises on weekdays other than
holidays (Landlord reserves the right to bill Tenant separately for extra
janitorial service required for any special improvements installed by or at the
request of Tenant) such janitorial services to be generally in accordance with
those services described on Exhibit G; (4) non-exclusive elevator for ingress
and egress to the floors on which the Premises are located; (5) replacement of
Building-standard light bulbs and fluorescent tubes, provided that Landlord's
standard charge for such bulbs and tubes shall be paid by Tenant; and (6)
electrical current (subject to Tenant's obligation to pay its share of
Electrical Costs as provided herein). If Tenant desires heat and air
conditioning at any time other than times herein designated, such services shall
be supplied to Tenant upon reasonable advance notice and Tenant shall pay to
Landlord $40.00 per hour (minimum two hours) for each additional hour (prorated
and rounded up to the nearest quarter hour) such services are provided, such
amount being payable within ten (10) days of receipt of an invoice therefor.
Landlord's obligation to furnish services under this Section shall be subject to
the rules, regulations and other conditions or requirements of the supplier of
such services
and any applicable governmental entity or agency.
(b) Maintenance. Landlord shall maintain all Shell Construction items,
-----------
Building Systems (defined below), and Building common areas including all
parking areas and landscaping, in good order and condition as customary for
Comparable Buildings. "Building Systems" shall include all electrical, plumbing,
and air conditioning systems within the Building which either were included in
the Shell Construction or which were installed by Tenant pursuant to this Lease
and which meet the following requirements: (i) properly approved by Landlord;
(ii) installed in conformance with all plans and specifications as approved by
Landlord; (iii) Tenant shall have informed Landlord in writing of the name,
address, phone number and contact person of the contractor responsible for the
installation of such system; (iv) Tenant shall have assigned in writing all
contractor's and manufacturer's warranties received by Tenant in connection with
such system; and (v) in connection with Tenant's contracting for the
installation thereof, Landlord shall have been expressly named as a third party
beneficiary to, and shall have been provided copies of, such contract and any
related warranties. Notwithstanding the foregoing, "Building Systems" shall not
include any improvements made to or within the Premises which differ from the
base building systems or are otherwise specialized to Tenant's use and occupancy
of the Premises and not customary for office tenants in Comparable Buildings.
(c) Excess Electrical Use. Landlord shall use reasonable
---------------------
efforts to furnish electrical current for computers,
electronic data processing equipment, special lighting, or
other equipment that requires more than 120 volts, or other
equipment whose electrical energy consumption exceeds normal
office usage, through any existing feeders and risers serving
the Building and the Premises. Tenant shall not install any
electrical equipment requiring special wiring or requiring
voltage in excess of 120 volts or otherwise exceeding Building
capacity unless approved in advance by Landlord. The use of
electricity in the Premises shall not exceed the capacity of
existing feeders and risers to or wiring in the Premises. Any
risers or wiring required to meet Tenant's excess electrical
requirements shall, upon Tenant's request, be installed by
Landlord (unless otherwise agreed by Landlord) at Tenant's
expense, if, in Landlord's sole and absolute judgment, the
same are necessary and shall not cause permanent damage or
injury to the Building or the Premises, cause or create a
dangerous or hazardous condition, entail excessive or
unreasonable alterations, repairs, or expenses, or interfere
with or disturb other tenants of the Building. If Tenant uses
machines or equipment (other than general office machines,
excluding computers and electronic data processing equipment)
in the Premises which affect the temperature otherwise
maintained by the air conditioning system or otherwise
overload any utility, Landlord may install supplemental air
conditioning units or other supplemental equipment in the
Premises, and the cost thereof, including the cost of
installation, operation, use, and maintenance, shall be paid
by Tenant to Landlord within ten (10) days after Landlord has
delivered to Tenant an invoice therefor. At the time of
Tenant's submission of plans and specifications for Landlord's
approval pursuant to Section 7 herein or Exhibit D to this
Lease, Landlord and Tenant shall cooperate in good faith to
identify any fixtures, equipment and/or appliances to be
installed or placed in the Premises which fixtures, equipment
or appliances would exceed the normal and customary electrical
use and consumption of typical office tenants in Comparable
Buildings, would affect the temperature otherwise maintained
by the air conditioning system, or would require electric
capacity in excess of any planned or existing feeders, risers,
or wiring to the Premises. Landlord shall install as part of
the original Tenant Improvements described in Exhibit "D" a
separate meter for the supplemental air conditioning unit in
Tenant's computer room.
(d) Restoration of Services; Abatement.
Landlord shall use reasonable efforts to restore any service
that becomes unavailable; however, such unavailability shall
not render Landlord liable for any damages caused thereby, be
a constructive eviction of Tenant, constitute a breach of any
implied warranty, or, except as provided in the next sentence,
entitle Tenant to any abatement of Tenant's obligations
hereunder. However, if Tenant is prevented from making
reasonable use of all or a portion of the Premises for more
than thirty (30) consecutive days because of the
unavailability of any such service, Tenant shall, as its
exclusive remedy therefor, be entitled to abatement of Rent,
or the pro rata portion thereof equivalent to the portion of
the Premises rendered unusable to the entire Premises, for
each consecutive day (after such thirty (30) day period) that
Tenant is so prevented from making reasonable use of the
Premises or the applicable portion thereof.
(e) Access. Subject to any Building rules
and regulations, necessary repairs and maintenance, and any
events beyond Landlord's reasonable control which would
prevent access, Tenant shall have access to the Premises
twenty-four (24) hours a day, seven (7) days a week. The
Building shall include twenty-four (24) hour access by
security card which cards shall be provided to Tenant upon
payment of a $10 refundable deposit per card.
IMPROVEMENTS; 7. (a) Improvements; Alterations. No improvements or alterations
in or ------------------------- ALTERATIONS; upon the Premises, including not by
limitation paint, wall coverings, floor coverings, light REPAIRS ; fixtures,
window treatments, signs, advertising, or promotional lettering or other media,
shall MAINTENANCE be installed or made by Tenant except in accordance with plans
and specifications which have been previously submitted to and approved in
writing by Landlord, which approval shall not be unreasonably withheld or
delayed except that Landlord may withhold approval of any improvements or
alterations which it determines, in its sole opinion, will materially and
adversely affect any structural or aesthetic (only to the extent visible from
outside the Premises or common areas) aspect of the Building or Building
Systems. All improvements and alterations (whether temporary or permanent in
character) made in or upon the Premises, either by Landlord or Tenant, shall (i)
comply with all applicable laws, ordinances, rules and regulations, and (ii) be
Landlord's property at the end of the Term and shall remain on the Premises
without compensation to Tenant unless prior to installation, Tenant provides
Landlord with written notice of all items which may be removed by Tenant and
Landlord consents to such removal in advance. Such consent shall not be
unreasonably withheld provided Landlord may condition such consent as it deems
reasonably necessary including not by limitation requiring Tenant to replace any
items upon removal with similar items comparable to any such items in the
Building or, if not applicable, then Comparable Buildings. Approval by Landlord
of any of Tenant's drawings and plans and specifications prepared in connection
with any improvements in the Premises shall not constitute a representation or
warranty of Landlord as to the adequacy or sufficiency of such drawings, plans
and specifications, or the improvements to which they relate, for any use,
purpose, or condition, but such approval shall merely be the consent of Landlord
as required hereunder. Landlord warrants and agrees that it shall complete the
Building Shell Construction in compliance with all then applicable governmental
laws, rules and regulations, including not by limitation the Americans with
Disabilities Act of 1990 ("ADA"). Thereafter, notwithstanding --- anything in
this Lease to the contrary, Tenant shall be responsible for all costs incurred
to cause the Premises to comply with any such laws, rules or regulations,
including not by limitation the retrofit requirements of ADA, as may be amended.
(b) Tenant Repairs; Maintenance. Except for
those janitorial services to be provided by Landlord as
expressly provided in this Lease, Tenant shall maintain its
personal property and all improvements or alterations to the
Premises other than those items included in Shell Construction
(which shall be maintained by Landlord) in a clean, safe,
operable, attractive condition, and shall not permit or allow
to remain any waste or damage to any portion of the Premises.
Tenant shall repair or replace, subject to Landlord's
direction and supervision, any damage to the Project caused by
Tenant or Tenant's agents, contractors, or invitees. If Tenant
fails to make such repairs or replacements within fifteen (15)
days after the occurrence of such damage, then Landlord, upon
written notice to Tenant, may make the same at Tenant's
expense, which shall be payable to Landlord within ten (10)
days after Landlord has delivered to Tenant an invoice
therefor.
(c) Performance of Work. All work described
in this Section 7 shall be performed only by Landlord or by
contractors and subcontractors approved in writing by
Landlord. Tenant shall cause all contractors and
subcontractors to procure and maintain insurance coverage
against such risks, in such amounts, and with such companies
as Landlord may reasonably require. All such work shall be
performed in accordance with all legal requirements and in a
good and workmanlike manner so as not to damage the Premises,
the structure of the Building, or plumbing, electrical lines,
or other utility transmission facilities or Building
mechanical systems. All such work which may affect the
Building's electrical, mechanical, plumbing or other systems
must be approved by the Building's engineer of record.
(d) Mechanic's Liens. Tenant shall not
permit any mechanic's liens to be filed against the Project
for any work performed, materials furnished, or obligation
incurred by or at the request of Tenant. If such a lien is
filed, then Tenant shall, within thirty (30) days after
Landlord has delivered notice of the filing to Tenant, either
pay the amount of the lien or diligently contest such lien and
deliver to Landlord a bond or other security reasonably
satisfactory to Landlord. If Tenant fails to timely take
either such action, then Landlord may pay the lien claim
without inquiry as to the validity thereof, and any amounts so
paid, including expenses and interest, shall be paid by Tenant
to Landlord within ten (10) days after Landlord has delivered
to Tenant an invoice therefor.
USE 8. Tenant shall occupy and use the Premises only for the Permitted Use and
shall comply with all laws, orders, rules, and regulations relating to the use,
condition, and occupancy of the Premises. The Premises shall not be used for (i)
any use which is disreputable, (ii) creates extraordinary fire hazards, (iii)
results in an increased rate of insurance on the Building or its contents, or
(iv) the storage of any hazardous materials or substances. If, because of
Tenant's acts, the rate of insurance on the Building or its contents increases,
Tenant shall pay to Landlord the amount of such increase on demand, and
acceptance of such payment shall not constitute a waiver of any of Landlord's
other rights. Tenant shall conduct its business and control its agents,
employees, and invitees in such a manner as not to create any nuisance or
interfere with other tenants or Landlord in its management of the Project.
ASSIGNMENT 9. (a) Transfers; Consent. Other than permitted transfers as
described
------------------
AND SUBLETTING below, Tenant shall not, without the prior written consent of
Landlord, (1) advertise that any portion of the Premises is available for lease,
(2) assign,
transfer, or encumber this Lease or any estate or interest
herein whether directly or by operation of law, (3) if Tenant
is an entity other than a corporation whose stock is publicly
traded, permit the transfer of an ownership interest in Tenant
so as to result in a change in the current control of Tenant,
(4) sublet any portion of the Premises, (5) grant any license,
concession, or other right of occupancy of any portion of the
Premises, or (6) permit the use of the Premises by any parties
other than Tenant (any of the events listed in Sections
9.(a)(2) through 9.(a)(6) being a "Transfer"). If Tenant
requests Landlord's consent to a Transfer, then Tenant shall
provide Landlord with a written description of all terms and
conditions of the proposed Transfer, copies of the proposed
documentation, and the following information about the
proposed transferee: name and address; reasonably satisfactory
information about its business and business history; its
proposed use of the Premises; and general references
sufficient to enable Landlord to determine the proposed
transferee's reputation and character. Landlord shall respond
in writing to Tenant's request for a Transfer within ten (10)
business days of receipt of written request therefor. Tenant
shall reimburse Landlord for its attorneys' fees (not to
exceed $1,000 per request) and other expenses incurred in
connection with considering any request for its consent to a
Transfer. Landlord shall not unreasonably withhold, delay or
condition its consent except that Landlord may withhold or
condition its consent if it reasonably determines that the
proposed transferee or its use (including not by limitation
the number of employees, hours of operation, parking
requirements, electrical or other Building system
requirements, conflicts or competition with existing tenants)
is unacceptable, would burden the Building, or are
incompatible with the Building or its occupants. If Landlord
consents to a proposed Transfer, then the proposed transferee
shall deliver to Landlord a written agreement whereby it
expressly assumes the Tenant's obligations hereunder; however,
any transferee of less than all of the space in the Premises
shall be liable only for obligations under this Lease that are
properly allocable to the space subject to the Transfer, and
only to the extent of the rent it has agreed to pay Tenant
therefor. Landlord's consent to a Transfer shall not release
Tenant from performing its obligations under this Lease, but
rather Tenant and its transferee shall be jointly and
severally liable therefor. Landlord's consent to any Transfer
shall not waive Landlord's rights as to any subsequent
Transfers. If an Event of Default occurs while the Premises or
any part thereof are subject to a Transfer, then Landlord, in
addition to its other remedies, may collect directly from such
transferee all rents becoming due to Tenant and apply such
rents against Rent. Tenant authorizes its transferees to make
payments of rent directly to Landlord upon Tenant's receipt of
notice from Landlord to do so; however, Landlord shall not be
obligated to accept separate Rent payments from any
transferees and may require that all Rent be paid directly by
Tenant.
(i) Permitted Transfers. Tenant shall be permitted to
-------------------
periodically sublet portions of the Premises or to assign its
rights to any parent or wholly-owned subsidiary entity, any
organization resulting from a merger or a consolidation with
the Tenant, or any organization succeeding to the business
assets of the Tenant, provided the Premises continue to be
used solely for the Permitted Use, the business and parking
requirements of the subtenant or assignee are substantially
the same as Tenant and the net worth of the subtenant or
assignee is at least $100,000,000. Tenant shall promptly
notify Landlord in writing within ten (10) days after such
assignment or subletting.
(b) Additional Compensation. Tenant shall
pay to Landlord, immediately upon receipt thereof, all
compensation received by Tenant for a Transfer that exceeds
the Rent allocable to the portion of the Premises covered
thereby. Tenant shall hold such amounts in trust for Landlord
and pay them to Landlord within ten (10) days after receipt.
(c) Cancellation. Landlord may, within
twenty (20) days after submission of Tenant's written request
for Landlord's consent to a Transfer (excluding Permitted
Transfers), cancel this Lease (or, as to a subletting or
assignment, cancel as to the portion of the Premises proposed
to be sublet or assigned) as of the date the proposed Transfer
was to be effective. If Landlord cancels this Lease as to any
portion of the Premises, then this Lease shall cease for such
portion of the Premises and Tenant shall pay to Landlord all
Rent accrued through the cancellation date relating to the
portion of the Premises covered by the proposed Transfer, all
unamortized tenant improvements and unamortized brokerage
commissions (amortized on a straight-line basis over the
initial Term of the Lease) paid or payable by Landlord in
connection with this Lease to the brokerage firms listed in
Section 23. (d) that are allocable to such portion of the
Premises. Thereafter, Landlord may lease such portion of the
Premises to the prospective transferee (or to any other
person) without liability to Tenant. In such event, prior to
the effective date of such termination, and subject to
Landlord's direction and supervision, Tenant shall be solely
responsible for the cost and construction of a wall demising
the remaining Premises from the portion of the Premises as to
which the Lease is terminated.
INSURANCE; 10. (a) Insurance. Tenant shall at its expense procure and maintain
WAIVERS; --------- throughout the Term the following insurance policies: (1)
comprehensive general liability SUBROGATION; insurance in amounts of not less
than a combined single limit of $2,000,000 (the INDEMNITY "Initial Liability
Insurance Amount") or such other amounts as Landlord may from time
- ----------------------------------- to time reasonably require, insuring Tenant,
Landlord, Landlord's agents, and their respective affiliates against all
liability for injury to or death of a person or persons or damage to property
arising from the use and occupancy of the Premises, and (2) insurance covering
the full value of Tenant's property and improvements, and other property
(including property of others), in the Premises. Tenant's insurance shall
provide primary coverage to Landlord when any policy issued to Landlord provides
duplicate or similar coverage, and in such circumstance Landlord's policy will
be excess over Tenant's policy. Tenant shall furnish certificates of such
insurance and such other evidence satisfactory to Landlord of the maintenance of
all insurance coverage required hereunder, and Tenant shall obtain a written
obligation on the part of each insurance company to notify Landlord at least
thirty (30) days before cancellation or a material change of any such insurance.
All such insurance policies shall be in form, and be issued by companies,
reasonably satisfactory to Landlord. The term "affiliate" shall mean any person
or entity which, directly or indirectly, controls, is controlled by, or is under
common control with the party in question.
(b) Waiver of Claims; No Subrogation. Neither
Landlord nor Tenant shall have any liability to the other for
any damage or injury to the property of Landlord or Tenant,
including the Building and Tenant Improvements in the
Premises, arising from or caused by any cause customarily
insured against under a standard fire and extended casualty
insurance policy, even if caused by the negligence of
Landlord, Tenant, or their shareholders, partners, officers,
or employees, and no insurer shall have any rights to
subrogation with respect to the foregoing. Landlord shall not
be liable or responsible to Tenant for any loss or damage to
any property or person occasioned by theft, fire, casualty,
vandalism, acts of God, public enemy, injunction, riot,
strike, inability to procure materials, insurrection, war,
court order, requisition or order of governmental body or
authority, or for any other causes beyond Landlord's control.
All goods, property or personal effects stored or placed by
Tenant in or about the Building or Premises shall be at the
sole risk of Tenant.
(c) Indemnity. Each party shall indemnify
and hold harmless the other from and against any and all
claims, demands, liabilities, causes of action, suits,
judgments, and expenses (including attorney's fees) arising
from and for injury to third persons or damage of property
owned by third persons and caused by the negligence or
intentional torts of the indemnifying party.
SUBORDINATION; 11. (a) Subordination. This Lease shall be subordinate to any
deed of trust, ------------- ATTORNMENT; mortgage, or other security instrument
(a "Mortgage"), or any ground lease, -------- master NOTICE TO lease, or primary
lease (a "Primary Lease"), that now or ------- ----- hereafter covers all or any
LANDLORD'S part of the Premises (the mortgagee under any Mortgage or the lessor
under any Primary MORTGAGEE Lease is referred to herein as "Landlord's
- ---------- Mortgagee"). Landlord shall use reasonable efforts to obtain from
- --------- Landlord's Mortgagee, both existing and future, and deliver to Tenant
a non-disturbance agreement for the benefit of Tenant in a form reasonably
acceptable to Landlord, Landlord's Mortgagee, and Tenant.
(b) Attornment. Tenant shall attorn to any
party succeeding to Landlord's interest in the Premises,
whether by purchase, foreclosure, deed in lieu of foreclosure,
power of sale, termination of lease, or otherwise, upon such
party's request, and shall execute such agreements confirming
such attornment as such party may reasonably request.
(c) Notice to Landlord's Mortgagee. Tenant
shall not seek to enforce any remedy it may have for any
default on the part of the Landlord without first giving
written notice by certified mail, return receipt requested,
specifying the default in reasonable detail, to any Landlord's
Mortgagee whose address has been given to Tenant, and
affording such Landlord's Mortgagee a period to perform
Landlord's obligations hereunder, which period shall equal the
cure period applicable to Landlord hereunder.
RULES AND 12. Tenant shall comply with the rules and regulations of
the Building which are REGULATIONS attached hereto as Exhibit
B. Landlord may, from time to time, change such rules and
regulations for the safety, care, or cleanliness of the
Building and related facilities, provided that such changes
are applicable to all tenants of the Building and will not
unreasonably interfere with Tenant's use of the Premises.
Tenant shall be responsible for the compliance with such rules
and regulations by its employees, agents, and invitees.
CONDEMNATION 13. (a) Taking - Landlord's and Tenant's Rights. If any part of the
Project
---------------------------------------
(including parking) is taken by right of eminent domain for a period exceeding
ninety (90) days or conveyed in lieu thereof (a "Taking"), and such Taking
prevents Tenant from conducting
------
its business from the Premises in a manner reasonably comparable to that
conducted immediately before such Taking, then Landlord may, at its expense,
relocate Tenant to similar office space within any Comparable Building owned or
under the control of Landlord. Landlord shall notify Tenant of its intention to
do so within thirty (30) days after the Taking. Rent shall be abated on a
reasonable basis as to that portion of the Premises rendered untenantable by the
Taking until relocation. Such relocation may be for a portion of the remaining
Term or the entire Term. Landlord shall complete any such relocation within 180
days after Landlord has notified Tenant of its intention to relocate Tenant. If
Landlord does not elect to relocate Tenant following such Taking, then Tenant
may terminate this Lease as of the date of such Taking by giving written notice
to Landlord within sixty (60) days after the Taking, and Rent shall be
apportioned as of the date of such Taking. If Landlord does not relocate Tenant
and Tenant does not terminate this Lease, then Rent shall be abated on a
reasonable basis as to that portion of the Premises rendered untenantable by the
Taking. Upon the occurrence of a Taking, Rent shall be adjusted on a reasonable
basis from the first day of the Taking until
such termination.
(b) Taking - Landlord's Rights. If any
material portion, but less than all, of the Project or related
parking becomes subject to a Taking, or if Landlord is
required to pay any of the proceeds received for a Taking to
Landlord's Mortgagee, then this Lease, at the option of
Landlord, exercised by written notice to Tenant within thirty
(30) days after such Taking, shall terminate and Rent shall be
apportioned as of the date of such Taking. Upon the occurrence
of a Taking, Rent shall be adjusted on a reasonable basis from
the first day of the Taking until such termination.
(c) Award. If any Taking occurs, all
proceeds shall belong to and be paid to Landlord, and Tenant
shall not be entitled to any portion thereof except that
Tenant shall have all rights permitted under the laws of the
State of Texas to appear, claim and prove in proceedings
relative to such taking (i) the value of any fixtures,
furnishings, and other personal property which are taken but
which under the terms of this Lease Tenant is permitted to
remove at the end of the Term, (ii) the unamortized cost (such
costs having been amortized on a straight-line basis over the
Term excluding any renewal terms) of Tenant's leasehold
improvements which are taken that Tenant is not permitted to
remove at the end of the Term and which were installed solely
at Tenant's expense (i.e., not made or paid for by Landlord
from the Construction Allowance or otherwise), and (iii)
relocation and moving expenses, but not the value of Tenant's
leasehold estate created by this Lease and only so long as
such claims in no way diminish the award Landlord is entitled
to from the condemning authority as provided hereunder.
FIRE OR OTHER 14. (a) Repair Estimate. If the Premises or the Building
are damaged by fire --------------- CASUALTY or other casualty (a
"Casualty"), Landlord shall, within sixty (60) days after -------- such
Casualty, deliver to Tenant a good faith estimate (the "Damage Notice") of
the time needed ------------- to repair or replace the damage caused by
such Casualty.
(b) Landlord's and Tenant's Rights. If a
material portion of the Premises or the Building is damaged by
Casualty such that Tenant is prevented from conducting its
business in the Premises in a manner reasonably comparable to
that conducted immediately before such Casualty and Landlord
estimates that the damage caused thereby cannot be repaired
within one hundred eighty (180) days after the date of
casualty, then Landlord may, at its expense, relocate Tenant
to similar office space within any Comparable Building owned
or under the control of Landlord. Landlord shall notify Tenant
of its intention to do so in the Damage Notice. Rent for the
portion of the Premises rendered untenantable by the damage
shall be abated on a reasonable basis from the date of damage
until relocation. Such relocation may be for a portion of the
remaining Term or the entire Term. Landlord shall complete any
such relocation within one hundred eighty (180) days after
Landlord has delivered the Damage Notice to Tenant. If
Landlord does not elect to relocate Tenant following such
Casualty, then Tenant may terminate this Lease by delivering
written notice to Landlord of its election to terminate within
thirty (30) days after the Damage Notice has been delivered to
Tenant. If Landlord does not relocate Tenant and Tenant does
not terminate this Lease, then (subject to Landlord's rights
under Section 14.(c)) Landlord shall repair the Building or
the Premises, as the case may be, as provided below. Upon the
occurrence of a Casualty, Rent for the portion of the Premises
rendered untenantable by the damage shall be abated on a
reasonable basis from the date of damage until the completion
of the repair or until such termination.
(c) Landlord's Rights. If a Casualty damages
a material portion of the Building, and Landlord makes a good
faith determination that restoring the Premises would be
uneconomical, or if Landlord is required to pay any insurance
proceeds arising out of the Casualty to Landlord's Mortgagee,
then Landlord may terminate this Lease by giving written
notice of its election to terminate within thirty (30) days
after the Damage Notice has been delivered to Tenant, and Rent
hereunder shall be abated as of the date of the Casualty.
(d) Repair Obligation. If neither party elects to terminate this Lease
-----------------
following a Casualty, then Landlord shall, within a reasonable time after such
Casualty, commence to repair the Building and the Premises and shall proceed
with reasonable diligence to restore the Building and Premises to substantially
the same condition as they existed immediately before such Casualty; however,
Landlord shall not be required to repair or replace any part of the furniture,
equipment, fixtures, and other improvements which may have been placed by, or at
the request of, Tenant or other occupants in the Building or the Premises, and
Landlord's obligation to repair or restore the Building or Premises shall be
limited to the extent of the insurance proceeds actually received by Landlord
for the Casualty in question.
EVENTS OF 15. Events of Default. Each of the following occurrences shall
-----------------
constitute an
DEFAULT "Event of Default" by Tenant:
----------------
(a) Tenant's failure to pay Rent, or any
other sums due from Tenant to Landlord under the Lease (or any
other lease executed by Tenant for space in the Building),
when due;
(b) Tenant's failure to perform, comply
with, or observe any other agreement or obligation of Tenant
under this Lease (or any other lease executed by Tenant for
space in the Building);
(c) The filing of a petition by or against Tenant (the term "Tenant" shall
include, for the purpose of this Section 15.(c), any guarantor of the Tenant's
obligations hereunder) (i) in any bankruptcy or other insolvency proceeding;
(ii) seeking any relief under any state or federal debtor relief law; (iii) for
the appointment of a liquidator or receiver for all or substantially all of
Tenant's property or for Tenant's interest in this Lease; or (iv) for the
reorganization or modification of Tenant's capital structure; and provided that
in the case of any of the foregoing which is filed against Tenant, the same is
not dismissed within ninety (90) days after it is filed;
(d) The admission by Tenant that it cannot meet its obligations as they become
due or the making by Tenant of an assignment for the benefit of its creditors;
and
(e) Tenant vacates the Premises or fails to
continuously operate its business at the Premises for a period
of ninety (90) days or more.
REMEDIES 16. (a) Landlord's Remedies. Upon any Event of Default by
Tenant, Landlord may, subject to any judicial process and
notice to the extent required by Title 4, Chapter 24 of the
Texas Property Code, as may be amended, in addition to all
other rights and remedies afforded Landlord hereunder or by
law or equity, take any of the following actions:
(i) Terminate this Lease by giving Tenant written notice thereof, in which
event, Tenant shall pay to Landlord the sum of (1) all Rent accrued hereunder
through the date of termination, (2) all amounts due under Section 15.(a), and
(3) an amount equal to (A) the total Rent that Tenant would have
been required to pay for the remainder of the Term discounted
to present value at a per annum rate equal to the "Prime Rate"
as published on the date this Lease is terminated by The Wall
Street Journal, Southwest Edition, in its listing of "Money
Rates", minus (B) the then present fair rental value of the
Premises for such period, similarly discounted; or
(ii) Terminate Tenant's right to possession of the Premises
without terminating this Lease by giving written notice
thereof to Tenant, in which event Tenant shall pay to Landlord
(1) all Rent and other amounts accrued hereunder to the date
of termination of possession, (2) all amounts due from time to
time under Section 15.(a), and (3) all Rent and other sums
required hereunder to be paid by Tenant during the remainder
of the Term, diminished by any net sums thereafter received by
Landlord through reletting the Premises during such period.
Landlord shall use reasonable efforts to relet the Premises on
such terms and conditions as Landlord in its sole discretion
may determine (including a term different from the Term,
rental concessions, and alterations to, and improvement of ,
the Premises); however, Landlord shall not be obligated to
relet the Premises before leasing other portions of the
Building. Landlord shall not be liable for, nor shall Tenant's
obligations hereunder be diminished because of, Landlord's
failure to relet the Premises or to collect rent due for such
reletting. Tenant shall not be entitled to the excess of any
consideration obtained by reletting over the Rent due
hereunder. Re-entry by Landlord in the Premises shall not
affect Tenant's obligations hereunder for the unexpired Term;
rather, Landlord may, from time to time, bring action against
Tenant to collect amounts due by Tenant, without the necessity
of Landlord's waiting until the expiration of the Term. Unless
Landlord delivers written notice to Tenant expressly stating
that it has elected to terminate this Lease, all actions taken
by Landlord to exclude or dispossess Tenant of the Premises
shall be deemed to be taken under this Section 16.(a)(ii). If
Landlord elects to proceed under this Section 16.(a)(ii), it
may at any time elect to terminate this Lease under Section
16.(a)(i).
(iii) Notwithstanding anything to the contrary herein, Tenant shall not be
deemed to have waived any requirements of Landlord to mitigate damages upon an
Event of Default as required by law.
(b) Tenant's Remedies.
(i) Notice and Cure. If Landlord should fail to
---------------
perform or observe any covenant, term, provision or condition
of this Lease and such default should continue beyond a period
of ten (10) days as to a monetary default or thirty (30) days
(or such longer period as is reasonably necessary to remedy
such default, provided Landlord shall diligently pursue such
remedy until such default is cured) as to a non-monetary
default, after in each instance written notice thereof is
given by Tenant to Landlord and Landlord's Mortgagee, then, in
any such event Tenant shall have the right (but no obligation)
to cure the default, and Landlord shall reimburse Tenant for
all reasonable sums expended in so curing said default. Tenant
specifically agrees that Landlord's Mortgagee may enter the
Premises upon reasonable notice to Tenant to cure any such
default and that the cure of any default by Landlord's
Mortgagee shall be deemed a cure by Landlord under this Lease.
(ii) Set-off. If Tenant obtains a judgment against ------- Landlord or any
assignee for any default by Landlord under this Lease and (i) Tenant provided
Landlord's Mortgagee notice and opportunity to cure as described in Section
16(b)(i) above, (ii) said judgment is final and all rights of appeal have been
exercised or have expired, and (iii) such judgment remains unsatisfied upon
thirty (30) days written notice thereof to Landlord's Mortgagee, Tenant may set
off such judgment against Rent.
PAYMENT; 17. (a) Payment. Upon any Event of Default by Tenant, Tenant shall pay
to -------
NON-WAIVER Landlord all costs incurred by Landlord (including court costs and
reasonable attorney's fees
and expenses) in (1) obtaining possession of the Premises, (2)
removing and storing Tenant's or any other occupant's
property, (3) repairing, restoring, altering, remodeling, or
otherwise putting the Premises into condition acceptable to a
new tenant, (4) if Tenant is dispossessed of the Premises and
this Lease is not terminated, reletting all or any part of the
Premises (including brokerage commissions, cost of tenant
finish work, and other costs incidental to such reletting),
(5) performing Tenant's obligations which Tenant failed to
perform, and (6) enforcing, or advising Landlord of, its
rights, remedies, and recourses arising out of the Event of
Default.
(b) No Waiver. Acceptance or payment of Rent
following any Event of Default shall not waive any rights
regarding such Event of Default. No waiver by any party of any
violation or breach of any of the terms contained herein shall
waive any rights regarding any future violation of such term
or violation of any other term.
LANDLORD'S INTENTIONALLY DELETED
LIEN
SURRENDER OF 19. No act by Landlord shall be deemed an acceptance of a surrender
of the PREMISES Premises, and no agreement to accept a surrender of the Premises
shall be valid unless the same is made in writing and signed by Landlord. At the
expiration or termination of this Lease, subject to Landlord's obligation to
maintain the Building, Tenant shall deliver to Landlord the Premises with all
improvements located thereon in good repair and condition, reasonable wear and
tear (and condemnation and fire or other casualty damage not caused by Tenant,
as to which Sections 13 and 14 shall control) excepted, and shall deliver to
Landlord all keys and/or access cards to the Premises. Provided that Tenant has
performed all of its obligations hereunder, Tenant may remove all unattached
trade fixtures, furniture, and personal property placed in the Premises by
Tenant (but Tenant shall not remove any such item which was paid for, in whole
or in part, by Landlord). Additionally, Tenant may remove such additional items
as Landlord may have agreed. Tenant shall repair all damage caused by removal of
any items. All items not so removed shall be deemed to have been abandoned by
Tenant and may be appropriated, sold, stored, destroyed, or otherwise disposed
of by Landlord without notice to Tenant and without any obligation to account
for such items. The provisions of this Section 19 shall survive the end of the
Term.
HOLDING OVER 20. If Tenant fails to vacate the Premises at the end of
the Term, then Tenant shall be a tenant at will and, in
addition to all other damages and remedies to which Landlord
may be entitled for such holding over, Tenant shall pay, in
addition to the other Rent, a daily Basic Rental equal to the
greater of (a) 150% of the daily Basic Rental payable during
the last month of the Term, or (b) the then prevailing market
rental rate for leases then being entered into for similar
space in Comparable Buildings.
CERTAIN RIGHTS 21. Provided that the exercise of such rights does not
unreasonably interfere with RESERVED BY Tenant's occupancy of the Premises, and
upon reasonable advance notice provided by LANDLORD Landlord to Tenant (except
in case of emergency), Landlord shall have the following rights:
(a) to decorate and to make inspections,
repairs, alterations, additions, changes, or improvements,
whether structural or otherwise, in and about the Building, or
any part thereof; for such purposes, to enter upon the
Premises and, during the continuance of any such work, to
temporarily close doors, entryways, public space, and
corridors in the Building; to interrupt or temporarily suspend
Building services and facilities (Landlord shall use
reasonable efforts to complete any work requiring the
suspension of Building services and facilities during
off-business hours when reasonably and commercially
practicable to do so); and to change the arrangement and
location of entrances or passageways, doors, and doorways,
corridors, elevators, stairs, restrooms, or other public parts
of the Building;
(b) to take such reasonable measures as
Landlord deems advisable for the security of the Building and
its occupants, including without limitation searching all
items entering or leaving the Building; evacuating the
Building for cause, suspected cause, or for drill purposes;
temporarily denying access to the Building; and closing the
Building after normal business hours and on Saturdays,
Sundays, and holidays, subject, however, to Tenant's right to
enter when the Building is closed after normal business hours
under such reasonable regulations as Landlord may prescribe
from time to time which may include by way of example, but not
of limitation, that persons entering or leaving the Building,
whether or not during normal business hours, identify
themselves to a security officer by registration or otherwise
and that such persons establish their right to enter or leave
the Building;
(c) to change the name by which the Building is designated; and
(d) upon reasonable advance notice, to enter
the Premises during Tenant's regular business hours (or at any
time when accompanied by a representative of Tenant) to show
the Premises to prospective purchasers or lenders, and within
the last six months of the Term to show the Premises to
prospective tenants.
SUBSTITUTION 22. (a) From time to time during the Term, Landlord may
substitute for the SPACE Premises other substantially
comparable space that has an area at least equal but not
greater than 105% of that of the Premises and is located in
the Building or in any building located in International
Business Park which is owned or managed by Landlord or an
affiliate of Landlord (the "Substitution Space");
(b) If Landlord exercises such right by
giving Tenant notice thereof ("Substitution Notice") at least
60 days before the effective date of such substitution, then
(1) the description of the Premises shall be replaced by the
description of the Substitution Space; and (2) all of the
terms and conditions of this Lease shall apply to the
Substitution Space except that (A) if the then unexpired
balance of the Term shall be less than one year, then the Term
shall be extended so that the Term shall be one year from the
Substitution Effective Date (defined below), and (B) if the
Substitution Space contains more square footage than the
Premises, then the Basic Rental then in effect shall be
increased proportionately (provided that such increase shall
not exceed 105% of the Basic Rental due for the Premises) and
shall be subject to adjustment as herein provided. The
effective date of such substitution (the "Substitution
Effective Date") shall be the date specified in the
Substitution Notice or, if Landlord is required to perform
tenant finish work to the Substitution Space under Section
22.(c), then the date on which Landlord substantially
completes such tenant finish work. If Landlord is delayed in
performing the tenant finish work by Tenant's actions (either
by Tenant's change in plans and specifications for such work
or otherwise), then the Substitution Effective Date shall not
be extended and Tenant shall pay Rent for the Substitution
Space beginning on the date specified in the Substitution
Notice;
(c) Tenant may either accept possession of
the Substitution Space in its "as is" condition as of the
Substitution Effective Date or require Landlord to alter the
Substitution Space in the same manner as the Premises were
altered or were to be altered. Tenant shall deliver to
Landlord written notice of its election within ten (10) days
after the Substitution Notice has been delivered to Tenant. If
Tenant fails to timely deliver notice of its election or if an
Event of Default then exists, then Tenant shall be deemed to
have elected to accept possession of the Substitution Space in
its "as is" condition. If Tenant timely elects to require
Landlord to alter the Substitution Space, then (1)
notwithstanding Section 22.(b), if the then unexpired balance
of the Term is less than three years, then the Term shall be
extended so that it continues for three years from the
Substitution Effective Date, and (2) Tenant shall continue to
occupy the Premises (upon all of the terms of this Lease)
until the Substitution Effective Date;
(d) Tenant shall move from the Premises into
the Substitution Space and shall surrender possession of the
Premises as provided in Section 19 by the Substitution
Effective Date. If Tenant occupies the Premises after the
Substitution Effective Date, then Tenant's occupancy of the
Premises shall be a tenancy at will (and, without limiting all
other rights and remedies available to Landlord, including
instituting a forcible detainer suit), Tenant shall pay Basic
Rental for the Premises as provided in Section 20 and all
other Rent due therefor until such occupancy ends; such
amounts shall be in addition to the Rent due for the
Substitution Space; and
(e) If Landlord exercises its substitution
right, then Landlord shall reimburse Tenant for Tenant's
reasonable out-of-pocket expenses for moving Tenant's
furniture, equipment, supplies , telephone equipment,
telephone lines, computer lines, wiring, data circuits,
special wiring, and lieberts units. from the Premises to the
Substitution Space and for reprinting Tenant's stationery of
the same quality and quantity of Tenant's stationery supply on
hand immediately prior to Landlord's notice to Tenant of the
exercise of this relocation right. If the Substitution Space
contains more square footage than the Premises, and if the
Premises were carpeted, Landlord shall supply and install an
equal amount of carpeting of the same or equivalent quality
and color.
MISCELLANEOUS 23. (a) Landlord Transfer. Landlord may transfer, in whole or in
part, the ----------------- Project and any of its rights under this Lease. If
Landlord assigns its rights under this Lease and such assignee assumes
Landlord's obligations hereunder, then Landlord shall thereby be released from
any further obligations hereunder.
(b) Landlord's Liability. The liability of Landlord to Tenant for any
--------------------
default by Landlord under the terms of this Lease shall be limited to Tenant's
actual direct, but not consequential, damages therefor and shall be recoverable
from the interest of Landlord in the Project (including any rents, profits, or
other proceeds therefrom), and Landlord shall not be personally liable for any
deficiency. This section shall not be deemed to limit or deny any remedies which
Tenant may have in the event of default by Landlord hereunder which do not
involve the personal liability of Landlord.
(c) Force Majeure. Other than for Tenant's
monetary obligations under this Lease and obligations which
can be cured by the payment of money (e.g., maintaining
insurance), whenever a period of time is herein prescribed for
action to be taken by either party hereto, such party shall
not be liable or responsible for, and there shall be excluded
from the computation for any such period of time, any delays
due to strikes, riots, acts of God, shortages of labor or
materials, war, governmental laws, regulations, or
restrictions, or any other causes of any kind whatsoever which
are beyond the control of such party.
(d) Brokerage. Landlord and Tenant each
warrant to the other that it has not dealt with any broker or
agent in connection with the negotiation or execution of this
Lease, other than Trammell Crow D/FW and Colliers
International, whose commissions shall be paid by Landlord.
Tenant and Landlord shall each indemnify the other against all
costs, expenses, attorneys' fees, and other liability for
commissions or other compensation claimed by any broker or
agent claiming the same by, through, or under the indemnifying
party.
(e) Estoppel Certificates. From time to
time, either Landlord or Tenant shall furnish, within ten (10)
business days after request therefor, a signed certificate
confirming and containing such factual certifications and
representations as to this Lease as the requesting party may
reasonably request.
(f) Notices. All notices and other
communications given pursuant to this Lease shall be in
writing and shall be (1) mailed by first class, United States
Mail, postage prepaid, certified, with return receipt
requested, and addressed to the parties hereto at the address
specified in the Basic Lease Information, (2) hand delivered
to the intended address, or (3) sent by prepaid telegram,
cable, facsimile transmission, or telex followed by a
confirmatory letter. Notice sent by certified mail, postage
prepaid, shall be effective three business days after being
deposited in the United States Mail; all other notices shall
be effective upon delivery to the address of the addressee.
The parties hereto may change their addresses by giving notice
thereof to the other in conformity with this provision.
(g) Separability. If any clause or provision
of this Lease is illegal, invalid, or unenforceable under
present or future laws, then the remainder of this Lease shall
not be affected thereby and in lieu of such clause or
provision, there shall be added as a part of this Lease a
clause or provision as similar in terms to such illegal,
invalid, or unenforceable clause or provision as may be
possible and be legal, valid, and enforceable.
(h) Amendments; and Binding Effect. This
Lease may not be amended except by instrument in writing
signed by Landlord and Tenant. No provision of this Lease
shall be deemed to have been waived by Landlord or Tenant
unless such waiver is in writing signed by Landlord or Tenant,
and no custom or practice which may evolve between the parties
in the administration of the terms hereof shall waive or
diminish the right of Landlord or Tenant to insist upon the
performance by Landlord or Tenant in strict accordance with
the terms hereof. The terms and conditions contained in this
Lease shall inure to the benefit of and be binding upon the
parties hereto, and upon their respective successors in
interest and legal representatives, except as otherwise herein
expressly provided. This Lease is for the sole benefit of
Landlord and Tenant, and, other than Landlord's Mortgagee, no
third party shall be deemed a third party beneficiary hereof.
(i) Quiet Enjoyment. Provided Tenant has
performed all of the terms and conditions of this Lease to be
performed by Tenant, Tenant shall peaceably and quietly hold
and enjoy the Premises for the Term, without hindrance from
Landlord or any party claiming by, through, or under Landlord,
subject to the terms and conditions of this Lease.
(j) Joint and Several Liability. If there is
more than one Tenant, then the obligations hereunder imposed
upon Tenant shall be joint and several. If there is a
guarantor of Tenant's obligations hereunder, then the
obligations hereunder imposed upon Tenant shall be the joint
and several obligations of Tenant and such guarantor, and
Landlord need not first proceed against Tenant before
proceeding against such guarantor nor shall any such guarantor
be released from its guaranty for any reason whatsoever.
(k) Use of Lobby and/or Common Areas. During the term, and only
--------------------------------
on
weekends, holidays, and between the hours of 6:00 p.m. and
7:00 a.m. on weekends (other than holidays), Tenant shall have
the right to use the building lobby and/or common areas,
without charge, for any Tenant-sponsored special event,
provided (a) Tenant gives Landlord reasonable prior written
notice of the date, time and nature of the event, (b) the date
and time of the event do not conflict with another previously
scheduled event, (c) Tenant reimburses Landlord for all
out-of-pocket expenses Landlord incurs in connection with the
event, (d) Tenant indemnifies and holds Landlord harmless from
and against any and all claims, actions, damages or liens
resulting from Tenant's use of lobby and/or common areas,
including any reasonable attorney's fees incurred by Landlord,
(e) Tenant complies in all respects with applicable law, (f)
Landlord approves, in its sole discretion, all aspects of
Tenant's intended use of the Building lobby and/or common
areas, and (g) Tenant shall not use the Building lobby and/or
common areas for such events for more than twelve (12) days in
any calendar year.
(l) Captions. The captions contained in this Lease are for convenience
-------- of reference only, and do not limit or enlarge the terms and
conditions of this Lease.
(m) No Merger. There shall be no merger of
the leasehold estate hereby created with the fee estate in the
Premises or any part thereof if the same person acquires or
holds, directly or indirectly, this Lease or any interest in
this Lease and the fee estate in the leasehold Premises or any
interest in such fee estate.
(n) No Offer. The submission of this Lease
to Tenant shall not be construed as an offer, nor shall Tenant
have any rights under this Lease unless Landlord executes a
copy of this Lease and delivers it to Tenant.
(o) Exhibits. The following exhibits hereto are incorporated herein by
--------
this reference:
Exhibit A - Outline of Premises
Exhibit A-1 - Legal Description of
the Land Exhibit B - Building Rules
and Regulations Exhibit C -
Operating Expenses Exhibit D -
Tenant Finish Work: Plans Exhibit
D-1 - Plans/Specifications Exhibit E
- Renewal Option Exhibit F - Parking
Exhibit G - Janitorial
Specifications Exhibit H - Signage
Criteria
(o) Entire Agreement. This Lease constitutes
the entire agreement between Landlord and Tenant regarding the
subject matter hereof and supersedes all oral statements and
prior writings relating thereto. Except for those set forth in
this Lease, no representations, warranties, or agreements have
been made by Landlord or Tenant to the other with respect to
this Lease or the obligations of Landlord or Tenant in
connection therewith.
(p) Representations and Warranties. Landlord and Tenant each represent
- ------------------------------
and warrant that the person executing this Lease on its behalf is acting in his
or her capacity as an officer or partner, as applicable, with due authorization
and authority to bind Landlord or Tenant, as applicable, to this Lease. Landlord
represents and warrants that it has good title to the Project so to fully and
properly lease the Premises to Tenant as provided herein. Landlord represents
and warrants that the Project conforms in all material respects to all
applicable laws, ordinances, rules and regulations generally applicable to
commercial office buildings in Plano, Texas, as of the date hereof. Further,
Landlord represents and warrants that, to Landlord's knowledge, the Project
contains no hazardous substances as currently defined under applicable law,
except those used in the operation of the Building and which are being used in
compliance with applicable law. Other than any express warranties contained
herein, neither Landlord nor Tenant make any implied warranties of any kind or
nature, and the parties hereby waive any claims upon any such implied
warranties.
DATED as of the date first above written.
LANDLORD: TENANT:
CB PARKWAY BUSINESS CENTER II, LTD., ETHOS COMMUNICATIONS CORP.
a Texas limited partnership
By: 14BCO, Inc., general partner
By:
By:
Name:
- ---------
Name:
Title:
Title:
<PAGE>
DAL02:136713.10
EXHIBIT A
OUTLINE OF THE PREMISES
<PAGE>
EXHIBIT A-1
LEGAL DESCRIPTION OF THE LAND
BEING a 7.1557 acre tract of land situated in the Mary A. Taylor Survey,
Abstract No. 897 and the Edwin Allen Survey, Abstract No. 8, City of Plano,
Collin County, Texas and being part of that certain tract of land conveyed to
Crow-Billingsley #30, Ltd. as recorded in Volume 1690, Page 296 and further
being part of that certain tract of land conveyed to Henry Billingsley as
recorded in Collin County Clerk #95-0067322 Deed Records, Collin County, Texas
and being more particularly described as follows:
COMMENCING at a point for corner in the center line of Midway Road (100'
R.O.W.), said corner also being in the South line of International Parkway (110'
R.O.W.);
THENCE South 89 degrees 3 minutes 56 seconds East, departing said center line, a
distance of 1135.46 feet to a point for corner at the beginning of a curve to
the right having a central angle of 04 degrees 40 minutes 24 seconds, a radius
of 945.00 feet, a tangent of 38.56 feet and a chord bearing and distance of
South 86 degrees 43 minutes 34 seconds East, 77.06 feet;
THENCE along said curve to the right and along the said south line of
International Parkway, an arc distance of 77.08 feet to a 5/8" iron set for the
POINT OF BEGINNING of the above mentioned 7.1557 acre tract;
THENCE continuing along said curve to the right and along said South line of
International Parkway, said curve having a central angle of 22 degrees 24
minutes 51 seconds, a radius of 945.00, a tangent of 187.24 feet and a chord
bearing and distance of South 73 degrees 07 minutes 11 seconds East, 367.33
feet, and an arc distance of 369.69 feet to a 5/8" iron rod set for corner;
THENCE South 00 degrees 25 minutes 34 seconds West, departing said South line
and along the East line of said 7.1557 acre tract, a distance of 836.11 feet to
a 5/8" iron rod set for corner in the North line of the Kansas City South
Railroad Company (150' R.O.W.);
THENCE North 84 degrees 38 minutes 45 seconds West, along said North line, a
distance of 353.10 feet to a 5/8" iron rod set for corner, said corner being the
Southwest corner of said 7.1557 acre tract;
THENCE North 00 degrees 23 minutes 14 seconds East, along the West line of said
tract, a distance of 909.43 feet to the POINT OF BEGINNING and containing
311,702 square feet or 7.1557 acres of land, more or less, and also being all of
those certain tracts of land conveyed to CB PARKWAY BUSINESS CENTER II, LTD. by
Crow-Billingsley #30 and Henry Billingsley as recorded in Collin County Clerk
#97-0018434 and 97-0018433 Deed Records, Collin County, Texas, respectively.
<PAGE>
EXHIBIT B
BUILDING RULES AND REGULATIONS
The following rules and regulations shall apply to the Project and the
appurtenances thereto:
1. Sidewalks, doorways, vestibules, halls, stairways, and other similar
areas shall not be obstructed by tenants or used by any tenant for purposes
other than ingress and egress to and from their respective leased premises and
for going from one to another part of the Building.
2. Plumbing, fixtures and appliances shall be used only for the
purposes for which designed, and no sweepings, rubbish, rags or other unsuitable
material shall be thrown or deposited therein. Damage resulting to any such
fixtures or appliances from misuse by a tenant or its agents, employees or
invitees, shall be paid by such tenant.
3. No signs, advertisements or notices shall be painted or affixed on
or to any windows or doors or other part of the Building without the prior
written consent of Landlord. No nails, hooks or screws (other than those which
are necessary to hang paintings, prints, pictures, or other similar items on the
Premises' interior walls) shall be driven or inserted in any part of the
Building except by Building maintenance personnel. No curtains or other window
treatments shall be placed between the glass and any Building standard window
treatments.
4. Landlord shall provide and maintain an alphabetical directory for all tenants
in the main lobby
of the Building.
5. Landlord shall provide all door locks in each tenant's leased
premises, at the cost of such tenant, and no tenant shall place any additional
door locks in its leased premises without Landlord's prior written consent.
Landlord shall furnish to each tenant three keys to such tenant's leased
premises free of charge, with additional keys provided at such tenant's cost,
and no tenant shall make a duplicate thereof. Security Building access cards
shall be provided by Landlord to tenants after receipt of a $10.00 deposit per
card.
6. Movement in or out of the Building of furniture or office equipment,
or dispatch or receipt by tenants of any bulky material, merchandise or
materials which require use of elevators or stairways, or movement through the
Building entrances or lobby, shall be conducted so not to unreasonably interfere
with the use of the Building by Landlord and other tenants, and if reasonably
required by Landlord, under its supervision and control. Tenant assumes all
risks of and shall be liable for all damage to articles moved and injury to
persons or public engaged or not engaged in such movement, including equipment,
property and personnel of Landlord if damaged or injured as a result of acts in
connection with carrying out this service for such tenant.
7. All damage to the Building caused by the installation, placement, or
removal of any property of a tenant, or done by a tenant's property while in the
Building, shall be repaired at the expense of such tenant. No tenant shall be
liable for any damage resulting solely from the weight of any items placed in
the Building by such tenant provided such items do not, in the aggregate, exceed
the building weight loads specified by Landlord.
8. Corridor doors, when not in use, shall be kept closed. Nothing shall
be swept or thrown into the corridors, halls, elevator shafts or stairways. No
birds or animals other than animals assisting the disabled shall be brought into
or kept in, on or about any tenant's leased premises. No portion of any tenant's
leased premises shall at any time be used or occupied as sleeping or lodging
quarters.
9. Tenant shall cooperate with Landlord's employees in keeping the
Building and its leased premises neat and clean. Tenants shall not employ any
person for the purpose of such cleaning other than the Building's cleaning and
maintenance personnel.
10. To ensure orderly operation of the Building, no ice, mineral or
other water, towels, newspapers, etc. shall be delivered to any leased area
except by persons approved by Landlord.
11. Tenant shall not make or permit any improper, objectionable or
unpleasant noises or odors in the Building or otherwise interfere in any way
with other tenants or persons having business with them.
12. No machinery of any kind (other than normal office equipment) shall
be operated by any tenant on its leased area without Landlord's prior written
consent, nor shall any tenant use or keep in the Building any flammable or
explosive fluid or substance not approved in writing in advance by Landlord.
13. Landlord will not be responsible for lost or stolen personal
property, money or jewelry from tenant's leased premises or public or common
areas regardless of whether such loss occurs when the area is locked against
entry or not.
14. In the event any vending machines are maintained in the Building
for common use by all tenants, no vending or dispensing machines of any kind may
be maintained in any leased premises without the prior written permission of
Landlord, which consent shall not be unreasonably delayed, withheld or
conditioned. Any vending machines contained in any leased premises shall be for
the sole use of the applicable tenant, its employees and guests.
15. All mail chutes located in the Building shall be available for use
by Landlord and all tenants of the Building according to the rules of the United
States Postal Service.
16. No smoking of any type is permitted in any portion of the Building,
including any portion thereof leased by tenants. Landlord shall designate
smoking areas outside of the Building.
17. No firearms or weapons of any type are permitted upon the Land or within the
Project.
18. While at the Project, Tenant, its employees, agents and guests
shall behave in a manner consistent with that expected in a Class A office
building located in North Dallas.
19. Tenant shall notify Landlord before holding an event in a common area of the
Project or serving alcohol.
<PAGE>
EXHIBIT C
OPERATING EXPENSES
1. Tenant shall pay from time to time an amount (the "Excess")
calculated by multiplying (a) the amount by which the Basic Cost (defined
below), divided by the Total Rentable Square Feet, exceeds $5.50 (the "Expense
Stop"), by (b) the Rentable Square Feet. The Excess may be calculated and
collected annually in arrears on a calendar year basis and, in such event, shall
be due within thirty (30) days after Landlord furnishes to Tenant a written
statement (the "Annual Operating Statement") reflecting the Basic Cost for the
calendar year (as may be adjusted as provided herein) and calculating the
Excess, if any. Said statement shall be furnished by April 1 immediately
following the applicable calendar year, or as soon thereafter as practicable.
Alternatively, Excess may be estimated and collected monthly and then reconciled
against Basic Costs at calendar year end. In such event, Landlord shall make and
notify Tenant of its good faith estimate of the Excess for the applicable
calendar year (or part thereof), whereafter, Tenant shall pay to Landlord, in
advance on the first day of each calendar month of such year (or part thereof),
an amount equal to the estimated Excess divided by 12 (or such lesser number of
months as applicable). From time to time during any calendar year, Landlord may
re-estimate the Excess for that calendar year and the monthly installments of
Excess payable by Tenant shall be adjusted accordingly so that, by the end of
the calendar year in question, Tenant shall have paid the full Excess as
estimated by Landlord for such year. The Basic Cost (other than the first year
in which the Building is occupied) and Expense Stop shall be prorated for any
portion of the Term which is less than a full calendar year.
2. The term "Basic Cost" shall mean all expenses and disbursements of
every kind (subject to the limitations set forth below) which Landlord incurs,
pays or becomes obligated to pay in connection with the ownership, operation,
and maintenance of the Project (including the associated parking facilities),
determined in accordance with generally accepted federal income tax basis
accounting principles consistently applied, including but not limited to the
following:
(a) Wages and salaries of all employees engaged on-site in the
Project in the operation, repair, replacement, maintenance, landscaping and
security of the Project, including taxes, insurance and benefits relating
thereto, such costs to be allocated based on the relative rentable square
footage of the buildings directly managed by these personnel if they are
providing services to multiple buildings;
(b) All supplies and materials used in the operation, maintenance,
landscaping, repair, replacement, and security of the Project;
(c) Annual cost of all capital improvements made to the
Project which although capital in nature can reasonably be expected to reduce
the normal operating costs of the Project, as well as all capital improvements
made in order to comply with any law hereafter promulgated by any governmental
authority, as amortized over the useful economic life of such improvements as
determined in accordance with generally accepted federal income tax basis
accounting principles consistently applied;
(d) Cost of all utilities, other than the cost of utilities
paid directly by Tenant or actually reimbursed to Landlord by Tenant or other
Building tenants (including Tenant under Section 4 (b) of the Lease);
(e) Cost of any insurance or insurance related expense applicable to the Project
and Landlord's personal property used in connection therewith;
(f) All taxes and assessments and governmental charges whether
federal, state, county or municipal, and whether they be by taxing or management
districts or authorities presently taxing or by others, subsequently created or
otherwise, and any other taxes and assessments attributable to the Project (or
its operation), excluding, however, federal and state taxes on income
(collectively, "Taxes") (and Landlord shall make reasonable and diligent
efforts, as deemed necessary or appropriate in Landlord's reasonable discretion,
to contest property valuations and otherwise minimize Taxes which may include
retaining a tax consultant to assist in determining the fair tax valuation of
the Project and protesting any unfair valuations, with all associated costs
being a Basic Cost). Notwithstanding the above, if the present method of
taxation changes so that in lieu of the whole or any part of any Taxes levied on
the Project, there is levied on Landlord a capital tax directly on the rents
received therefrom or a franchise tax, assessment, or charge based, in whole or
in part, upon such rents for the Building, then all such taxes, assessments, or
charges, or the part thereof so based, shall be deemed to be included within the
term "Taxes" for the purposes hereof;
(g) Cost of repairs, replacements, and general maintenance of the Project, other
than replacement of the roof, foundation and exterior walls of the Building;
(h) Cost of service or maintenance contracts with independent
contractors for the operation, maintenance, landscaping, repair, replacement, or
security of the Project (including, without limitation, alarm service, window
cleaning, and elevator maintenance);
(i) A management fee, which may be paid to Landlord or any affiliates thereof,
as a percentage of the gross scheduled rent of the Building;
(j) Costs for landscaping and maintaining the medians within
the Park, such costs to be allocated based on a fraction of which the numerator
is the linear footage of frontage of the Project to International Parkway and
the denominator which is the total linear footage of frontage in the Park
bounded by the medians;
(k) Security for the Project, such costs to be allocated to
each building based on relative rentable square footage when multiple buildings
are covered by one contract; and
(l) A pro rata portion of the salary and benefits (including
taxes and insurance) of the employees located off-site at Landlord's corporate
offices providing services to the Project, such costs to be allocated among all
buildings managed by such employees based on rentable square footage.
Any Basic Cost incurred in connection with any work performed,
or services provided, to or for the benefit of one or more of the buildings
located in the office park of which the Project is a part and commonly referred
to as the International Business Park shall be allocated between all such
buildings, including the Building, on a per square foot of rentable area basis.
There are specifically excluded from the definition of the term "Basic Cost"
costs (1) for capital improvements made to the Project, other than capital
improvements described in Section 2.(c) above and except for items which, though
capital for accounting purposes, are properly considered maintenance and repair
items, such as painting of common areas, replacement of carpet in elevator
lobbies, and the like; (2) for repair, replacements and general maintenance paid
by proceeds of insurance or by Tenant or other third parties, and alterations
attributable solely to tenants of the Building other than Tenant; (3) for
interest, amortization or other payments on loans to Landlord; (4) for
depreciation of the Building; (5) for leasing commissions; (6) for legal
expenses, other than those incurred for the general benefit of the Building's
tenants (e.g., tax disputes); (7) for renovating or otherwise improving space
for occupants of the Building or vacant space in the Building; (8) for
correcting defects in the construction of the Building; (9) for overtime or
other expenses of Landlord in curing defaults or performing work expressly
provided in this Lease to be borne at Landlord's expense; (10) for federal
income taxes imposed on or measured by the income of Landlord from the operation
of the Project; (11) repairs or replacements necessitated by Landlord's gross
negligence or willful misconduct; (12) amounts reimbursed to Landlord pursuant
to any warranty or by any other tenant or third party; (13) reserves for future
expenses; (14) late charges or penalties incurred as a result of Landlord's
failure to pay any bills or charges when due; (15) general overhead of Landlord
(not including any goods or services used or provided directly for the benefit
of the Project); (16) amounts incurred to remediate any hazardous substances as
defined by applicable environmental law unless caused in whole or in part by
Tenant, its officers, employees, agents, contractors or customers; and (17) for
rent or other payment due under any ground lease for any or all the Land.
3. The Annual Operating Expense Statement shall include a statement of
Landlord's actual Basic Cost for the previous year adjusted as provided in
Section 4 of this Exhibit. If Tenant has paid estimated Excess and the Annual
Operating Expense Statement reveals that Tenant paid more for Basic Cost than
the actual Excess in the year for which such statement was prepared, then
Landlord shall credit or reimburse Tenant for such excess within thirty (30)
days after delivery of the Annual Operating Expense Statement; conversely, if
Tenant paid less than the actual Excess, then Tenant shall pay Landlord such
deficiency within thirty (30) days after delivery of the Annual Operating
Expense Statement.
4. With respect to any calendar year or partial calendar year in which
the Building is not occupied to the extent of 95% of the rentable area thereof,
the Variable Basic Costs (defined below) for such period shall, for the purposes
hereof, be increased to the amount which would have been incurred had the
Building been occupied to the extent of 95% of the rentable area thereof. As
used herein, "Variable Basic Costs" means any Basic Cost that is variable in
correlation with the level of occupancy of the Building.
EXHIBIT D
TENANT FINISH-WORK: PLANS
<PAGE>
DAL02:136713.10
1. Except as set forth in this Exhibit, Tenant accepts the Premises in their "as
is" condition on the date that this Lease is entered into.
2. On or before January 13, 1999, Landlord shall provide to Tenant for its
approval final working drawings, prepared in accordance with the Space Plans
approved by Tenant and attached hereto as Exhibit "D-1", of all improvements
that Landlord proposes to install in the Premises; such working drawings shall
include the partition layout, ceiling plan, electrical outlets and switches,
telephone outlets, drawings for any modifications to the mechanical and plumbing
systems of the Building, and detailed plans and specifications for the
construction of the improvements called for under this Exhibit in accordance
with all applicable governmental laws, codes, rules, and regulations. Landlord
shall require Tenant's written approval of such plans within three (3) business
days after delivery to Tenant. Further, if any of Tenant's proposed construction
work will affect the Building's heating, ventilation and air conditioning,
electrical, mechanical, or plumbing systems, then the working drawings
pertaining thereto shall be prepared by the Building's engineer of record. As
used herein, "Working Drawings " shall mean the final working drawings provided
by Landlord, as amended from time to time by any approved changes thereto, and
"Work " shall mean all improvements to be constructed in accordance with and as
indicated on the Working Drawings. Landlord's preparation and delivery of the
Working Drawings shall not be a representation or warranty of Landlord that such
drawings are adequate for any use, purpose, or condition, or that such drawings
comply with any applicable law or code, but shall merely be the consent of
Landlord to the performance of the Work. Tenant shall, at Landlord's request,
sign the Working Drawings to evidence its review and approval thereof. All
changes in the Work must receive the prior written approval of Landlord. After
the Working Drawings have been approved, Landlord shall cause the Work to be
performed in accordance with the Working Drawings.
(c) If a delay in the performance of the Work occurs because of any change by
Tenant to the Space Plans or the Working Drawings, because of any specification
by Tenant of materials or installations in addition to or other than Landlord's
standard finish-out materials, or if Tenant otherwise delays completion of the
Work, then, notwithstanding any provision to the contrary in this Lease,
Tenant's obligation to pay Basic Rental and Tenant's share of Excess and
Electrical Costs hereunder shall commence on the scheduled Commencement Date. If
the Premises are not ready for occupancy and the Work is not substantially
completed (as reasonably determined by Landlord) on the scheduled Commencement
Date for any reason other than the reasons specified in the immediately
preceding sentence, then the obligations of Landlord and Tenant shall continue
in full force and Basic Rental and Tenant's share of Excess and Electrical Costs
shall be abated until the date the Work is substantially completed, which date
shall be the Commencement Date.
4. Landlord shall bear the entire cost of performing the Work depicted on the
Space Plans initially submitted to and approved by Tenant. Tenant shall bear the
entire additional costs incurred by Landlord in performing the Work because of
an event specified in clauses , , or of this Exhibit. Tenant shall pay Landlord
an amount equal to 50% of the estimated additional costs of any change to the
Space Plans or the Working Drawings at the time of such change; Tenant shall pay
to Landlord the remaining portion of additional costs incurred in performing the
Work because of an event specified in clauses , , or of this Exhibit upon
Substantial Completion of the Work and before Tenant occupies the Premises to
conduct business therein.
5. To the extent not inconsistent with this Exhibit, Section 7 of this Lease
shall govern the performance of the Work and the Landlord's and Tenant's
respective rights and obligations regarding the improvements installed pursuant
thereto.
<PAGE>
EXHIBIT E
RENEWAL OPTION
1. Provided no Event of Default exists and Tenant (or any permitted or
approved assignee or subtenant) is occupying the entire Premises at the time of
such election, Tenant may renew this Lease for one (1) additional period of five
(5) years on the same terms provided in this Lease (except as set forth below),
by delivering written notice of the exercise thereof to Landlord not later than
twelve (12) months before the expiration of the initial Term. On or before the
expiration of the initial Term, Landlord and Tenant shall execute an amendment
to this Lease extending the Term on the same terms provided in this Lease,
except as follows:
(a) The Basic Rental payable for each month during each such extended Term shall
be as
provided below;
(b) Tenant shall have no further renewal options unless expressly granted by
Landlord in writing; and
2. Basic Rental during the extended Term shall be equal to the then
prevailing market rate for leases then being renewed or for new leases of second
generation space then being entered into of equivalent quality, size, utility
and location in Comparable Buildings, with the length of the extended Term, the
credit standing of the Tenant, and any tenant inducements (e.g., tenant
improvement allowance) taken into account.
3. Tenant's rights under this Exhibit shall terminate if (a) this Lease
or Tenant's right to possession of the Premises is terminated, (b) Tenant
wrongfully assigns any of its interest in this Lease or wrongfully sublets any
portion of the Premises, or (c) Tenant fails to timely exercise its option under
this Exhibit, time being of the essence with respect to Tenant's exercise
thereof.
<PAGE>
EXHIBIT F
PARKING
Landlord shall provide and Tenant shall be permitted the non-exclusive
use of one parking space for every 247 square feet of Rentable Square Feet
during the initial Term at no cost. Such parking shall be located in the parking
area associated with the Project (the "Parking Area") and shall be unassigned.
<PAGE>
EXHIBIT G
JANITORIAL SPECIFICATIONS
6.JANITORIAL SERVICE SPECIFICATIONS FOR TENANT SUITES, COMMON AREAS ON
TENANT-OCCUPIED FLOORS AND TENANT COMPUTER ROOMS.
(a) Nightly Services
(1) All surface areas, desks, file cabinets, counter tops, book shelves,
credenzas, computer screens and other equipment will be dusted. Desk tops will
be wiped down but no papers will be moved. All ashtrays and urns will be emptied
and wiped.
(2) All carpeted areas will be vacuumed. Carpets will be spot cleaned where
needed. All hard surface floors will be swept with a dust mop then damp mopped.
(3) All trash receptacles will be emptied and wiped down. Liners will be changed
whenever necessary. Garbage will be taken to the designated areas for trash
removal. (4) All magazines will be straightened. Glass top desks, glass doors,
partitions, light switches and walls will be cleaned to remove smudges and
fingerprints.
(5) All stairwells will be vacuumed and swept as well as dusted. (6) The
elevator will be vacuumed and fingerprints removed from wall surfaces. (7) All
kitchen countertops, tables and cupboard doors in break rooms will be cleaned
and disinfected. Hand prints and smudges will be removed from the exterior of
the refrigerator as well as any other appliances. Microwaves will be cleaned
inside and out. Sinks and other chrome areas will be cleaned and polished. (8)
Mugs, plates and glasses will be placed in the dishwasher and washed only if
they are placed in the break room sink by company employees. Dishes will not be
removed from the dishwasher. (9) All fixtures and appliances in the restrooms
will be cleaned and sanitized. All chrome and mirrors will be cleaned and
polished.
(10) All commodes and urinals will be cleaned with a germicidal
disinfectant. The use of an
- ----
emulsion bowl cleaner will be used whenever necessary.
(11) Restroom floors will be cleaned using a germicidal disinfectant.
- ----
(12) Light bulbs will be replaced as needed.
- ----
(b) Weekly Services
(1) All pictures and door frames will be dusted.
- ---
(2) Partitions and walls in the restrooms will be completely
wiped down with a germicidal
- ---
disinfectant.
(3) All VCT floors will be buffed.
- ---
c. Monthly Services
i. All mini-blinds and A/C vents will be dusted.
ii. All interior windows will be cleaned.
iii. All VCT floors will be waxed (more often as
necessary).
d. Quarterly Services
i. All exterior windows will be cleaned.
<PAGE>
EXHIBIT H
SIGNAGE CRITERIA
SIGN CRITERIA
The purpose of this sign criteria is to create a graphic environment that is
individual and distinctive in identity for the Tenant and also compatible with
other signs on this and future buildings. The total concept should give an
impression of quality, professionalism and instill a good business image.
Lettering shall be well proportioned and its design, spacing and legibility
shall be a major criterion for approval.
The following specifications are to be used for the design of your sign;
however, in all cases, final written approval must be obtained from the lessor
prior to the manufacturing or installation of any signage. Lessor shall make all
final and controlling determinations concerning any questions of interpretations
of this sign policy.
NOTICE: Written approval and conformance with these specifications does not
imply conformance with local City and County sign ordinances. Please have your
sign company check with local authorities to avoid non-compliance with local
codes.
Exterior Signs
A. REQUIRED SIGNS
1. Tenant shall be requested to identify its premises by erecting
one (1) sign which shall be attached directly to the building
parapet as described hereinafter.
B. TYPE OF SIGN
1. Internally illuminated acrylic faced, individual letters raceway mounted on
building face. Letters shall appear black when not illuminated, white when
illuminated.
C. SIZE OF SIGN
1. Placement: All signs shall be designed to fit entirely within a horizontal
band 48 inches high, from 12 inches below the top of parapet to 60 inches below
the top of parapet, ascending and descending characters included.
2. Sign locations for individual tenants are to be as agreed with Owner. Maximum
allowable areas per building elevation:
North elevation, north wing (aggregate): 67.5' maximum length, 180 sf. area
North elevation, south wing (aggregate): 67.5' maximum length, 180 sf. area
East elevation, north wing (aggregate):135.0' maximum length, 360 sf. area
East elevation, south wing (aggregate):225.0' maximum length, 600 sf. area
West elevation, north wing (aggregate):225.0' maximum length, 600 sf. area
3. Depth - 6" minimum, or as required to diffuse neon stroke
for uniform appearance.
4. Height - not to exceed 40" . Multiple Rows - not to exceed 40" in total
height including spaces between rows; Minimum Letter Size - 10" .
D. TYPE OF SIGN
1. Any style (block or script) may be used. Upper and lower case letters are
allowed. Lessor will have final review over height increases for script letters.
2. Logos in addition to signage must be approved. They must be proportionate to
height of parapet and sign and in same color as signage.
3. Box type signs will not be permitted.
E. COLOR OR SIGN
1. Signs are to appear black when not illuminated,
and white when illuminated.
2. Face is to be Rohm & Haas Plexiglass. Color permitted: as
required to provide day black/night
white effect.
3. Returns: Flat Black.
4. Trim Cap: 1" Flat Black Jewel Lite.
F. CONSTRUCTION OF LETTERS
1. Individual channel letters up to 40" high to have 1/8"
plexiglass faces.
2. Returns: .063 aluminum gauge (minimum).
3. Backs: .080 aluminum gauge (minimum).
4. No armor plate or wood in the manufactured returns may be used
5. Letter fabrication to be welded. Riveted construction not
acceptable.
G. ILLUMINATION AND WIRING
1. All signs must be UL labeled.
2. Illumination shall be with 15mm and 30mm 6500 degree white
neon tubing, and shall be uniform. Provide number of neon
strokes adequate to provide uniform lighting across width and
length of letter stroke.
3. Secondary Wiring - All transformers and secondary wiring are
to be concealed behind parapets or
within ceiling plenum.
4. Electrical power shall be brought to required location at Tenant's expense.
Routing and location of conduit and other required items shall not be visible on
front of parapet.
5. Final electrical connection of sign to transformer box will be performed by a
licensed electrician approved by Landlord. Sign timer controls for all tenants
to be set per Landlord requirements.
H. PLACEMENT AND INSTALLATION
1. General Notes
a. Letters are to be located on signage area of building
as determined by Landlord.
b. Attachment of signage to meet U.L. Standards. No
exposed wiring is permitted.
c. All fasteners used are to be non-corrosive.
d. Tenant will be responsible for all damage to the
building incurred during sign
installation or removal.
e. Tenant submittals for lighting approval shall
indicate methods of attachment to
building face. Tenants should be aware that building
face is 8" concrete tilt wall.
I. SUBMITTAL FOR APPROVAL
1. Prior to awarding a contract for fabrication and installation,
Tenant shall submit three (3)
-----
sealed drawings for final review and approval to:
Billingsley Property Services
Texas Commerce Tower
2200 Ross Avenue, Suite 4800 West
Dallas, Texas 75201
Attention: Becky Rowland, Property Manager
2. Elevation of building fascia and sign shall be drawn using a
minimum 1/4" = 1' - 0" scale.
3. Drawing shall indicate the following specifications: Type,
color and thickness of plexiglass, type of materials, finish
used on return, type of illumination and mounting method.
Tenant's sign contractor shall first visit the site to verify
existing conditions prior to preparation of shop drawings,
information needed to prepare submittals shall also be
obtained during the visit.
4. Drawings must include fascia cross section showing electrical
connections.
J. PERMITS
1. All City permits and approvals from the landlord are required
prior to sign fabrication.
K. WINDOW SIGNS
1. No window signs are permitted.
L. MONUMENT SIGNS
1. Tenants shall provide identification signs per Owner's
criteria for mounting on monument sign.
2. All single-tenant buildings, signs shall be 10" high metal
letters with black baked-on gloss finish, in Universe 67
letter style.
3. At multi-tenant buildings, signs shall be 6" high metal letters with black
baked-on gloss finish, in Universe 67 letter style.
M. SECONDARY ENTRY SIGNS
1. Not allowed.
N. THE FOLLOWING ARE NOT PERMITTED:
1. Roof signs or box signs
2. Cloth signs hanging in front of business
3. Exposed seam tubing
4. Animated or moving components
5. Intermittent or flashing illumination
6. Iridescent painted signs
7. Letters mounted or painted directly on illuminated panels
8. Signs or letters painted directly on any surface except
as herein provided
9. The names, stamps or decals of manufacturers or installers
shall not be visible except for
technical data (if any) required by governing authorities.
Interior Signs
A. Interior signs identifying fixed building elements, and two building
directions identifying Tenant Names
and Suite Numbers, will be provided by Landlord.
1. Signs Included:
a. Building Directory (Lobby)
b. Building Directory (South Vestibule)
c. Suite Number Identification
d. Stair Identification
e. Toilet Room Identification
f. Identification of Mechanical Spaces
g. Emergency Egress Directions
B. Tenant Identification signs for suite entries are to be provided by each
tenant. These are to be wall mounted adjacent to entrance doors. Sign size and
location shall comply with all local codes and ordinances, as well as ADA/TAS.
1. Size: 24 inches high maximum; 48 inches wide maximum; 4 sf. maximum overall,
as defined by a rectangle surrounding a regularly shaped sign, or as defined in
the case of an irregularly shaped sign by a rectilinear perimeter of not more
than eight (8) straight lines enclosing the extreme limits of any figure or
character.
2. Color: At tenant's option subject to approval by Landlord.
3. Illumination: Not Allowed. 4. Content: Text and logos acceptable, subject to
size limitations.
C. Tenant signs within tenant space provided by tenant if desired. Size, color,
configuration, illumination and content at Tenant's option subject to approval
by Landlord.
July 23, 1997
DAL02:136713.10
TABLE OF CONTENTS
Basic Lease Information
Page
Lease Date iii
Tenant iii
Tenant's Address iii
Tenant's Contact iii
Landlord iii
Landlord's Address iii
Landlord's Contact iii
Premises iii
Term iii
Basic Rental iii
Security Deposit iii
Rent iii
Permitted Use iii
Tenant's Proportionate Share iii
Construction Allowance iv
Comparable Buildings iv
Lease Agreement
Definitions and Basic Provisions 1
Lease Grant 1
Term 1
Rent 1
Security Deposit 2
Landlord's Obligations 2
Improvements; Alterations; Repairs; Maintenance 4
Use 5
Assignment and Subletting 6
Insurance; Waivers; Subrogation; Indemnity 7
Subordination; Attornment; Notice to Landlord's Mortgagee 7
Rules and Regulations 8
Condemnation 8
Fire or Other Casualty 9
Events of Defaul 9
Remedies 10
Payment; Non-Waiver 11
Landlord's Lien 11
Surrender of Premises 12
Holding Over 12
Certain Rights Reserved by Landlord 12
Substitution Space 13
Miscellaneous 14
Exhibits
Exhibit A Outline of the Premises
Exhibit A-1 Legal Description of the Land
Exhibit B Building Rules and Regulations
Exhibit C Operating Expenses
Exhibit D Tenant Finish Work: Plans
Exhibit D-1 Plans/Specifications
Exhibit E Renewal Option
Exhibit F Parking
Exhibit G Janitorial Specifications
Exhibit H Signage Criteria
List of Defined Terms
Page
ADA 4
Annual Electrical Cost Statement 1
Annual Operating Statement Exh. C
Basic Cost Exh. C
Basic Lease Information 1
BOMA iii
Building iii
Building Systems 3
Casualty 9
Commencement Date iii, 1
Comparable Buildings iv
Construction Hard Costs Exh. D
Construction Allowance iv, Exh. D
Controllable Expenses Exh. C
Damage Notice 9
Electrical Costs 1
Event of Default 9
Excess Exh. C
Expense Stop Exh. C
Initial Liability Insurance Amount 7
Land iii
Landlord iii, 1
Landlord's Mortgagee 8
Lease 1
Loss 6
Mortgage 7
Park iii
Parking Area Exh. F
Permitted Transfer 6
Premises iii
Primary Lease 7
Project iii
Rentable Square Feet iii
Rentable Square Foot iii
Security Deposit iv, 2
Shell Construction Exh. D
Substantial Completion Exh. D
Substitution Effective Date 12
Substitution Notice 12
Substitution Space 12
Taking 8
Taxes 2, Exh. C
Tenant iii, 1
Total Construction Costs Exh. D
Total Rentable Square Feet iii
Total Rentable Square Foot iii
Transfer 6
Work Exh. D
Working Drawings Exh. D
<PAGE>
BASIC LEASE INFORMATION
Lease Date: January________, 1999
Tenant: Ethos Communications Corp.
Tenant's Address: 6404 International Parkway, Suite
2200 Plano, Texas
75093
Contact: Robert W. Crull Telephone: 405-752-4473
Landlord: CB Parkway Business Center II, Ltd., a Texas limited
partnership
Landlord's Address: 2200 Ross Avenue, Suite 4800
West Dallas,
Texas 75201
Contact: Becky Rowland Telephone: (214)754-1751
Premises: Suite No.2200, in the office building (the "Building") located or to
be -------- located on the land described as International Business Park, Plano,
Collin County, Texas, and whose street address is 6404 International Parkway,
Plano, Texas 75093, as particularly described in Exhibit A-1 (the "Land"). The
- ---- Building and Land together comprise the "Project". The Premises are
outlined ------- on the plan attached to the Lease as Exhibit A and shall
contain approximately 3,349 square feet of rentable area ("Rentable Square Feet"
or singularly --------------------- "Rentable Square Foot"). The Building
contains approximately 117,654 of total --------------------- square feet of
rentable area ("Total Rentable Square Feet" or singularly
- -------------------------- "Total Rentable Square Foot"). As soon as reasonably
practicable, the --------------------------- rentable area shall be calculated
and confirmed by Landlord's architect utilizing the American National Standard
Method for Measuring Floor Area in Office Buildings, ANSI Z65.1 - 1996, as
adopted by the Building Owners and Managers Association International ("BOMA")
and the actual Rentable Square Feet, Total Rentable Square Feet and Tenant's
Proportionate Share shall be adjusted as necessary based upon such calculations.
In the event of any adjustment to Rentable Square Feet, Total Rentable Square
Feet or Tenant's Proportionate Share, Landlord and Tenant shall execute an
amendment to the Lease confirming the adjusted Rentable Square Feet, Total
Rentable Square Feet and Tenant's Proportionate Share.
Term: Commencing March 15, 1999 (the "Commencement Date"), and ending at 5:00
p.m. ----------------- March 31, 2005, subject to earlier termination and
extension as provided in the Lease.
<TABLE>
<S> <C> <C> <C>
Basic Rental: Months Annual Rate per Basic Monthly Rental
------ --------------------
Rentable Square Foot
1-72 $21.00 $5,860.75
</TABLE>
Security Deposit: $5,860.75 due upon execution of the Lease as referenced in
Section 5 of the Lease
Rent: Basic Rental, Tenant's share of Electrical Costs, Excess (if any), and all
other sums that Tenant may owe to Landlord under the Lease.
Permitted Use: General office use.
Tenant's 2.84648% (which is the percentage obtained by dividing the Rentable
Proportionate Share: Square Feet by the Total Rentable Square Feet; Tenant's
Proportionate Share is subject to adjustment upon confirmation of the Rentable
Square Feet and Total Rentable Square Feet as provided above)
Construction Allowance: Turn key per plans attached as Exhibit "D-1"
Comparable Buildings: As used herein or in the Lease,
the term "Comparable Buildings" shall mean
those low-rise garden style, multi-tenant,
commercial office buildings completed on or
after January 1, 1997, which are comparable
to the Building in size, design, quality,
use, and tenant mix, and which are located
in the same market area (i.e., Plano area
North of Frankford, East of I-35E, West of
Preston Road and South of State Hwy. 121).
The foregoing Basic Lease Information is incorporated into and made a part of
the related lease (the "Lease"). If any conflict exists between any Basic Lease
Information and the Lease, then the Lease shall control.
LANDLORD:
CB PARKWAY BUSINESS CENTER II, LTD.,
a Texas limited partnership
By: 14BCO, Inc., a Texas corporation, its
general partner
By:
Name:
Title:
TENANT:
ETHOS COMMUNICATIONS CORP.
By:
- ---
Name:
Title:
<PAGE>
THIS LEASE AGREEMENT (this "Lease") is entered into as of January
_____, 1999 between ----- CB PARKWAY BUSINESS CENTER II, LTD., a Texas
limited partnership ("Landlord"), and Ethos -------- Communications Corp.
("Tenant"). ------
DEFINITIONS 1. The definitions and basic provisions set forth in the Basic Lease
Information AND BASIC (the "Basic Lease Information") executed by Landlord and
Tenant contemporaneously
-----------------------
PROVISIONS herewith are incorporated herein by reference for all purposes. To
the extent of any conflict between the Basic Lease Information and any provision
contained in this Lease, this Lease shall control.
LEASE GRANT 2. Subject to the terms of this Lease, Landlord leases to Tenant,
and Tenant leases from Landlord, the Premises.
TERM 3. The Term shall commence March 15, 1999 (the "Commencement Date"), and
end at ----------------- 5:00 p.m. March 31, 2005 subject to adjustment due to
delays caused by Landlord as provided in Exhibit D or renewal as provided in
Exhibit E. Landlord shall deliver possession of the Premises to Tenant upon
execution hereof. By occupying the Premises, Tenant shall be deemed to have
accepted the Premises in their condition as of the date of such occupancy,
subject to Landlord's completion of any related punch-list items. Tenant shall
execute and deliver to Landlord, within ten (10) days after Landlord has
requested same, a letter confirming (1) the Commencement Date, (2) that Tenant
has accepted the Premises, and (3) that Landlord has performed all of its
obligations with respect to the Premises.
RENT 4. (a) Payment. Tenant shall timely pay to Landlord the Rent -------------
without deduction or set off (except as otherwise expressly provided herein), at
Landlord's Address (or such other address as Landlord may from time to time
designate in writing to Tenant). Basic Rental, adjusted as herein provided,
shall be payable monthly in advance. The first full monthly installment of Basic
Rental shall be payable contemporaneously with the execution of this Lease;
thereafter, monthly installments of Basic Rental shall be due on the first day
of each succeeding calendar month during the Term. Basic Rental for any partial
month at the beginning or end of the Term shall be prorated based upon the
number of days within the Term during the partial month multiplied by 1/365 of
the then current annual Basic Rental and shall be due on or before the fifth day
immediately preceding the Commencement Date, or first day of the last calendar
month of the Term, as applicable.
(b) Electrical Costs. Tenant shall pay to
Landlord an amount equal to the product of (1) the cost of all
electricity used by the Project ("Electrical Costs"),
multiplied by (2) Tenant's Proportionate Share. Such amount
shall be payable monthly based on Landlord's reasonable
estimate of the amount due for each month, and shall be due on
the Commencement Date and on the first day of each calendar
month thereafter.
(c) Annual Electrical Cost Statement. By
April 1 of each calendar year, or as soon thereafter as
practicable, Landlord shall furnish to Tenant a statement of
Landlord's actual Electrical Costs (the "Annual Electrical
Cost Statement") for the previous year adjusted as provided in
Section 4.(d), which shall include a reconciliation of the
actual amount Tenant owes for its share of Electrical Costs
against the estimated amount collected from Tenant. If such
reconciliation shows that Tenant paid more than owed, then
Landlord shall reimburse Tenant by check or cash for such
excess within thirty (30) days after delivery of the Annual
Electrical Cost Statement; conversely, if Tenant paid less
than it owed, then Tenant shall pay Landlord such deficiency
within thirty (30) days after delivery of the Annual
Electrical Cost Statement.
(d) Adjustments to Electrical Costs. With
respect to any calendar year or partial calendar year in which
the Building is not occupied to the extent of 95% of the
rentable area thereof, the Electrical Costs for such period
shall, for the purposes hereof, be increased to the amount
which would have been incurred had the Building been occupied
to the extent of 95% of the rentable area thereof.
(e) Delinquent Payment. If any payment required by Tenant under
------------------
this Lease is not paid when due, Landlord may charge Tenant a
fee equal to 5% of the delinquent payment to reimburse
Landlord for its cost and inconvenience incurred as a
consequence of Tenant's delinquency. In no event shall the
charges permitted under this section 4(e) or elsewhere in this
Lease, to the extent the same are considered to be interest
under applicable law, exceed the maximum lawful rate of
interest.
(f) Taxes. Tenant shall be liable for all
taxes levied or assessed against personal property, furniture,
or fixtures placed by Tenant in the Premises. If any taxes for
which Tenant is liable are levied or assessed against Landlord
or Landlord's property and Landlord elects to pay the same, or
if the assessed value of Landlord's property is increased by
inclusion of such personal property, furniture or fixtures and
Landlord elects to pay the taxes based on such increase, then
Tenant shall pay to Landlord, within ten (10) days of demand,
that part of such taxes for which Tenant is primarily liable.
(g) Excess. Tenant shall pay the Excess in the Basic Cost over
------
the Expense Stop as such terms are defined in Exhibit C.
SECURITY 5. Contemporaneously with the execution of this Lease, Tenant shall pay
to DEPOSIT Landlord, in immediately available funds, the Security Deposit, which
shall be held by Landlord without liability for interest and as security for
performance by Tenant of its obligations under this Lease. The Security Deposit
is not an advance payment of Rent or a measure or limit of Landlord's damages
upon an Event of Default (defined below). Landlord may, from time to time upon
notice to Tenant and without prejudice to any other remedy, use all or a part of
the Security Deposit to perform any obligation which Tenant was obligated, but
failed to perform hereunder. Following any such application of the Security
Deposit, Tenant shall pay to Landlord on demand the amount so applied in order
to restore the Security Deposit to its original amount. Within a reasonable time
after the expiration of the Term, as may have been extended, provided Tenant has
performed all of its obligations hereunder, Landlord shall return to Tenant the
balance of the Security Deposit not applied to satisfy Tenant's obligations. If
Landlord transfers its interest in the Premises, then Landlord may assign the
Security Deposit to the transferee and Landlord thereafter shall have no further
liability for the return of the Security Deposit.
LANDLORD'S 6. (a) Services; Maintenance. Landlord shall furnish to Tenant (1)
water
---------------------
OBLIGATIONS (hot and cold) at those points of supply provided for general use of
tenants of the Building; (2) heated and refrigerated air conditioning from 7
a.m. to 7 p.m. Monday through Friday and 7 a.m. to 1 p.m. on Saturday (except
for New Years Day. Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and the Friday following Thanksgiving Day and Christmas Day which days shall be
collectively referred to herein as Holidays) sufficient to maintain temperatures
during these hours in the range of from 70 degrees Fahrenheit to 78 degrees
Fahrenheit; (3) janitorial service to the Premises on weekdays other than
holidays (Landlord reserves the right to bill Tenant separately for extra
janitorial service required for any special improvements installed by or at the
request of Tenant) such janitorial services to be generally in accordance with
those services described on Exhibit G; (4) non-exclusive elevator for ingress
and egress to the floors on which the Premises are located; (5) replacement of
Building-standard light bulbs and fluorescent tubes, provided that Landlord's
standard charge for such bulbs and tubes shall be paid by Tenant; and (6)
electrical current (subject to Tenant's obligation to pay its share of
Electrical Costs as provided herein). If Tenant desires heat and air
conditioning at any time other than times herein designated, such services shall
be supplied to Tenant upon reasonable advance notice and Tenant shall pay to
Landlord $40.00 per hour (minimum two hours) for each additional hour (prorated
and rounded up to the nearest quarter hour) such services are provided, such
amount being payable within ten (10) days of receipt of an invoice therefor.
Landlord's obligation to furnish services under this Section shall be subject to
the rules, regulations and other conditions or requirements of the supplier of
such services
and any applicable governmental entity or agency.
(b) Maintenance. Landlord shall maintain all Shell Construction items,
-----------
Building Systems (defined below), and Building common areas including all
parking areas and landscaping, in good order and condition as customary for
Comparable Buildings. "Building Systems" shall include all electrical, plumbing,
and air conditioning systems within the Building which either were included in
the Shell Construction or which were installed by Tenant pursuant to this Lease
and which meet the following requirements: (i) properly approved by Landlord;
(ii) installed in conformance with all plans and specifications as approved by
Landlord; (iii) Tenant shall have informed Landlord in writing of the name,
address, phone number and contact person of the contractor responsible for the
installation of such system; (iv) Tenant shall have assigned in writing all
contractor's and manufacturer's warranties received by Tenant in connection with
such system; and (v) in connection with Tenant's contracting for the
installation thereof, Landlord shall have been expressly named as a third party
beneficiary to, and shall have been provided copies of, such contract and any
related warranties. Notwithstanding the foregoing, "Building Systems" shall not
include any improvements made to or within the Premises which differ from the
base building systems or are otherwise specialized to Tenant's use and occupancy
of the Premises and not customary for office tenants in Comparable Buildings.
(c) Excess Electrical Use. Landlord shall use reasonable
---------------------
efforts to furnish electrical current for computers,
electronic data processing equipment, special lighting, or
other equipment that requires more than 120 volts, or other
equipment whose electrical energy consumption exceeds normal
office usage, through any existing feeders and risers serving
the Building and the Premises. Tenant shall not install any
electrical equipment requiring special wiring or requiring
voltage in excess of 120 volts or otherwise exceeding Building
capacity unless approved in advance by Landlord. The use of
electricity in the Premises shall not exceed the capacity of
existing feeders and risers to or wiring in the Premises. Any
risers or wiring required to meet Tenant's excess electrical
requirements shall, upon Tenant's request, be installed by
Landlord (unless otherwise agreed by Landlord) at Tenant's
expense, if, in Landlord's sole and absolute judgment, the
same are necessary and shall not cause permanent damage or
injury to the Building or the Premises, cause or create a
dangerous or hazardous condition, entail excessive or
unreasonable alterations, repairs, or expenses, or interfere
with or disturb other tenants of the Building. If Tenant uses
machines or equipment (other than general office machines,
excluding computers and electronic data processing equipment)
in the Premises which affect the temperature otherwise
maintained by the air conditioning system or otherwise
overload any utility, Landlord may install supplemental air
conditioning units or other supplemental equipment in the
Premises, and the cost thereof, including the cost of
installation, operation, use, and maintenance, shall be paid
by Tenant to Landlord within ten (10) days after Landlord has
delivered to Tenant an invoice therefor. At the time of
Tenant's submission of plans and specifications for Landlord's
approval pursuant to Section 7 herein or Exhibit D to this
Lease, Landlord and Tenant shall cooperate in good faith to
identify any fixtures, equipment and/or appliances to be
installed or placed in the Premises which fixtures, equipment
or appliances would exceed the normal and customary electrical
use and consumption of typical office tenants in Comparable
Buildings, would affect the temperature otherwise maintained
by the air conditioning system, or would require electric
capacity in excess of any planned or existing feeders, risers,
or wiring to the Premises. Landlord shall install as part of
the original Tenant Improvements described in Exhibit "D" a
separate meter for the supplemental air conditioning unit in
Tenant's computer room.
(d) Restoration of Services; Abatement.
Landlord shall use reasonable efforts to restore any service
that becomes unavailable; however, such unavailability shall
not render Landlord liable for any damages caused thereby, be
a constructive eviction of Tenant, constitute a breach of any
implied warranty, or, except as provided in the next sentence,
entitle Tenant to any abatement of Tenant's obligations
hereunder. However, if Tenant is prevented from making
reasonable use of all or a portion of the Premises for more
than thirty (30) consecutive days because of the
unavailability of any such service, Tenant shall, as its
exclusive remedy therefor, be entitled to abatement of Rent,
or the pro rata portion thereof equivalent to the portion of
the Premises rendered unusable to the entire Premises, for
each consecutive day (after such thirty (30) day period) that
Tenant is so prevented from making reasonable use of the
Premises or the applicable portion thereof.
(e) Access. Subject to any Building rules
and regulations, necessary repairs and maintenance, and any
events beyond Landlord's reasonable control which would
prevent access, Tenant shall have access to the Premises
twenty-four (24) hours a day, seven (7) days a week. The
Building shall include twenty-four (24) hour access by
security card which cards shall be provided to Tenant upon
payment of a $10 refundable deposit per card.
IMPROVEMENTS; 7. (a) Improvements; Alterations. No improvements or alterations
in or ------------------------- ALTERATIONS; upon the Premises, including not by
limitation paint, wall coverings, floor coverings, light REPAIRS ; fixtures,
window treatments, signs, advertising, or promotional lettering or other media,
shall MAINTENANCE be installed or made by Tenant except in accordance with plans
and specifications which have been previously submitted to and approved in
writing by Landlord, which approval shall not be unreasonably withheld or
delayed except that Landlord may withhold approval of any improvements or
alterations which it determines, in its sole opinion, will materially and
adversely affect any structural or aesthetic (only to the extent visible from
outside the Premises or common areas) aspect of the Building or Building
Systems. All improvements and alterations (whether temporary or permanent in
character) made in or upon the Premises, either by Landlord or Tenant, shall (i)
comply with all applicable laws, ordinances, rules and regulations, and (ii) be
Landlord's property at the end of the Term and shall remain on the Premises
without compensation to Tenant unless prior to installation, Tenant provides
Landlord with written notice of all items which may be removed by Tenant and
Landlord consents to such removal in advance. Such consent shall not be
unreasonably withheld provided Landlord may condition such consent as it deems
reasonably necessary including not by limitation requiring Tenant to replace any
items upon removal with similar items comparable to any such items in the
Building or, if not applicable, then Comparable Buildings. Approval by Landlord
of any of Tenant's drawings and plans and specifications prepared in connection
with any improvements in the Premises shall not constitute a representation or
warranty of Landlord as to the adequacy or sufficiency of such drawings, plans
and specifications, or the improvements to which they relate, for any use,
purpose, or condition, but such approval shall merely be the consent of Landlord
as required hereunder. Landlord warrants and agrees that it shall complete the
Building Shell Construction in compliance with all then applicable governmental
laws, rules and regulations, including not by limitation the Americans with
Disabilities Act of 1990 ("ADA"). Thereafter, notwithstanding --- anything in
this Lease to the contrary, Tenant shall be responsible for all costs incurred
to cause the Premises to comply with any such laws, rules or regulations,
including not by limitation the retrofit requirements of ADA, as may be amended.
(b) Tenant Repairs; Maintenance. Except for
those janitorial services to be provided by Landlord as
expressly provided in this Lease, Tenant shall maintain its
personal property and all improvements or alterations to the
Premises other than those items included in Shell Construction
(which shall be maintained by Landlord) in a clean, safe,
operable, attractive condition, and shall not permit or allow
to remain any waste or damage to any portion of the Premises.
Tenant shall repair or replace, subject to Landlord's
direction and supervision, any damage to the Project caused by
Tenant or Tenant's agents, contractors, or invitees. If Tenant
fails to make such repairs or replacements within fifteen (15)
days after the occurrence of such damage, then Landlord, upon
written notice to Tenant, may make the same at Tenant's
expense, which shall be payable to Landlord within ten (10)
days after Landlord has delivered to Tenant an invoice
therefor.
(c) Performance of Work. All work described
in this Section 7 shall be performed only by Landlord or by
contractors and subcontractors approved in writing by
Landlord. Tenant shall cause all contractors and
subcontractors to procure and maintain insurance coverage
against such risks, in such amounts, and with such companies
as Landlord may reasonably require. All such work shall be
performed in accordance with all legal requirements and in a
good and workmanlike manner so as not to damage the Premises,
the structure of the Building, or plumbing, electrical lines,
or other utility transmission facilities or Building
mechanical systems. All such work which may affect the
Building's electrical, mechanical, plumbing or other systems
must be approved by the Building's engineer of record.
(d) Mechanic's Liens. Tenant shall not
permit any mechanic's liens to be filed against the Project
for any work performed, materials furnished, or obligation
incurred by or at the request of Tenant. If such a lien is
filed, then Tenant shall, within thirty (30) days after
Landlord has delivered notice of the filing to Tenant, either
pay the amount of the lien or diligently contest such lien and
deliver to Landlord a bond or other security reasonably
satisfactory to Landlord. If Tenant fails to timely take
either such action, then Landlord may pay the lien claim
without inquiry as to the validity thereof, and any amounts so
paid, including expenses and interest, shall be paid by Tenant
to Landlord within ten (10) days after Landlord has delivered
to Tenant an invoice therefor.
USE 8. Tenant shall occupy and use the Premises only for the Permitted Use and
shall comply with all laws, orders, rules, and regulations relating to the use,
condition, and occupancy of the Premises. The Premises shall not be used for (i)
any use which is disreputable, (ii) creates extraordinary fire hazards, (iii)
results in an increased rate of insurance on the Building or its contents, or
(iv) the storage of any hazardous materials or substances. If, because of
Tenant's acts, the rate of insurance on the Building or its contents increases,
Tenant shall pay to Landlord the amount of such increase on demand, and
acceptance of such payment shall not constitute a waiver of any of Landlord's
other rights. Tenant shall conduct its business and control its agents,
employees, and invitees in such a manner as not to create any nuisance or
interfere with other tenants or Landlord in its management of the Project.
ASSIGNMENT 9. (a) Transfers; Consent. Other than permitted transfers as
described
------------------
AND SUBLETTING below, Tenant shall not, without the prior written consent of
Landlord, (1) advertise that any portion of the Premises is available for lease,
(2) assign,
transfer, or encumber this Lease or any estate or interest
herein whether directly or by operation of law, (3) if Tenant
is an entity other than a corporation whose stock is publicly
traded, permit the transfer of an ownership interest in Tenant
so as to result in a change in the current control of Tenant,
(4) sublet any portion of the Premises, (5) grant any license,
concession, or other right of occupancy of any portion of the
Premises, or (6) permit the use of the Premises by any parties
other than Tenant (any of the events listed in Sections
9.(a)(2) through 9.(a)(6) being a "Transfer"). If Tenant
requests Landlord's consent to a Transfer, then Tenant shall
provide Landlord with a written description of all terms and
conditions of the proposed Transfer, copies of the proposed
documentation, and the following information about the
proposed transferee: name and address; reasonably satisfactory
information about its business and business history; its
proposed use of the Premises; and general references
sufficient to enable Landlord to determine the proposed
transferee's reputation and character. Landlord shall respond
in writing to Tenant's request for a Transfer within ten (10)
business days of receipt of written request therefor. Tenant
shall reimburse Landlord for its attorneys' fees (not to
exceed $1,000 per request) and other expenses incurred in
connection with considering any request for its consent to a
Transfer. Landlord shall not unreasonably withhold, delay or
condition its consent except that Landlord may withhold or
condition its consent if it reasonably determines that the
proposed transferee or its use (including not by limitation
the number of employees, hours of operation, parking
requirements, electrical or other Building system
requirements, conflicts or competition with existing tenants)
is unacceptable, would burden the Building, or are
incompatible with the Building or its occupants. If Landlord
consents to a proposed Transfer, then the proposed transferee
shall deliver to Landlord a written agreement whereby it
expressly assumes the Tenant's obligations hereunder; however,
any transferee of less than all of the space in the Premises
shall be liable only for obligations under this Lease that are
properly allocable to the space subject to the Transfer, and
only to the extent of the rent it has agreed to pay Tenant
therefor. Landlord's consent to a Transfer shall not release
Tenant from performing its obligations under this Lease, but
rather Tenant and its transferee shall be jointly and
severally liable therefor. Landlord's consent to any Transfer
shall not waive Landlord's rights as to any subsequent
Transfers. If an Event of Default occurs while the Premises or
any part thereof are subject to a Transfer, then Landlord, in
addition to its other remedies, may collect directly from such
transferee all rents becoming due to Tenant and apply such
rents against Rent. Tenant authorizes its transferees to make
payments of rent directly to Landlord upon Tenant's receipt of
notice from Landlord to do so; however, Landlord shall not be
obligated to accept separate Rent payments from any
transferees and may require that all Rent be paid directly by
Tenant.
(i) Permitted Transfers. Tenant shall be permitted to
-------------------
periodically sublet portions of the Premises or to assign its
rights to any parent or wholly-owned subsidiary entity, any
organization resulting from a merger or a consolidation with
the Tenant, or any organization succeeding to the business
assets of the Tenant, provided the Premises continue to be
used solely for the Permitted Use, the business and parking
requirements of the subtenant or assignee are substantially
the same as Tenant and the net worth of the subtenant or
assignee is at least $100,000,000. Tenant shall promptly
notify Landlord in writing within ten (10) days after such
assignment or subletting.
(b) Additional Compensation. Tenant shall
pay to Landlord, immediately upon receipt thereof, all
compensation received by Tenant for a Transfer that exceeds
the Rent allocable to the portion of the Premises covered
thereby. Tenant shall hold such amounts in trust for Landlord
and pay them to Landlord within ten (10) days after receipt.
(c) Cancellation. Landlord may, within
twenty (20) days after submission of Tenant's written request
for Landlord's consent to a Transfer (excluding Permitted
Transfers), cancel this Lease (or, as to a subletting or
assignment, cancel as to the portion of the Premises proposed
to be sublet or assigned) as of the date the proposed Transfer
was to be effective. If Landlord cancels this Lease as to any
portion of the Premises, then this Lease shall cease for such
portion of the Premises and Tenant shall pay to Landlord all
Rent accrued through the cancellation date relating to the
portion of the Premises covered by the proposed Transfer, all
unamortized tenant improvements and unamortized brokerage
commissions (amortized on a straight-line basis over the
initial Term of the Lease) paid or payable by Landlord in
connection with this Lease to the brokerage firms listed in
Section 23. (d) that are allocable to such portion of the
Premises. Thereafter, Landlord may lease such portion of the
Premises to the prospective transferee (or to any other
person) without liability to Tenant. In such event, prior to
the effective date of such termination, and subject to
Landlord's direction and supervision, Tenant shall be solely
responsible for the cost and construction of a wall demising
the remaining Premises from the portion of the Premises as to
which the Lease is terminated.
INSURANCE; 10. (a) Insurance. Tenant shall at its expense procure and maintain
WAIVERS; --------- throughout the Term the following insurance policies: (1)
comprehensive general liability SUBROGATION; insurance in amounts of not less
than a combined single limit of $2,000,000 (the INDEMNITY "Initial Liability
Insurance Amount") or such other amounts as Landlord may from time
- ----------------------------------- to time reasonably require, insuring Tenant,
Landlord, Landlord's agents, and their respective affiliates against all
liability for injury to or death of a person or persons or damage to property
arising from the use and occupancy of the Premises, and (2) insurance covering
the full value of Tenant's property and improvements, and other property
(including property of others), in the Premises. Tenant's insurance shall
provide primary coverage to Landlord when any policy issued to Landlord provides
duplicate or similar coverage, and in such circumstance Landlord's policy will
be excess over Tenant's policy. Tenant shall furnish certificates of such
insurance and such other evidence satisfactory to Landlord of the maintenance of
all insurance coverage required hereunder, and Tenant shall obtain a written
obligation on the part of each insurance company to notify Landlord at least
thirty (30) days before cancellation or a material change of any such insurance.
All such insurance policies shall be in form, and be issued by companies,
reasonably satisfactory to Landlord. The term "affiliate" shall mean any person
or entity which, directly or indirectly, controls, is controlled by, or is under
common control with the party in question.
(b) Waiver of Claims; No Subrogation. Neither
Landlord nor Tenant shall have any liability to the other for
any damage or injury to the property of Landlord or Tenant,
including the Building and Tenant Improvements in the
Premises, arising from or caused by any cause customarily
insured against under a standard fire and extended casualty
insurance policy, even if caused by the negligence of
Landlord, Tenant, or their shareholders, partners, officers,
or employees, and no insurer shall have any rights to
subrogation with respect to the foregoing. Landlord shall not
be liable or responsible to Tenant for any loss or damage to
any property or person occasioned by theft, fire, casualty,
vandalism, acts of God, public enemy, injunction, riot,
strike, inability to procure materials, insurrection, war,
court order, requisition or order of governmental body or
authority, or for any other causes beyond Landlord's control.
All goods, property or personal effects stored or placed by
Tenant in or about the Building or Premises shall be at the
sole risk of Tenant.
(c) Indemnity. Each party shall indemnify
and hold harmless the other from and against any and all
claims, demands, liabilities, causes of action, suits,
judgments, and expenses (including attorney's fees) arising
from and for injury to third persons or damage of property
owned by third persons and caused by the negligence or
intentional torts of the indemnifying party.
SUBORDINATION; 11. (a) Subordination. This Lease shall be subordinate to any
deed of trust, ------------- ATTORNMENT; mortgage, or other security instrument
(a "Mortgage"), or any ground lease, -------- master NOTICE TO lease, or primary
lease (a "Primary Lease"), that now or ------- ----- hereafter covers all or any
LANDLORD'S part of the Premises (the mortgagee under any Mortgage or the lessor
under any Primary MORTGAGEE Lease is referred to herein as "Landlord's
- ---------- Mortgagee"). Landlord shall use reasonable efforts to obtain from
- --------- Landlord's Mortgagee, both existing and future, and deliver to Tenant
a non-disturbance agreement for the benefit of Tenant in a form reasonably
acceptable to Landlord, Landlord's Mortgagee, and Tenant.
(b) Attornment. Tenant shall attorn to any
party succeeding to Landlord's interest in the Premises,
whether by purchase, foreclosure, deed in lieu of foreclosure,
power of sale, termination of lease, or otherwise, upon such
party's request, and shall execute such agreements confirming
such attornment as such party may reasonably request.
(c) Notice to Landlord's Mortgagee. Tenant
shall not seek to enforce any remedy it may have for any
default on the part of the Landlord without first giving
written notice by certified mail, return receipt requested,
specifying the default in reasonable detail, to any Landlord's
Mortgagee whose address has been given to Tenant, and
affording such Landlord's Mortgagee a period to perform
Landlord's obligations hereunder, which period shall equal the
cure period applicable to Landlord hereunder.
RULES AND 12. Tenant shall comply with the rules and regulations of
the Building which are REGULATIONS attached hereto as Exhibit
B. Landlord may, from time to time, change such rules and
regulations for the safety, care, or cleanliness of the
Building and related facilities, provided that such changes
are applicable to all tenants of the Building and will not
unreasonably interfere with Tenant's use of the Premises.
Tenant shall be responsible for the compliance with such rules
and regulations by its employees, agents, and invitees.
CONDEMNATION 13. (a) Taking - Landlord's and Tenant's Rights. If any part of the
Project
---------------------------------------
(including parking) is taken by right of eminent domain for a period exceeding
ninety (90) days or conveyed in lieu thereof (a "Taking"), and such Taking
prevents Tenant from conducting
------
its business from the Premises in a manner reasonably comparable to that
conducted immediately before such Taking, then Landlord may, at its expense,
relocate Tenant to similar office space within any Comparable Building owned or
under the control of Landlord. Landlord shall notify Tenant of its intention to
do so within thirty (30) days after the Taking. Rent shall be abated on a
reasonable basis as to that portion of the Premises rendered untenantable by the
Taking until relocation. Such relocation may be for a portion of the remaining
Term or the entire Term. Landlord shall complete any such relocation within 180
days after Landlord has notified Tenant of its intention to relocate Tenant. If
Landlord does not elect to relocate Tenant following such Taking, then Tenant
may terminate this Lease as of the date of such Taking by giving written notice
to Landlord within sixty (60) days after the Taking, and Rent shall be
apportioned as of the date of such Taking. If Landlord does not relocate Tenant
and Tenant does not terminate this Lease, then Rent shall be abated on a
reasonable basis as to that portion of the Premises rendered untenantable by the
Taking. Upon the occurrence of a Taking, Rent shall be adjusted on a reasonable
basis from the first day of the Taking until
such termination.
(b) Taking - Landlord's Rights. If any
material portion, but less than all, of the Project or related
parking becomes subject to a Taking, or if Landlord is
required to pay any of the proceeds received for a Taking to
Landlord's Mortgagee, then this Lease, at the option of
Landlord, exercised by written notice to Tenant within thirty
(30) days after such Taking, shall terminate and Rent shall be
apportioned as of the date of such Taking. Upon the occurrence
of a Taking, Rent shall be adjusted on a reasonable basis from
the first day of the Taking until such termination.
(c) Award. If any Taking occurs, all
proceeds shall belong to and be paid to Landlord, and Tenant
shall not be entitled to any portion thereof except that
Tenant shall have all rights permitted under the laws of the
State of Texas to appear, claim and prove in proceedings
relative to such taking (i) the value of any fixtures,
furnishings, and other personal property which are taken but
which under the terms of this Lease Tenant is permitted to
remove at the end of the Term, (ii) the unamortized cost (such
costs having been amortized on a straight-line basis over the
Term excluding any renewal terms) of Tenant's leasehold
improvements which are taken that Tenant is not permitted to
remove at the end of the Term and which were installed solely
at Tenant's expense (i.e., not made or paid for by Landlord
from the Construction Allowance or otherwise), and (iii)
relocation and moving expenses, but not the value of Tenant's
leasehold estate created by this Lease and only so long as
such claims in no way diminish the award Landlord is entitled
to from the condemning authority as provided hereunder.
FIRE OR OTHER 14. (a) Repair Estimate. If the Premises or the Building
are damaged by fire --------------- CASUALTY or other casualty (a
"Casualty"), Landlord shall, within sixty (60) days after -------- such
Casualty, deliver to Tenant a good faith estimate (the "Damage Notice") of
the time needed ------------- to repair or replace the damage caused by
such Casualty.
(b) Landlord's and Tenant's Rights. If a
material portion of the Premises or the Building is damaged by
Casualty such that Tenant is prevented from conducting its
business in the Premises in a manner reasonably comparable to
that conducted immediately before such Casualty and Landlord
estimates that the damage caused thereby cannot be repaired
within one hundred eighty (180) days after the date of
casualty, then Landlord may, at its expense, relocate Tenant
to similar office space within any Comparable Building owned
or under the control of Landlord. Landlord shall notify Tenant
of its intention to do so in the Damage Notice. Rent for the
portion of the Premises rendered untenantable by the damage
shall be abated on a reasonable basis from the date of damage
until relocation. Such relocation may be for a portion of the
remaining Term or the entire Term. Landlord shall complete any
such relocation within one hundred eighty (180) days after
Landlord has delivered the Damage Notice to Tenant. If
Landlord does not elect to relocate Tenant following such
Casualty, then Tenant may terminate this Lease by delivering
written notice to Landlord of its election to terminate within
thirty (30) days after the Damage Notice has been delivered to
Tenant. If Landlord does not relocate Tenant and Tenant does
not terminate this Lease, then (subject to Landlord's rights
under Section 14.(c)) Landlord shall repair the Building or
the Premises, as the case may be, as provided below. Upon the
occurrence of a Casualty, Rent for the portion of the Premises
rendered untenantable by the damage shall be abated on a
reasonable basis from the date of damage until the completion
of the repair or until such termination.
(c) Landlord's Rights. If a Casualty damages
a material portion of the Building, and Landlord makes a good
faith determination that restoring the Premises would be
uneconomical, or if Landlord is required to pay any insurance
proceeds arising out of the Casualty to Landlord's Mortgagee,
then Landlord may terminate this Lease by giving written
notice of its election to terminate within thirty (30) days
after the Damage Notice has been delivered to Tenant, and Rent
hereunder shall be abated as of the date of the Casualty.
(d) Repair Obligation. If neither party elects to terminate this Lease
-----------------
following a Casualty, then Landlord shall, within a reasonable time after such
Casualty, commence to repair the Building and the Premises and shall proceed
with reasonable diligence to restore the Building and Premises to substantially
the same condition as they existed immediately before such Casualty; however,
Landlord shall not be required to repair or replace any part of the furniture,
equipment, fixtures, and other improvements which may have been placed by, or at
the request of, Tenant or other occupants in the Building or the Premises, and
Landlord's obligation to repair or restore the Building or Premises shall be
limited to the extent of the insurance proceeds actually received by Landlord
for the Casualty in question.
EVENTS OF 15. Events of Default. Each of the following occurrences shall
-----------------
constitute an
DEFAULT "Event of Default" by Tenant:
----------------
(a) Tenant's failure to pay Rent, or any
other sums due from Tenant to Landlord under the Lease (or any
other lease executed by Tenant for space in the Building),
when due;
(b) Tenant's failure to perform, comply
with, or observe any other agreement or obligation of Tenant
under this Lease (or any other lease executed by Tenant for
space in the Building);
(c) The filing of a petition by or against Tenant (the term "Tenant" shall
include, for the purpose of this Section 15.(c), any guarantor of the Tenant's
obligations hereunder) (i) in any bankruptcy or other insolvency proceeding;
(ii) seeking any relief under any state or federal debtor relief law; (iii) for
the appointment of a liquidator or receiver for all or substantially all of
Tenant's property or for Tenant's interest in this Lease; or (iv) for the
reorganization or modification of Tenant's capital structure; and provided that
in the case of any of the foregoing which is filed against Tenant, the same is
not dismissed within ninety (90) days after it is filed;
(d) The admission by Tenant that it cannot meet its obligations as they become
due or the making by Tenant of an assignment for the benefit of its creditors;
and
(e) Tenant vacates the Premises or fails to
continuously operate its business at the Premises for a period
of ninety (90) days or more.
REMEDIES 16. (a) Landlord's Remedies. Upon any Event of Default by
Tenant, Landlord may, subject to any judicial process and
notice to the extent required by Title 4, Chapter 24 of the
Texas Property Code, as may be amended, in addition to all
other rights and remedies afforded Landlord hereunder or by
law or equity, take any of the following actions:
(i) Terminate this Lease by giving Tenant written notice thereof, in which
event, Tenant shall pay to Landlord the sum of (1) all Rent accrued hereunder
through the date of termination, (2) all amounts due under Section 15.(a), and
(3) an amount equal to (A) the total Rent that Tenant would have
been required to pay for the remainder of the Term discounted
to present value at a per annum rate equal to the "Prime Rate"
as published on the date this Lease is terminated by The Wall
Street Journal, Southwest Edition, in its listing of "Money
Rates", minus (B) the then present fair rental value of the
Premises for such period, similarly discounted; or
(ii) Terminate Tenant's right to possession of the Premises
without terminating this Lease by giving written notice
thereof to Tenant, in which event Tenant shall pay to Landlord
(1) all Rent and other amounts accrued hereunder to the date
of termination of possession, (2) all amounts due from time to
time under Section 15.(a), and (3) all Rent and other sums
required hereunder to be paid by Tenant during the remainder
of the Term, diminished by any net sums thereafter received by
Landlord through reletting the Premises during such period.
Landlord shall use reasonable efforts to relet the Premises on
such terms and conditions as Landlord in its sole discretion
may determine (including a term different from the Term,
rental concessions, and alterations to, and improvement of ,
the Premises); however, Landlord shall not be obligated to
relet the Premises before leasing other portions of the
Building. Landlord shall not be liable for, nor shall Tenant's
obligations hereunder be diminished because of, Landlord's
failure to relet the Premises or to collect rent due for such
reletting. Tenant shall not be entitled to the excess of any
consideration obtained by reletting over the Rent due
hereunder. Re-entry by Landlord in the Premises shall not
affect Tenant's obligations hereunder for the unexpired Term;
rather, Landlord may, from time to time, bring action against
Tenant to collect amounts due by Tenant, without the necessity
of Landlord's waiting until the expiration of the Term. Unless
Landlord delivers written notice to Tenant expressly stating
that it has elected to terminate this Lease, all actions taken
by Landlord to exclude or dispossess Tenant of the Premises
shall be deemed to be taken under this Section 16.(a)(ii). If
Landlord elects to proceed under this Section 16.(a)(ii), it
may at any time elect to terminate this Lease under Section
16.(a)(i).
(iii) Notwithstanding anything to the contrary herein, Tenant shall not be
deemed to have waived any requirements of Landlord to mitigate damages upon an
Event of Default as required by law.
(b) Tenant's Remedies.
(i) Notice and Cure. If Landlord should fail to
---------------
perform or observe any covenant, term, provision or condition
of this Lease and such default should continue beyond a period
of ten (10) days as to a monetary default or thirty (30) days
(or such longer period as is reasonably necessary to remedy
such default, provided Landlord shall diligently pursue such
remedy until such default is cured) as to a non-monetary
default, after in each instance written notice thereof is
given by Tenant to Landlord and Landlord's Mortgagee, then, in
any such event Tenant shall have the right (but no obligation)
to cure the default, and Landlord shall reimburse Tenant for
all reasonable sums expended in so curing said default. Tenant
specifically agrees that Landlord's Mortgagee may enter the
Premises upon reasonable notice to Tenant to cure any such
default and that the cure of any default by Landlord's
Mortgagee shall be deemed a cure by Landlord under this Lease.
(ii) Set-off. If Tenant obtains a judgment against ------- Landlord or any
assignee for any default by Landlord under this Lease and (i) Tenant provided
Landlord's Mortgagee notice and opportunity to cure as described in Section
16(b)(i) above, (ii) said judgment is final and all rights of appeal have been
exercised or have expired, and (iii) such judgment remains unsatisfied upon
thirty (30) days written notice thereof to Landlord's Mortgagee, Tenant may set
off such judgment against Rent.
PAYMENT; 17. (a) Payment. Upon any Event of Default by Tenant, Tenant shall pay
to -------
NON-WAIVER Landlord all costs incurred by Landlord (including court costs and
reasonable attorney's fees
and expenses) in (1) obtaining possession of the Premises, (2)
removing and storing Tenant's or any other occupant's
property, (3) repairing, restoring, altering, remodeling, or
otherwise putting the Premises into condition acceptable to a
new tenant, (4) if Tenant is dispossessed of the Premises and
this Lease is not terminated, reletting all or any part of the
Premises (including brokerage commissions, cost of tenant
finish work, and other costs incidental to such reletting),
(5) performing Tenant's obligations which Tenant failed to
perform, and (6) enforcing, or advising Landlord of, its
rights, remedies, and recourses arising out of the Event of
Default.
(b) No Waiver. Acceptance or payment of Rent
following any Event of Default shall not waive any rights
regarding such Event of Default. No waiver by any party of any
violation or breach of any of the terms contained herein shall
waive any rights regarding any future violation of such term
or violation of any other term.
LANDLORD'S INTENTIONALLY DELETED
LIEN
SURRENDER OF 19. No act by Landlord shall be deemed an acceptance of a surrender
of the PREMISES Premises, and no agreement to accept a surrender of the Premises
shall be valid unless the same is made in writing and signed by Landlord. At the
expiration or termination of this Lease, subject to Landlord's obligation to
maintain the Building, Tenant shall deliver to Landlord the Premises with all
improvements located thereon in good repair and condition, reasonable wear and
tear (and condemnation and fire or other casualty damage not caused by Tenant,
as to which Sections 13 and 14 shall control) excepted, and shall deliver to
Landlord all keys and/or access cards to the Premises. Provided that Tenant has
performed all of its obligations hereunder, Tenant may remove all unattached
trade fixtures, furniture, and personal property placed in the Premises by
Tenant (but Tenant shall not remove any such item which was paid for, in whole
or in part, by Landlord). Additionally, Tenant may remove such additional items
as Landlord may have agreed. Tenant shall repair all damage caused by removal of
any items. All items not so removed shall be deemed to have been abandoned by
Tenant and may be appropriated, sold, stored, destroyed, or otherwise disposed
of by Landlord without notice to Tenant and without any obligation to account
for such items. The provisions of this Section 19 shall survive the end of the
Term.
HOLDING OVER 20. If Tenant fails to vacate the Premises at the end of
the Term, then Tenant shall be a tenant at will and, in
addition to all other damages and remedies to which Landlord
may be entitled for such holding over, Tenant shall pay, in
addition to the other Rent, a daily Basic Rental equal to the
greater of (a) 150% of the daily Basic Rental payable during
the last month of the Term, or (b) the then prevailing market
rental rate for leases then being entered into for similar
space in Comparable Buildings.
CERTAIN RIGHTS 21. Provided that the exercise of such rights does not
unreasonably interfere with RESERVED BY Tenant's occupancy of the Premises, and
upon reasonable advance notice provided by LANDLORD Landlord to Tenant (except
in case of emergency), Landlord shall have the following rights:
(a) to decorate and to make inspections,
repairs, alterations, additions, changes, or improvements,
whether structural or otherwise, in and about the Building, or
any part thereof; for such purposes, to enter upon the
Premises and, during the continuance of any such work, to
temporarily close doors, entryways, public space, and
corridors in the Building; to interrupt or temporarily suspend
Building services and facilities (Landlord shall use
reasonable efforts to complete any work requiring the
suspension of Building services and facilities during
off-business hours when reasonably and commercially
practicable to do so); and to change the arrangement and
location of entrances or passageways, doors, and doorways,
corridors, elevators, stairs, restrooms, or other public parts
of the Building;
(b) to take such reasonable measures as
Landlord deems advisable for the security of the Building and
its occupants, including without limitation searching all
items entering or leaving the Building; evacuating the
Building for cause, suspected cause, or for drill purposes;
temporarily denying access to the Building; and closing the
Building after normal business hours and on Saturdays,
Sundays, and holidays, subject, however, to Tenant's right to
enter when the Building is closed after normal business hours
under such reasonable regulations as Landlord may prescribe
from time to time which may include by way of example, but not
of limitation, that persons entering or leaving the Building,
whether or not during normal business hours, identify
themselves to a security officer by registration or otherwise
and that such persons establish their right to enter or leave
the Building;
(c) to change the name by which the Building is designated; and
(d) upon reasonable advance notice, to enter
the Premises during Tenant's regular business hours (or at any
time when accompanied by a representative of Tenant) to show
the Premises to prospective purchasers or lenders, and within
the last six months of the Term to show the Premises to
prospective tenants.
SUBSTITUTION 22. (a) From time to time during the Term, Landlord may
substitute for the SPACE Premises other substantially
comparable space that has an area at least equal but not
greater than 105% of that of the Premises and is located in
the Building or in any building located in International
Business Park which is owned or managed by Landlord or an
affiliate of Landlord (the "Substitution Space");
(b) If Landlord exercises such right by
giving Tenant notice thereof ("Substitution Notice") at least
60 days before the effective date of such substitution, then
(1) the description of the Premises shall be replaced by the
description of the Substitution Space; and (2) all of the
terms and conditions of this Lease shall apply to the
Substitution Space except that (A) if the then unexpired
balance of the Term shall be less than one year, then the Term
shall be extended so that the Term shall be one year from the
Substitution Effective Date (defined below), and (B) if the
Substitution Space contains more square footage than the
Premises, then the Basic Rental then in effect shall be
increased proportionately (provided that such increase shall
not exceed 105% of the Basic Rental due for the Premises) and
shall be subject to adjustment as herein provided. The
effective date of such substitution (the "Substitution
Effective Date") shall be the date specified in the
Substitution Notice or, if Landlord is required to perform
tenant finish work to the Substitution Space under Section
22.(c), then the date on which Landlord substantially
completes such tenant finish work. If Landlord is delayed in
performing the tenant finish work by Tenant's actions (either
by Tenant's change in plans and specifications for such work
or otherwise), then the Substitution Effective Date shall not
be extended and Tenant shall pay Rent for the Substitution
Space beginning on the date specified in the Substitution
Notice;
(c) Tenant may either accept possession of
the Substitution Space in its "as is" condition as of the
Substitution Effective Date or require Landlord to alter the
Substitution Space in the same manner as the Premises were
altered or were to be altered. Tenant shall deliver to
Landlord written notice of its election within ten (10) days
after the Substitution Notice has been delivered to Tenant. If
Tenant fails to timely deliver notice of its election or if an
Event of Default then exists, then Tenant shall be deemed to
have elected to accept possession of the Substitution Space in
its "as is" condition. If Tenant timely elects to require
Landlord to alter the Substitution Space, then (1)
notwithstanding Section 22.(b), if the then unexpired balance
of the Term is less than three years, then the Term shall be
extended so that it continues for three years from the
Substitution Effective Date, and (2) Tenant shall continue to
occupy the Premises (upon all of the terms of this Lease)
until the Substitution Effective Date;
(d) Tenant shall move from the Premises into
the Substitution Space and shall surrender possession of the
Premises as provided in Section 19 by the Substitution
Effective Date. If Tenant occupies the Premises after the
Substitution Effective Date, then Tenant's occupancy of the
Premises shall be a tenancy at will (and, without limiting all
other rights and remedies available to Landlord, including
instituting a forcible detainer suit), Tenant shall pay Basic
Rental for the Premises as provided in Section 20 and all
other Rent due therefor until such occupancy ends; such
amounts shall be in addition to the Rent due for the
Substitution Space; and
(e) If Landlord exercises its substitution
right, then Landlord shall reimburse Tenant for Tenant's
reasonable out-of-pocket expenses for moving Tenant's
furniture, equipment, supplies , telephone equipment,
telephone lines, computer lines, wiring, data circuits,
special wiring, and lieberts units. from the Premises to the
Substitution Space and for reprinting Tenant's stationery of
the same quality and quantity of Tenant's stationery supply on
hand immediately prior to Landlord's notice to Tenant of the
exercise of this relocation right. If the Substitution Space
contains more square footage than the Premises, and if the
Premises were carpeted, Landlord shall supply and install an
equal amount of carpeting of the same or equivalent quality
and color.
MISCELLANEOUS 23. (a) Landlord Transfer. Landlord may transfer, in whole or in
part, the ----------------- Project and any of its rights under this Lease. If
Landlord assigns its rights under this Lease and such assignee assumes
Landlord's obligations hereunder, then Landlord shall thereby be released from
any further obligations hereunder.
(b) Landlord's Liability. The liability of Landlord to Tenant for any
--------------------
default by Landlord under the terms of this Lease shall be limited to Tenant's
actual direct, but not consequential, damages therefor and shall be recoverable
from the interest of Landlord in the Project (including any rents, profits, or
other proceeds therefrom), and Landlord shall not be personally liable for any
deficiency. This section shall not be deemed to limit or deny any remedies which
Tenant may have in the event of default by Landlord hereunder which do not
involve the personal liability of Landlord.
(c) Force Majeure. Other than for Tenant's
monetary obligations under this Lease and obligations which
can be cured by the payment of money (e.g., maintaining
insurance), whenever a period of time is herein prescribed for
action to be taken by either party hereto, such party shall
not be liable or responsible for, and there shall be excluded
from the computation for any such period of time, any delays
due to strikes, riots, acts of God, shortages of labor or
materials, war, governmental laws, regulations, or
restrictions, or any other causes of any kind whatsoever which
are beyond the control of such party.
(d) Brokerage. Landlord and Tenant each
warrant to the other that it has not dealt with any broker or
agent in connection with the negotiation or execution of this
Lease, other than Trammell Crow D/FW and Colliers
International, whose commissions shall be paid by Landlord.
Tenant and Landlord shall each indemnify the other against all
costs, expenses, attorneys' fees, and other liability for
commissions or other compensation claimed by any broker or
agent claiming the same by, through, or under the indemnifying
party.
(e) Estoppel Certificates. From time to
time, either Landlord or Tenant shall furnish, within ten (10)
business days after request therefor, a signed certificate
confirming and containing such factual certifications and
representations as to this Lease as the requesting party may
reasonably request.
(f) Notices. All notices and other
communications given pursuant to this Lease shall be in
writing and shall be (1) mailed by first class, United States
Mail, postage prepaid, certified, with return receipt
requested, and addressed to the parties hereto at the address
specified in the Basic Lease Information, (2) hand delivered
to the intended address, or (3) sent by prepaid telegram,
cable, facsimile transmission, or telex followed by a
confirmatory letter. Notice sent by certified mail, postage
prepaid, shall be effective three business days after being
deposited in the United States Mail; all other notices shall
be effective upon delivery to the address of the addressee.
The parties hereto may change their addresses by giving notice
thereof to the other in conformity with this provision.
(g) Separability. If any clause or provision
of this Lease is illegal, invalid, or unenforceable under
present or future laws, then the remainder of this Lease shall
not be affected thereby and in lieu of such clause or
provision, there shall be added as a part of this Lease a
clause or provision as similar in terms to such illegal,
invalid, or unenforceable clause or provision as may be
possible and be legal, valid, and enforceable.
(h) Amendments; and Binding Effect. This
Lease may not be amended except by instrument in writing
signed by Landlord and Tenant. No provision of this Lease
shall be deemed to have been waived by Landlord or Tenant
unless such waiver is in writing signed by Landlord or Tenant,
and no custom or practice which may evolve between the parties
in the administration of the terms hereof shall waive or
diminish the right of Landlord or Tenant to insist upon the
performance by Landlord or Tenant in strict accordance with
the terms hereof. The terms and conditions contained in this
Lease shall inure to the benefit of and be binding upon the
parties hereto, and upon their respective successors in
interest and legal representatives, except as otherwise herein
expressly provided. This Lease is for the sole benefit of
Landlord and Tenant, and, other than Landlord's Mortgagee, no
third party shall be deemed a third party beneficiary hereof.
(i) Quiet Enjoyment. Provided Tenant has
performed all of the terms and conditions of this Lease to be
performed by Tenant, Tenant shall peaceably and quietly hold
and enjoy the Premises for the Term, without hindrance from
Landlord or any party claiming by, through, or under Landlord,
subject to the terms and conditions of this Lease.
(j) Joint and Several Liability. If there is
more than one Tenant, then the obligations hereunder imposed
upon Tenant shall be joint and several. If there is a
guarantor of Tenant's obligations hereunder, then the
obligations hereunder imposed upon Tenant shall be the joint
and several obligations of Tenant and such guarantor, and
Landlord need not first proceed against Tenant before
proceeding against such guarantor nor shall any such guarantor
be released from its guaranty for any reason whatsoever.
(k) Use of Lobby and/or Common Areas. During the term, and only
--------------------------------
on
weekends, holidays, and between the hours of 6:00 p.m. and
7:00 a.m. on weekends (other than holidays), Tenant shall have
the right to use the building lobby and/or common areas,
without charge, for any Tenant-sponsored special event,
provided (a) Tenant gives Landlord reasonable prior written
notice of the date, time and nature of the event, (b) the date
and time of the event do not conflict with another previously
scheduled event, (c) Tenant reimburses Landlord for all
out-of-pocket expenses Landlord incurs in connection with the
event, (d) Tenant indemnifies and holds Landlord harmless from
and against any and all claims, actions, damages or liens
resulting from Tenant's use of lobby and/or common areas,
including any reasonable attorney's fees incurred by Landlord,
(e) Tenant complies in all respects with applicable law, (f)
Landlord approves, in its sole discretion, all aspects of
Tenant's intended use of the Building lobby and/or common
areas, and (g) Tenant shall not use the Building lobby and/or
common areas for such events for more than twelve (12) days in
any calendar year.
(l) Captions. The captions contained in this Lease are for convenience
--------
of reference only, and do not limit or enlarge the terms and
conditions of this Lease.
(m) No Merger. There shall be no merger of
the leasehold estate hereby created with the fee estate in the
Premises or any part thereof if the same person acquires or
holds, directly or indirectly, this Lease or any interest in
this Lease and the fee estate in the leasehold Premises or any
interest in such fee estate.
(n) No Offer. The submission of this Lease
to Tenant shall not be construed as an offer, nor shall Tenant
have any rights under this Lease unless Landlord executes a
copy of this Lease and delivers it to Tenant.
(o) Exhibits. The following exhibits hereto are incorporated herein by
--------
this reference:
Exhibit A - Outline of Premises
Exhibit A-1 - Legal Description of
the Land Exhibit B - Building Rules
and Regulations Exhibit C -
Operating Expenses Exhibit D -
Tenant Finish Work: Plans Exhibit
D-1 - Plans/Specifications Exhibit E
- Renewal Option Exhibit F - Parking
Exhibit G - Janitorial
Specifications Exhibit H - Signage
Criteria
(o) Entire Agreement. This Lease constitutes
the entire agreement between Landlord and Tenant regarding the
subject matter hereof and supersedes all oral statements and
prior writings relating thereto. Except for those set forth in
this Lease, no representations, warranties, or agreements have
been made by Landlord or Tenant to the other with respect to
this Lease or the obligations of Landlord or Tenant in
connection therewith.
(p) Representations and Warranties. Landlord and Tenant each represent
- ------------------------------
and warrant that the person executing this Lease on its behalf is acting in his
or her capacity as an officer or partner, as applicable, with due authorization
and authority to bind Landlord or Tenant, as applicable, to this Lease. Landlord
represents and warrants that it has good title to the Project so to fully and
properly lease the Premises to Tenant as provided herein. Landlord represents
and warrants that the Project conforms in all material respects to all
applicable laws, ordinances, rules and regulations generally applicable to
commercial office buildings in Plano, Texas, as of the date hereof. Further,
Landlord represents and warrants that, to Landlord's knowledge, the Project
contains no hazardous substances as currently defined under applicable law,
except those used in the operation of the Building and which are being used in
compliance with applicable law. Other than any express warranties contained
herein, neither Landlord nor Tenant make any implied warranties of any kind or
nature, and the parties hereby waive any claims upon any such implied
warranties.
DATED as of the date first above written.
LANDLORD: TENANT:
CB PARKWAY BUSINESS CENTER II, LTD., ETHOS COMMUNICATIONS CORP.
a Texas limited partnership
By: 14BCO, Inc., general partner
By:
By:
Name:
- ---------
Name:
Title:
Title:
<PAGE>
DAL02:136713.10
EXHIBIT A
OUTLINE OF THE PREMISES
<PAGE>
EXHIBIT A-1
LEGAL DESCRIPTION OF THE LAND
BEING a 7.1557 acre tract of land situated in the Mary A. Taylor Survey,
Abstract No. 897 and the Edwin Allen Survey, Abstract No. 8, City of Plano,
Collin County, Texas and being part of that certain tract of land conveyed to
Crow-Billingsley #30, Ltd. as recorded in Volume 1690, Page 296 and further
being part of that certain tract of land conveyed to Henry Billingsley as
recorded in Collin County Clerk #95-0067322 Deed Records, Collin County, Texas
and being more particularly described as follows:
COMMENCING at a point for corner in the center line of Midway Road (100'
R.O.W.), said corner also being in the South line of International Parkway (110'
R.O.W.);
THENCE South 89 degrees 3 minutes 56 seconds East, departing said center line, a
distance of 1135.46 feet to a point for corner at the beginning of a curve to
the right having a central angle of 04 degrees 40 minutes 24 seconds, a radius
of 945.00 feet, a tangent of 38.56 feet and a chord bearing and distance of
South 86 degrees 43 minutes 34 seconds East, 77.06 feet;
THENCE along said curve to the right and along the said south line of
International Parkway, an arc distance of 77.08 feet to a 5/8" iron set for the
POINT OF BEGINNING of the above mentioned 7.1557 acre tract;
THENCE continuing along said curve to the right and along said South line of
International Parkway, said curve having a central angle of 22 degrees 24
minutes 51 seconds, a radius of 945.00, a tangent of 187.24 feet and a chord
bearing and distance of South 73 degrees 07 minutes 11 seconds East, 367.33
feet, and an arc distance of 369.69 feet to a 5/8" iron rod set for corner;
THENCE South 00 degrees 25 minutes 34 seconds West, departing said South line
and along the East line of said 7.1557 acre tract, a distance of 836.11 feet to
a 5/8" iron rod set for corner in the North line of the Kansas City South
Railroad Company (150' R.O.W.);
THENCE North 84 degrees 38 minutes 45 seconds West, along said North line, a
distance of 353.10 feet to a 5/8" iron rod set for corner, said corner being the
Southwest corner of said 7.1557 acre tract;
THENCE North 00 degrees 23 minutes 14 seconds East, along the West line of said
tract, a distance of 909.43 feet to the POINT OF BEGINNING and containing
311,702 square feet or 7.1557 acres of land, more or less, and also being all of
those certain tracts of land conveyed to CB PARKWAY BUSINESS CENTER II, LTD. by
Crow-Billingsley #30 and Henry Billingsley as recorded in Collin County Clerk
#97-0018434 and 97-0018433 Deed Records, Collin County, Texas, respectively.
<PAGE>
EXHIBIT B
BUILDING RULES AND REGULATIONS
The following rules and regulations shall apply to the Project and the
appurtenances thereto:
1. Sidewalks, doorways, vestibules, halls, stairways, and other similar
areas shall not be obstructed by tenants or used by any tenant for purposes
other than ingress and egress to and from their respective leased premises and
for going from one to another part of the Building.
2. Plumbing, fixtures and appliances shall be used only for the
purposes for which designed, and no sweepings, rubbish, rags or other unsuitable
material shall be thrown or deposited therein. Damage resulting to any such
fixtures or appliances from misuse by a tenant or its agents, employees or
invitees, shall be paid by such tenant.
3. No signs, advertisements or notices shall be painted or affixed on
or to any windows or doors or other part of the Building without the prior
written consent of Landlord. No nails, hooks or screws (other than those which
are necessary to hang paintings, prints, pictures, or other similar items on the
Premises' interior walls) shall be driven or inserted in any part of the
Building except by Building maintenance personnel. No curtains or other window
treatments shall be placed between the glass and any Building standard window
treatments.
4. Landlord shall provide and maintain an alphabetical directory for all tenants
in the main lobby
of the Building.
5. Landlord shall provide all door locks in each tenant's leased
premises, at the cost of such tenant, and no tenant shall place any additional
door locks in its leased premises without Landlord's prior written consent.
Landlord shall furnish to each tenant three keys to such tenant's leased
premises free of charge, with additional keys provided at such tenant's cost,
and no tenant shall make a duplicate thereof. Security Building access cards
shall be provided by Landlord to tenants after receipt of a $10.00 deposit per
card.
6. Movement in or out of the Building of furniture or office equipment,
or dispatch or receipt by tenants of any bulky material, merchandise or
materials which require use of elevators or stairways, or movement through the
Building entrances or lobby, shall be conducted so not to unreasonably interfere
with the use of the Building by Landlord and other tenants, and if reasonably
required by Landlord, under its supervision and control. Tenant assumes all
risks of and shall be liable for all damage to articles moved and injury to
persons or public engaged or not engaged in such movement, including equipment,
property and personnel of Landlord if damaged or injured as a result of acts in
connection with carrying out this service for such tenant.
7. All damage to the Building caused by the installation, placement, or
removal of any property of a tenant, or done by a tenant's property while in the
Building, shall be repaired at the expense of such tenant. No tenant shall be
liable for any damage resulting solely from the weight of any items placed in
the Building by such tenant provided such items do not, in the aggregate, exceed
the building weight loads specified by Landlord.
8. Corridor doors, when not in use, shall be kept closed. Nothing shall
be swept or thrown into the corridors, halls, elevator shafts or stairways. No
birds or animals other than animals assisting the disabled shall be brought into
or kept in, on or about any tenant's leased premises. No portion of any tenant's
leased premises shall at any time be used or occupied as sleeping or lodging
quarters.
9. Tenant shall cooperate with Landlord's employees in keeping the
Building and its leased premises neat and clean. Tenants shall not employ any
person for the purpose of such cleaning other than the Building's cleaning and
maintenance personnel.
10. To ensure orderly operation of the Building, no ice, mineral or
other water, towels, newspapers, etc. shall be delivered to any leased area
except by persons approved by Landlord.
11. Tenant shall not make or permit any improper, objectionable or
unpleasant noises or odors in the Building or otherwise interfere in any way
with other tenants or persons having business with them.
12. No machinery of any kind (other than normal office equipment) shall
be operated by any tenant on its leased area without Landlord's prior written
consent, nor shall any tenant use or keep in the Building any flammable or
explosive fluid or substance not approved in writing in advance by Landlord.
13. Landlord will not be responsible for lost or stolen personal
property, money or jewelry from tenant's leased premises or public or common
areas regardless of whether such loss occurs when the area is locked against
entry or not.
14. In the event any vending machines are maintained in the Building
for common use by all tenants, no vending or dispensing machines of any kind may
be maintained in any leased premises without the prior written permission of
Landlord, which consent shall not be unreasonably delayed, withheld or
conditioned. Any vending machines contained in any leased premises shall be for
the sole use of the applicable tenant, its employees and guests.
15. All mail chutes located in the Building shall be available for use
by Landlord and all tenants of the Building according to the rules of the United
States Postal Service.
16. No smoking of any type is permitted in any portion of the Building,
including any portion thereof leased by tenants. Landlord shall designate
smoking areas outside of the Building.
17. No firearms or weapons of any type are permitted upon the Land or within the
Project.
18. While at the Project, Tenant, its employees, agents and guests
shall behave in a manner consistent with that expected in a Class A office
building located in North Dallas.
19. Tenant shall notify Landlord before holding an event in a common area of the
Project or serving alcohol.
<PAGE>
EXHIBIT C
OPERATING EXPENSES
1. Tenant shall pay from time to time an amount (the "Excess")
calculated by multiplying (a) the amount by which the Basic Cost (defined
below), divided by the Total Rentable Square Feet, exceeds $5.50 (the "Expense
Stop"), by (b) the Rentable Square Feet. The Excess may be calculated and
collected annually in arrears on a calendar year basis and, in such event, shall
be due within thirty (30) days after Landlord furnishes to Tenant a written
statement (the "Annual Operating Statement") reflecting the Basic Cost for the
calendar year (as may be adjusted as provided herein) and calculating the
Excess, if any. Said statement shall be furnished by April 1 immediately
following the applicable calendar year, or as soon thereafter as practicable.
Alternatively, Excess may be estimated and collected monthly and then reconciled
against Basic Costs at calendar year end. In such event, Landlord shall make and
notify Tenant of its good faith estimate of the Excess for the applicable
calendar year (or part thereof), whereafter, Tenant shall pay to Landlord, in
advance on the first day of each calendar month of such year (or part thereof),
an amount equal to the estimated Excess divided by 12 (or such lesser number of
months as applicable). From time to time during any calendar year, Landlord may
re-estimate the Excess for that calendar year and the monthly installments of
Excess payable by Tenant shall be adjusted accordingly so that, by the end of
the calendar year in question, Tenant shall have paid the full Excess as
estimated by Landlord for such year. The Basic Cost (other than the first year
in which the Building is occupied) and Expense Stop shall be prorated for any
portion of the Term which is less than a full calendar year.
2. The term "Basic Cost" shall mean all expenses and disbursements of
every kind (subject to the limitations set forth below) which Landlord incurs,
pays or becomes obligated to pay in connection with the ownership, operation,
and maintenance of the Project (including the associated parking facilities),
determined in accordance with generally accepted federal income tax basis
accounting principles consistently applied, including but not limited to the
following:
(a) Wages and salaries of all employees engaged on-site in the
Project in the operation, repair, replacement, maintenance, landscaping and
security of the Project, including taxes, insurance and benefits relating
thereto, such costs to be allocated based on the relative rentable square
footage of the buildings directly managed by these personnel if they are
providing services to multiple buildings;
(b) All supplies and materials used in the operation, maintenance, landscaping,
repair,
replacement, and security of the Project;
(c) Annual cost of all capital improvements made to the
Project which although capital in nature can reasonably be expected to reduce
the normal operating costs of the Project, as well as all capital improvements
made in order to comply with any law hereafter promulgated by any governmental
authority, as amortized over the useful economic life of such improvements as
determined in accordance with generally accepted federal income tax basis
accounting principles consistently applied;
(d) Cost of all utilities, other than the cost of utilities
paid directly by Tenant or actually reimbursed to Landlord by Tenant or other
Building tenants (including Tenant under Section 4 (b) of the Lease);
(e) Cost of any insurance or insurance related expense applicable to the Project
and Landlord's personal property used in connection therewith;
(f) All taxes and assessments and governmental charges whether
federal, state, county or municipal, and whether they be by taxing or management
districts or authorities presently taxing or by others, subsequently created or
otherwise, and any other taxes and assessments attributable to the Project (or
its operation), excluding, however, federal and state taxes on income
(collectively, "Taxes") (and Landlord shall make reasonable and diligent
efforts, as deemed necessary or appropriate in Landlord's reasonable discretion,
to contest property valuations and otherwise minimize Taxes which may include
retaining a tax consultant to assist in determining the fair tax valuation of
the Project and protesting any unfair valuations, with all associated costs
being a Basic Cost). Notwithstanding the above, if the present method of
taxation changes so that in lieu of the whole or any part of any Taxes levied on
the Project, there is levied on Landlord a capital tax directly on the rents
received therefrom or a franchise tax, assessment, or charge based, in whole or
in part, upon such rents for the Building, then all such taxes, assessments, or
charges, or the part thereof so based, shall be deemed to be included within the
term "Taxes" for the purposes hereof;
(g) Cost of repairs, replacements, and general maintenance of the Project, other
than replacement of the roof, foundation and exterior walls of the Building;
(h) Cost of service or maintenance contracts with independent
contractors for the operation, maintenance, landscaping, repair, replacement, or
security of the Project (including, without limitation, alarm service, window
cleaning, and elevator maintenance);
(i) A management fee, which may be paid to Landlord or any affiliates thereof,
as a percentage of the gross scheduled rent of the Building;
(j) Costs for landscaping and maintaining the medians within
the Park, such costs to be allocated based on a fraction of which the numerator
is the linear footage of frontage of the Project to International Parkway and
the denominator which is the total linear footage of frontage in the Park
bounded by the medians;
(k) Security for the Project, such costs to be allocated to
each building based on relative rentable square footage when multiple buildings
are covered by one contract; and
(l) A pro rata portion of the salary and benefits (including
taxes and insurance) of the employees located off-site at Landlord's corporate
offices providing services to the Project, such costs to be allocated among all
buildings managed by such employees based on rentable square footage.
Any Basic Cost incurred in connection with any work performed,
or services provided, to or for the benefit of one or more of the buildings
located in the office park of which the Project is a part and commonly referred
to as the International Business Park shall be allocated between all such
buildings, including the Building, on a per square foot of rentable area basis.
There are specifically excluded from the definition of the term "Basic Cost"
costs (1) for capital improvements made to the Project, other than capital
improvements described in Section 2.(c) above and except for items which, though
capital for accounting purposes, are properly considered maintenance and repair
items, such as painting of common areas, replacement of carpet in elevator
lobbies, and the like; (2) for repair, replacements and general maintenance paid
by proceeds of insurance or by Tenant or other third parties, and alterations
attributable solely to tenants of the Building other than Tenant; (3) for
interest, amortization or other payments on loans to Landlord; (4) for
depreciation of the Building; (5) for leasing commissions; (6) for legal
expenses, other than those incurred for the general benefit of the Building's
tenants (e.g., tax disputes); (7) for renovating or otherwise improving space
for occupants of the Building or vacant space in the Building; (8) for
correcting defects in the construction of the Building; (9) for overtime or
other expenses of Landlord in curing defaults or performing work expressly
provided in this Lease to be borne at Landlord's expense; (10) for federal
income taxes imposed on or measured by the income of Landlord from the operation
of the Project; (11) repairs or replacements necessitated by Landlord's gross
negligence or willful misconduct; (12) amounts reimbursed to Landlord pursuant
to any warranty or by any other tenant or third party; (13) reserves for future
expenses; (14) late charges or penalties incurred as a result of Landlord's
failure to pay any bills or charges when due; (15) general overhead of Landlord
(not including any goods or services used or provided directly for the benefit
of the Project); (16) amounts incurred to remediate any hazardous substances as
defined by applicable environmental law unless caused in whole or in part by
Tenant, its officers, employees, agents, contractors or customers; and (17) for
rent or other payment due under any ground lease for any or all the Land.
3. The Annual Operating Expense Statement shall include a statement of
Landlord's actual Basic Cost for the previous year adjusted as provided in
Section 4 of this Exhibit. If Tenant has paid estimated Excess and the Annual
Operating Expense Statement reveals that Tenant paid more for Basic Cost than
the actual Excess in the year for which such statement was prepared, then
Landlord shall credit or reimburse Tenant for such excess within thirty (30)
days after delivery of the Annual Operating Expense Statement; conversely, if
Tenant paid less than the actual Excess, then Tenant shall pay Landlord such
deficiency within thirty (30) days after delivery of the Annual Operating
Expense Statement.
4. With respect to any calendar year or partial calendar year in which
the Building is not occupied to the extent of 95% of the rentable area thereof,
the Variable Basic Costs (defined below) for such period shall, for the purposes
hereof, be increased to the amount which would have been incurred had the
Building been occupied to the extent of 95% of the rentable area thereof. As
used herein, "Variable Basic Costs" means any Basic Cost that is variable in
correlation with the level of occupancy of the Building.
EXHIBIT D
TENANT FINISH-WORK: PLANS
<PAGE>
DAL02:136713.10
1. Except as set forth in this Exhibit, Tenant accepts the Premises in their "as
is" condition on the date that this Lease is entered into.
2. On or before January 13, 1999, Landlord shall provide to Tenant for its
approval final working drawings, prepared in accordance with the Space Plans
approved by Tenant and attached hereto as Exhibit "D-1", of all improvements
that Landlord proposes to install in the Premises; such working drawings shall
include the partition layout, ceiling plan, electrical outlets and switches,
telephone outlets, drawings for any modifications to the mechanical and plumbing
systems of the Building, and detailed plans and specifications for the
construction of the improvements called for under this Exhibit in accordance
with all applicable governmental laws, codes, rules, and regulations. Landlord
shall require Tenant's written approval of such plans within three (3) business
days after delivery to Tenant. Further, if any of Tenant's proposed construction
work will affect the Building's heating, ventilation and air conditioning,
electrical, mechanical, or plumbing systems, then the working drawings
pertaining thereto shall be prepared by the Building's engineer of record. As
used herein, "Working Drawings " shall mean the final working drawings provided
by Landlord, as amended from time to time by any approved changes thereto, and
"Work " shall mean all improvements to be constructed in accordance with and as
indicated on the Working Drawings. Landlord's preparation and delivery of the
Working Drawings shall not be a representation or warranty of Landlord that such
drawings are adequate for any use, purpose, or condition, or that such drawings
comply with any applicable law or code, but shall merely be the consent of
Landlord to the performance of the Work. Tenant shall, at Landlord's request,
sign the Working Drawings to evidence its review and approval thereof. All
changes in the Work must receive the prior written approval of Landlord. After
the Working Drawings have been approved, Landlord shall cause the Work to be
performed in accordance with the Working Drawings.
(c) If a delay in the performance of the Work occurs because of any change by
Tenant to the Space Plans or the Working Drawings, because of any specification
by Tenant of materials or installations in addition to or other than Landlord's
standard finish-out materials, or if Tenant otherwise delays completion of the
Work, then, notwithstanding any provision to the contrary in this Lease,
Tenant's obligation to pay Basic Rental and Tenant's share of Excess and
Electrical Costs hereunder shall commence on the scheduled Commencement Date. If
the Premises are not ready for occupancy and the Work is not substantially
completed (as reasonably determined by Landlord) on the scheduled Commencement
Date for any reason other than the reasons specified in the immediately
preceding sentence, then the obligations of Landlord and Tenant shall continue
in full force and Basic Rental and Tenant's share of Excess and Electrical Costs
shall be abated until the date the Work is substantially completed, which date
shall be the Commencement Date.
4. Landlord shall bear the entire cost of performing the Work depicted on the
Space Plans initially submitted to and approved by Tenant. Tenant shall bear the
entire additional costs incurred by Landlord in performing the Work because of
an event specified in clauses , , or of this Exhibit. Tenant shall pay Landlord
an amount equal to 50% of the estimated additional costs of any change to the
Space Plans or the Working Drawings at the time of such change; Tenant shall pay
to Landlord the remaining portion of additional costs incurred in performing the
Work because of an event specified in clauses , , or of this Exhibit upon
Substantial Completion of the Work and before Tenant occupies the Premises to
conduct business therein.
5. To the extent not inconsistent with this Exhibit, Section 7 of this Lease
shall govern the performance of the Work and the Landlord's and Tenant's
respective rights and obligations regarding the improvements installed pursuant
thereto.
<PAGE>
EXHIBIT E
RENEWAL OPTION
1. Provided no Event of Default exists and Tenant (or any permitted or
approved assignee or subtenant) is occupying the entire Premises at the time of
such election, Tenant may renew this Lease for one (1) additional period of five
(5) years on the same terms provided in this Lease (except as set forth below),
by delivering written notice of the exercise thereof to Landlord not later than
twelve (12) months before the expiration of the initial Term. On or before the
expiration of the initial Term, Landlord and Tenant shall execute an amendment
to this Lease extending the Term on the same terms provided in this Lease,
except as follows:
(a) The Basic Rental payable for each month during each such extended Term shall
be as provided below;
(b) Tenant shall have no further renewal options unless expressly granted by
Landlord in writing; and
2. Basic Rental during the extended Term shall be equal to the then
prevailing market rate for leases then being renewed or for new leases of second
generation space then being entered into of equivalent quality, size, utility
and location in Comparable Buildings, with the length of the extended Term, the
credit standing of the Tenant, and any tenant inducements (e.g., tenant
improvement allowance) taken into account.
3. Tenant's rights under this Exhibit shall terminate if (a) this Lease
or Tenant's right to possession of the Premises is terminated, (b) Tenant
wrongfully assigns any of its interest in this Lease or wrongfully sublets any
portion of the Premises, or (c) Tenant fails to timely exercise its option under
this Exhibit, time being of the essence with respect to Tenant's exercise
thereof.
<PAGE>
EXHIBIT F
PARKING
Landlord shall provide and Tenant shall be permitted the non-exclusive
use of one parking space for every 247 square feet of Rentable Square Feet
during the initial Term at no cost. Such parking shall be located in the parking
area associated with the Project (the "Parking Area") and shall be unassigned.
<PAGE>
EXHIBIT G
JANITORIAL SPECIFICATIONS
6.JANITORIAL SERVICE SPECIFICATIONS FOR TENANT SUITES, COMMON AREAS ON
TENANT-OCCUPIED FLOORS AND TENANT COMPUTER ROOMS.
(a) Nightly Services
(1) All surface areas, desks, file cabinets, counter tops, book shelves,
credenzas, computer screens and other equipment will be dusted. Desk tops will
be wiped down but no papers will be moved. All ashtrays and urns will be emptied
and wiped.
(2) All carpeted areas will be vacuumed. Carpets will be spot cleaned where
needed. All hard surface floors will be swept with a dust mop then damp mopped.
(3) All trash receptacles will be emptied and wiped down. Liners will be changed
whenever necessary. Garbage will be taken to the designated areas for trash
removal. (4) All magazines will be straightened. Glass top desks, glass doors,
partitions, light switches and walls will be cleaned to remove smudges and
fingerprints.
(5) All stairwells will be vacuumed and swept as well as dusted. (6) The
elevator will be vacuumed and fingerprints removed from wall surfaces. (7) All
kitchen countertops, tables and cupboard doors in break rooms will be cleaned
and disinfected. Hand prints and smudges will be removed from the exterior of
the refrigerator as well as any other appliances. Microwaves will be cleaned
inside and out. Sinks and other chrome areas will be cleaned and polished. (8)
Mugs, plates and glasses will be placed in the dishwasher and washed only if
they are placed in the break room sink by company employees. Dishes will not be
removed from the dishwasher. (9) All fixtures and appliances in the restrooms
will be cleaned and sanitized. All chrome and mirrors will be cleaned and
polished.
(10) All commodes and urinals will be cleaned with a germicidal
disinfectant. The use of an
- ----
emulsion bowl cleaner will be used whenever necessary.
(11) Restroom floors will be cleaned using a germicidal disinfectant.
- ----
(12) Light bulbs will be replaced as needed.
- ----
(b) Weekly Services
(1) All pictures and door frames will be dusted.
- ---
(2) Partitions and walls in the restrooms will be completely
wiped down with a germicidal
- ---
disinfectant.
(3) All VCT floors will be buffed.
- ---
c. Monthly Services
i. All mini-blinds and A/C vents will be dusted.
ii. All interior windows will be cleaned.
iii. All VCT floors will be waxed (more often as
necessary).
d. Quarterly Services
i. All exterior windows will be cleaned.
<PAGE>
EXHIBIT H
SIGNAGE CRITERIA
SIGN CRITERIA
The purpose of this sign criteria is to create a graphic environment that is
individual and distinctive in identity for the Tenant and also compatible with
other signs on this and future buildings. The total concept should give an
impression of quality, professionalism and instill a good business image.
Lettering shall be well proportioned and its design, spacing and legibility
shall be a major criterion for approval.
The following specifications are to be used for the design of your sign;
however, in all cases, final written approval must be obtained from the lessor
prior to the manufacturing or installation of any signage. Lessor shall make all
final and controlling determinations concerning any questions of interpretations
of this sign policy.
NOTICE: Written approval and conformance with these specifications does not
imply conformance with local City and County sign ordinances. Please have your
sign company check with local authorities to avoid non-compliance with local
codes.
Exterior Signs
A. REQUIRED SIGNS
1. Tenant shall be requested to identify its premises by erecting
one (1) sign which shall be attached directly to the building
parapet as described hereinafter.
B. TYPE OF SIGN
1. Internally illuminated acrylic faced, individual letters raceway mounted on
building face. Letters shall appear black when not illuminated, white when
illuminated.
C. SIZE OF SIGN
1. Placement: All signs shall be designed to fit entirely within a horizontal
band 48 inches high, from 12 inches below the top of parapet to 60 inches below
the top of parapet, ascending and descending characters included.
2. Sign locations for individual tenants are to be as agreed with Owner. Maximum
allowable areas per building elevation:
North elevation, north wing (aggregate): 67.5' maximum length, 180 sf. area
North elevation, south wing (aggregate): 67.5' maximum length, 180 sf. area
East elevation, north wing (aggregate):135.0' maximum length, 360 sf. area
East elevation, south wing (aggregate):225.0' maximum length, 600 sf. area
West elevation, north wing (aggregate):225.0' maximum length, 600 sf. area
3. Depth - 6" minimum, or as required to diffuse neon stroke
for uniform appearance.
4. Height - not to exceed 40" . Multiple Rows - not to exceed 40" in total
height including spaces between rows; Minimum Letter Size - 10" .
D. TYPE OF SIGN
1. Any style (block or script) may be used. Upper and lower case letters are
allowed. Lessor will have final review over height increases for script letters.
2. Logos in addition to signage must be approved. They must be proportionate to
height of parapet and sign and in same color as signage.
3. Box type signs will not be permitted.
E. COLOR OR SIGN
1. Signs are to appear black when not illuminated,
and white when illuminated.
2. Face is to be Rohm & Haas Plexiglass. Color permitted: as
required to provide day black/night
white effect.
3. Returns: Flat Black.
4. Trim Cap: 1" Flat Black Jewel Lite.
F. CONSTRUCTION OF LETTERS
1. Individual channel letters up to 40" high to have 1/8"
plexiglass faces.
2. Returns: .063 aluminum gauge (minimum).
3. Backs: .080 aluminum gauge (minimum).
4. No armor plate or wood in the manufactured returns may be used
5. Letter fabrication to be welded. Riveted construction not
acceptable.
G. ILLUMINATION AND WIRING
1. All signs must be UL labeled.
2. Illumination shall be with 15mm and 30mm 6500 degree white
neon tubing, and shall be uniform. Provide number of neon
strokes adequate to provide uniform lighting across width and
length of letter stroke.
3. Secondary Wiring - All transformers and secondary wiring are
to be concealed behind parapets or
within ceiling plenum.
4. Electrical power shall be brought to required location at Tenant's expense.
Routing and location of conduit and other required items shall not be visible on
front of parapet.
5. Final electrical connection of sign to transformer box will be performed by a
licensed electrician approved by Landlord. Sign timer controls for all tenants
to be set per Landlord requirements.
H. PLACEMENT AND INSTALLATION
1. General Notes
a. Letters are to be located on signage area of building
as determined by Landlord.
b. Attachment of signage to meet U.L. Standards. No
exposed wiring is permitted.
c. All fasteners used are to be non-corrosive.
d. Tenant will be responsible for all damage to the
building incurred during sign
installation or removal.
e. Tenant submittals for lighting approval shall
indicate methods of attachment to
building face. Tenants should be aware that building
face is 8" concrete tilt wall.
I. SUBMITTAL FOR APPROVAL
1. Prior to awarding a contract for fabrication and installation,
Tenant shall submit three (3)
-----
sealed drawings for final review and approval to:
Billingsley Property Services
Texas Commerce Tower
2200 Ross Avenue, Suite 4800 West
Dallas, Texas 75201
Attention: Becky Rowland, Property Manager
2. Elevation of building fascia and sign shall be drawn using a
minimum 1/4" = 1' - 0" scale.
3. Drawing shall indicate the following specifications: Type,
color and thickness of plexiglass, type of materials, finish
used on return, type of illumination and mounting method.
Tenant's sign contractor shall first visit the site to verify
existing conditions prior to preparation of shop drawings,
information needed to prepare submittals shall also be
obtained during the visit.
4. Drawings must include fascia cross section showing electrical
connections.
J. PERMITS
1. All City permits and approvals from the landlord are required
prior to sign fabrication.
K. WINDOW SIGNS
1. No window signs are permitted.
L. MONUMENT SIGNS
1. Tenants shall provide identification signs per Owner's
criteria for mounting on monument sign.
2. All single-tenant buildings, signs shall be 10" high metal
letters with black baked-on gloss finish, in Universe 67
letter style.
3. At multi-tenant buildings, signs shall be 6" high metal letters with black
baked-on gloss finish, in Universe 67 letter style.
M. SECONDARY ENTRY SIGNS
1. Not allowed.
N. THE FOLLOWING ARE NOT PERMITTED:
1. Roof signs or box signs
2. Cloth signs hanging in front of business
3. Exposed seam tubing
4. Animated or moving components
5. Intermittent or flashing illumination
6. Iridescent painted signs
7. Letters mounted or painted directly on illuminated panels
8. Signs or letters painted directly on any surface except
as herein provided
9. The names, stamps or decals of manufacturers or installers
shall not be visible except for
technical data (if any) required by governing authorities.
Interior Signs
A. Interior signs identifying fixed building elements, and two building
directions identifying Tenant Names
and Suite Numbers, will be provided by Landlord.
1. Signs Included:
a. Building Directory (Lobby)
b. Building Directory (South Vestibule)
c. Suite Number Identification
d. Stair Identification
e. Toilet Room Identification
f. Identification of Mechanical Spaces
g. Emergency Egress Directions
B. Tenant Identification signs for suite entries are to be provided by each
tenant. These are to be wall mounted adjacent to entrance doors. Sign size and
location shall comply with all local codes and ordinances, as well as ADA/TAS.
1. Size: 24 inches high maximum; 48 inches wide maximum; 4 sf. maximum overall,
as defined by a rectangle surrounding a regularly shaped sign, or as defined in
the case of an irregularly shaped sign by a rectilinear perimeter of not more
than eight (8) straight lines enclosing the extreme limits of any figure or
character.
2. Color: At tenant's option subject to approval by Landlord.
3. Illumination: Not Allowed. 4. Content: Text and logos acceptable, subject to
size limitations.
C. Tenant signs within tenant space provided by tenant if desired. Size, color,
configuration, illumination and content at Tenant's option subject to approval
by Landlord.
July 23, 1997
OFFICE LEASE
------------
(Quail Springs Office Building)
THIS AGREEMENT (the "Lease") is made __________, 1999, between TMK
INCOME PROPERTIES, L.P., a Delaware limited partnership, having an office at
Suite 600, 204 North Robinson, Oklahoma City, Oklahoma 73102 (the "Landlord"),
and ETHOS COMMUNICATIONS, INC., having a notice and mailing address at
_______________ (the "Tenant"). Unless otherwise separately defined, the
capitalized terms used herein are defined at Paragraph 4 below.
W I T N E S S E T H:
- - - - - - - - - -
1. Conditions Precedent. Notwithstanding anything herein to the contrary, it is
expressly recognized and agreed --------------------- that this Lease and/or the
Tenant's right to occupy the Leased Premises are expressly conditioned upon the
satisfaction
of the following conditions precedent:
1.1 Surrender by Pioneer. Tenant acknowledges that Pioneer Natural
Resources U.S.A., Inc. ("Pioneer") has certain rights in and
to the Leased Premises by virtue of that certain Office Lease
dated July 11, 1996, entered into by the respective
predecessors of Landlord and Pioneer, as amended (collectively
the "Pioneer Lease"), which rights are to be surrendered on or
before the Effective Date. Accordingly, this Lease is
expressly conditioned upon Pioneer and Landlord having fully
executed a Surrender and Acceptance Agreement in a form
satisfactory to Landlord on or before the Effective Date and
in the event such condition is not satisfied, then this Lease
shall be null and void and the parties shall have no further
rights or liabilities to each other hereunder.
1.2 Vacation by Pioneer. Tenant acknowledges that its occupancy of
the Leased Premises as of the Commencement Date is expressly
conditioned upon Pioneer's vacation of the Leased Premises at
least _____ (____) days before the Commencement Date.
Accordingly, in the event Pioneer has not vacated the Leased
Premises by such date, then Tenant's occupancy shall be
delayed pursuant to the terms of Paragraph 2.1.2 hereinbelow.
1.3 Rights of Refusal. Tenant acknowledges that Sonat Exploration Company
("Sonat") and Louis Dreyfus Natural Gas ----------------- Corp ("Louis Dreyfus")
have certain rights of refusal in and to the Leased Premises, which rights of
refusal should be exercised or expire prior to the Effective Date hereof.
Accordingly, this Lease is expressly conditioned upon Sonat and Louis Dreyfus,
respectively, either failing to exercise or expressly waiving their rights of
refusal in and to the Leased Premises, on or before the Effective Date and in
the event such conditions are not satisfied then this Lease shall be null and
void and the parties shall have no further rights or liabilities to each other
hereunder.
1.4 Leased Premises. Provided that the conditions precedent set forth in
Paragraphs 1.1 and 1.3 hereinabove are ---------------- satisfied on or before
the Effective Date, Landlord hereby leases the Leased Premises to Tenant and
Tenant hereby leases the same from Landlord. As reflected on Schedule "1", the
Leased Premises will be comprised of approximately 3,978 square feet of Net
Rentable Area on the third (3rd) floor of the Building; provided, however, the
square feet of Net Rentable Area within the Leased Premises will be increased or
decreased to reflect the actual square footage of Net Rentable Area reflected on
the Final Working Drawings and documented by an amendment to this Lease.
2. Term. The Lease Term is five (5) years having a Commencement Date on the
earlier of: (a) thirty (30) days after the Effective Date of this Agreement (the
"Projected Commencement Date"); or (b) Substantial Completion of the Leasehold
Improvements; subject to postponement, acceleration or extension as hereafter
provided. If the Commencement Date occurs (aa) on the first day of a month, the
Expiration Date will be five (5) years from the last day of the preceding month;
or (bb) on a date other than the first day of the month, the Expiration Date
will be five (5) years from the last day of the month in which the Commencement
Date occurs; unless extended as hereafter provided.
2.1 Late Occupancy. If for any reason construction of the Leasehold Improvements
has not reached --------------- Substantial Completion by the Projected
Commencement Date, this Lease will nevertheless continue in
effect.
<PAGE>
17
2.1.1 Tenant's Causation. If the failure to reach
Substantial Completion arises from: (a) any delay
in the installation of the Leasehold Improvements
caused by any change in or addition to the work
ordered by Tenant; (b) Tenant's nonpayment of
Tenant's Construction Cost; or (c) any other
default, delay or omission by Tenant or anyone
acting under or for Tenant; the payment of Rent
will commence on the Projected Commencement Date in
accordance with Paragraph 3.1 and the Lease Term
will not be modified.
2.1.2 Other Causation. If the failure to reach
Substantial Completion by the Projected
Commencement Date arises through no fault of
Tenant, Rent will abate and not commence until the
date of Substantial Completion and the Lease Term
will be extended by the period of time which
elapses between the Projected Commencement Date and
the date of Substantial Completion.
2.1.3 Outside Date. If through no fault of Tenant,
Substantial Completion is not reached within one
hundred eighty (180) days from the Projected
Commencement Date, either party may terminate this
Lease and neither party shall have any obligation
to the other party for any action taken prior to
the termination. The abatement of Rent through
Substantial Completion or termination as provided
herein will constitute full settlement of all
claims which Tenant might otherwise have against
Landlord by reason of any delay in occupancy of the
Leased Premises.
3. Rent. Tenant shall pay Rent to be mailed to Landlord at P. O. Box 25517,
Oklahoma City, Oklahoma 73125-0517 or ---- delivered to Landlord at Suite 600,
204 N. Robinson, Oklahoma City, Oklahoma 73102. All Base Rent is payable in
advance and without prior notice or demand, beginning on the date provided
herein and continuing thereafter on the first day of each month through the
Expiration Date.
3.1 Base Rent. During the Lease Term, Tenant shall pay to Landlord
as Base Rent an aggregate amount equal to the products of: (a)
$18.00 ; times (b) the total square feet of Net Rentable Area
actually in the Leased Premises; times (c) five (5) Lease
Years in the Lease Term. If there is an increase or decrease
in the square feet of Net Rentable Area in accordance with
Paragraph 1, the Base Rent will be adjusted according to the
preceding formula. Any such required adjustment to Base Rent
reflecting an increase or decrease in the square feet of Net
Rentable Area, shall be confirmed in an amendment to this
Lease, signed by both parties and attached hereto as a part
hereof for all purposes, which amendment will also confirm the
effective Commencement Date for all purposes hereunder.
3.2 Operating Cost Increase. In the event the Estimated Operating
Cost for any calendar year during the Lease Term exceeds the
Base Operating Cost, Tenant agrees to pay to Landlord on the
first day of the month following receipt of a statement
therefor and monthly thereafter an amount which is equal to
one-twelfth (1/12) of Tenant's Share of the excess amount.
3.3 Rent Adjustment. On or before March 15 of each calendar year
during the Lease Term, Landlord will provide Tenant a
statement of Landlord's Actual Operating Cost incurred during
the preceding calendar year. If the Estimated Operating Cost
exceeds or is less than the Actual Operating Cost for any
calendar year ending during the Lease Term, the amount of
Tenant's Share of such excess or deficiency will be added to
or credited against the subsequent installments of Additional
Rent payable during the remaining months of that calendar
year. Any sums owed by reason of such adjustment will not bear
interest and will, except with respect to final settlement on
the Expiration Date, be payable only as a reduction or
increase in the amount of Additional Rent to accrue and under
no circumstances will Rent be reduced to an amount less than
the Base Rent.
3.4 Prorations. If the Commencement Date is a date other than the
first day of a month, or if the Expiration Date is a date
other than the last day of a month, the installment of Base
Rent for the month in which such date occurs will be prorated
based on a thirty (30) day month. If any assessment for
Additional Rent is computed for a term beginning before the
Commencement Date or extending beyond the Expiration Date, the
assessment will be prorated based on a three hundred sixty
(360) day year.
<PAGE>
3.5 Late Charges. In the event Tenant fails to make timely payment
of Rent or any other amount due and owing hereunder and the
amount remains unpaid for a period of ten (10) days from such
due date, in addition to any and all other sums due and owing
herein, Landlord may collect from Tenant as Additional Rent an
administrative service fee in an amount equal to $100.00 per
day for the period of time Rent remains unpaid.
4. Construction and Definitions. Unless otherwise herein defined, the terms used
in this Lease have the meanings indicated in this Paragraph 4 and shall include
the plural as well as the singular. The word "including" shall be construed to
be followed by the words "without limitation" or "but not limited to." The words
"herein", "hereof", "hereunder", "hereafter" and other words of similar import
shall refer to this Lease as a whole and not to any particular Paragraph or
other subdivision. All references to Schedules or other attachments shall refer
to Schedules, exhibits, diagrams and special provisions attached to this Lease
and all of which are incorporated by reference herein for all purposes.
4.1 Actual Operating Cost. Operating Cost in fact incurred by
Landlord in any given calendar year.
---------------------
4.2 Additional Rent. The sums described at Paragraphs 3.2, 3.3
and 3.5 and any other amounts required to be
---------------
paid by Tenant hereunder.
4.3 Base Operating Cost. The Actual Operating Cost for calendar
year 1999.
-------------------
4.4 Base Rent. The sum described at Paragraph 3.1.
---------
4.5 Building. The structure owned by the Landlord known as "Quail
Springs Parkway Plaza - East Tower" (sometimes herein called
"East Tower") and Quail Springs Parkway Plaza - West Tower"
(sometimes herein called "West Tower") (as used herein East
Tower and West Tower are collectively called the "Building"),
are located on the following described tract of land:
A tract of land lying in the Southeast Quarter of Section 12,
Township 13 North, Range 4 West of the Indian Meridian,
Oklahoma County, Oklahoma, and being more particularly
described as follows:
Commencing at the Southwest corner of said
Southeast Quarter; THENCE North 00o20'07" West
along the West line of said Southeast Quarter a
distance of 307.43 feet to a point lying on the
North right-of-way line for West Memorial Road;
THENCE continuing North 00o20'07" West along said
West line a distance of 1222.99 feet; THENCE North
89o30'46" East a distance of 81.70 feet to a point
on the East right-of-way line for Quail Springs
Parkway, said point also being the POINT OF
BEGINNING; THENCE continuing North 89o30'46" East a
distance of 622.89 feet; THENCE South 00o29'14"
East a distance of 501.00 feet; THENCE South
89o30'46" West a distance of 103.81 feet; THENCE
South 44o30'46" West a distance of 102.53 feet;
THENCE South 89o30'46" West a distance of 403.08
feet to a point on the Easterly right-of-way line
for Quail Springs Parkway; THENCE Northerly along
said right-of-way line on the arc of a curve to the
left, said curve having a radius of 1662.16 feet (a
chord bearing North 02o24'30" West, a chord length
of 335.70 feet) an arc distance of 336.27 feet to a
point of tangent; THENCE continuing along said
right-of-way North 08o12'15" West a distance of
240.16 feet to the POINT OF BEGINNING. And contains
328,625 square feet or 7.5442 Acres, more or less.
4.6 Business Hours. The hours of operation for the Building will be 7:30 a.m.
until 5:30 p.m. every Monday --------------- through Friday and 8:00 a.m. until
12:30 p.m. on Saturdays, excluding those days designated by the government of
the United States as the following holidays, which shall be deemed outside of
the Business Hours: New Year's Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day (which for purposes of this Lease shall include the day after
Thanksgiving Day), and Christmas Day.
<PAGE>
4.7 Building Regulations. The rules and regulations adopted and
published from time to time by Landlord to promote the
convenience, peace, safety and welfare of the tenants of the
Building and to govern the Building use and the distribution
of services which are applicable to all tenants of the
Building. The current Building Regulations are set out at
Schedule "4". Any modification to the Building Regulations
shall bind Tenant upon delivery of a copy thereof to Tenant.
Landlord shall not be responsible to Tenant for the
nonperformance of any portion of the Building Regulations by
any other tenants, occupants, or invitees of the Building.
4.8 Commencement Date. The date on which the Lease Term commences as specified
at Paragraph 2, which may or ------------------ may not be the Projected
Commencement Date.
4.9 Common Areas. Parts of the Building designated by Landlord
from time to time as intended for non-exclusive common use by
the public and other tenants of the Building, including,
stairways, elevators, service corridors, delivery areas,
public restrooms, lobby entrances, and plaza areas.
4.10 Construction Agreement. Pursuant to Paragraph 5, the contract to be
executed and delivered by Landlord ----------------------- and Tenant calling
for the construction of the Leasehold Improvements by Landlord or Landlord's
designees, in substantially the form of Schedule "3".
4.11 Construction Cost. All costs incurred in constructing the
initial Leasehold Improvements, including contractors',
subcontractors', architects', engineers' and designers' fees
and expenses (including costs of Final Working Drawings), and
Landlord's construction supervision fee, all as set forth in
the Construction Agreement.
4.12 Effective Date. The date inserted on the first page of this Lease following
execution by the last party -------------- signing the counterparts of this
Lease.
4.13 Encumbrance(s). All mortgages, deeds of trust, security
agreements, collateral assignments, and other encumbrances and
all ground leases, master leases and other primary leases
which might now or hereafter affect any portion of Landlord's
interest in this Lease, the Building, the Land and/or any
other property associated therewith and all advancements
thereunder and all increases, renewals, modifications,
consolidations, replacements and extensions thereof.
4.14 Estimated Operating Cost. Landlord's good faith estimate of the Operating
Cost to be incurred in any -------------------------- given calendar year.
4.15 Expiration Date. The date when the Lease Term expires as specified at
Paragraph 2 or such earlier date ---------------- as specifically provided
herein.
4.16 Final Working Drawings. The plans, specifications and drawings for
construction of the Leasehold
------------------------
Improvements attached hereto as Schedule "2".
4.17 Governmental Authorities. All federal, state, county, and
municipal governmental bodies and agencies or
instrumentalities thereof, including all judicial,
quasi-judicial and administrative bodies, having jurisdiction
over the Land and Building, Landlord's ownership and operation
thereof, and Tenant's business and use and occupancy of the
Leased Premises and Building.
4.18 Guarantor. Any Person executing a full or partial guaranty of payment or
performance of any one or more
---------
of Tenant's obligations under this Lease.
4.19 Hazardous Material. Any hazardous or toxic substance, material
or waste, including, but not limited to, those substances,
materials and wastes listed in the United States Department of
Transportation Hazardous Materials Table or by the
Environmental Protection Agency as hazardous substances and
amendments thereto, or such substances, materials and wastes
that are or become regulated under any applicable Law.
4.20 Holder. The mortgagee, beneficiary, secured party or lessor under any
Encumbrance and such party's
------
successors and assigns.
4.21 Improvement Allowance. The credit to Tenant for Tenant's
Construction Cost incurred in the construction ---------------------- and
installation of the Leasehold Improvements, in an amount as provided in
Paragraph 5.3.
<PAGE>
4.22 Land. The tract of land upon which the Building is located
and all appurtenances thereto.
----
4.23 Landlord. TMK Income Properties, L.P., a Delaware limited
partnership, and its successors and assigns.
--------
4.24 Laws. All laws, statutes, regulations, rules, ordinances and
orders of any Governmental Authority, including common law and
rulings, decisions and interpretations of all judicial,
quasi-judicial, and administrative bodies.
4.25 Lease. This lease agreement and all subsequent amendments and
modifications, together with all schedules, exhibits, diagrams
and special provisions attached hereto or subsequently
attached hereto or thereto, and to any amendments or
modifications thereof.
4.26 Lease Term. The period of time designated at Paragraph 2
as the same might be modified from time to
----------
time by the written agreement of Landlord and Tenant.
4.27 Leased Premises. The space in the Building described at
Schedule "1" and the Leasehold Improvements
----------------
related thereto.
4.28 Lease Year. Twelve (12) complete months following the
Commencement Date and each successive twelve (12)
----------
month period thereafter during the Lease Term.
4.29 Leasehold Improvements. All improvements located within the
Leased Premises on the Commencement Date as constructed or
installed pursuant to the Final Working Drawings and the
Construction Agreement, and all subsequent alterations and
additions thereto, all of which are a part of the Building and
the property of Landlord from the time of installation and
shall be surrendered by Tenant to Landlord upon the Expiration
Date or earlier termination of this Lease.
4.30 Legal Requirements. All Laws and all recorded covenants,
conditions and restrictions to the extent that they pertain to
the access to, and maintenance, operation and occupancy of,
the Land, the Building, the Leased Premises and Tenant's
conduct of its business therein.
4.31 Net Rentable Area. The area included within the Leased
Premises as computed by Landlord on the
-------------------
following basis:
4.31.1 Entire Floor. If any portion of the Leased Premises
consists of a full floor, the area constituting a
full floor will be one hundred five percent (105%)
of the square footage enclosed within a perimeter
line constituting the midpoint of the outer wall or
the glass line of the Building, after deducting
space occupied by elevator shafts and other
vertical penetrations of the Leased Premises for
the use of other tenants of the Building but
without deducting space occupied by columns or
other intrusions into the Leased Premises which
constitute structural components of the Building.
4.31.2 Partial Floor. If the Leased Premises or any
portion thereof consists of less than a full
--------------
floor of the Building, the area thereof will be one hundred fourteen percent
(114%) of the square footage enclosed within a perimeter line constituting the
midpoint of the outer wall or the glass line of the Building and the midpoint of
the common walls separating the Leased Premises from the Common Areas or other
tenants of the Building, after deducting space occupied by elevator shafts and
other vertical penetrations of the Leased Premises for the use of other tenants
of the Building but without deducting space occupied by columns or other
intrusions into the Leased Premises which constitute structural components of
the Building.
4.32 Operating Cost. All costs incurred or to be incurred by
Landlord for any given calendar year in connection with the
management, operation, safety, security, replacement and
maintenance of the Building and the Park, the Land, the Common
Areas, all other improvements on the Land. The costs with
respect to the Building will be adjusted to reflect the
greater of actual or a minimum of ninety-five percent (95%)
occupancy of the Building and computed on an accrual basis.
<PAGE>
4.32.1 Included Costs. By way of illustration,
but not limitation, Operating Cost will include
---------------
expenditures for:
(a) Taxes;
(b) utility and sewerage charges;
(c) the Building's share of the assessments
and other expenses of Quail Springs Office
Park Owner's Association (the "Owner's
Association"), as may from time to time be
designated pursuant to recorded
declarations and other documents;
(d) the Building's share of the construction,
operation, maintenance, security and
repair of any parking areas and parking
structures, whether constructed, installed
and operated: (a) by the Owner's
Association; or (b) by any Person; and
whether available in common to all owners
of buildings within the Park or allocated
to all or one or more specified buildings
in varying proportions;
(e) cleaning (including supplies and
janitorial services);
(f) pest control;
(g) licenses, permits and inspection fees;
(h) insurance premiums;
(i) heating and cooling charges;
(j) repairs;
(k) management expenses, including management
fees and other costs paid directly by
Landlord under the terms of any real
property management agreement or
administrative services agreement and
direct costs incurred by Landlord other
than as provided in any such agreement;
(l) expenditures for personnel, including
payroll and related expenses of those
Persons directly involved with the
operation, maintenance, security and
management of the Building and the
Building's share of such expenses relating
to the Park;
(m) equipment rental;
(n) ground rental;
(o) reasonable reserves for repair and
replacement;
(p) labor;
(q) supplies;
(r) access monitoring charges attributable to
the Building;
(s) expenditures, whether by purchase or lease, for capital improvements and
capital equipment that under generally applied real estate practices are
expensed or regarded as deferred expenses and capital expenditures that are made
by reason of requirements of Law or for emergency or labor-saving devices or in
lieu of a repair, in which case such capital improvements shall be included in
Operating Costs for the calendar year in which such costs are incurred and every
subsequent calendar year, amortized on a straight-line basis over an appropriate
period with interest calculated at an annual rate of ten and one-half percent
(10-1/2%);
(t) charges of independent contractors performing work included within the
definition of Operating Costs;
<PAGE>
(u) exterior and interior landscaping not included in assessments of the Owner's
Association;
(v) all additional costs of compliance with
Laws and other Legal Requirements directly
applicable to the improvement or
alteration, maintenance and operation of
the Building, including ADA and all
environmental Laws; and
(w) legal, accounting and other professional fees and disbursements incurred in
the operation and management of the Land and Building.
4.32.2 Excluded Costs. The following will be excluded
from Operating Cost:
--------------
(a) charges which are reimbursed to Landlord for any reason, including without
limitation reimbursements of payments made from reserves previously accrued;
(b) depreciation;
(c) debt service, including interest and late
charges, except as specifically described
above;
(d) costs of constructing the Building and
initial Leasehold Improvements or the
repair and restoration thereof following
casualty loss or condemnation to the
extent reimbursed by insurance or by a
condemnation award;
(e) leasing commissions, rental concessions
and buy-outs;
(f) income, franchise and similar Taxes which
are personal to Landlord; and
(g) legal, accounting and other professional
fees incurred in preparation of leases for
tenants and prospective tenants or
otherwise not attributable to the
operation or management of the Building
and Land or for preparation of leases.
4.33 Park. The commercial mixed-use development currently known
as Quail Springs Office Park, within which
----
the Building is located.
4.34 Person. A natural person, or a corporation, partnership,
limited liability company, or any other legal
------
entity, or a Governmental Authority, as the case may be.
4.35 Rent. The sums to be paid by Tenant to Landlord as Base Rent
and Additional Rent pursuant to Paragraph 3 and such other
amounts as required to be paid by Tenant to Landlord pursuant
to the terms hereof.
4.36 Substantial Completion. The completion of the construction of
the Leasehold Improvements to the extent that the same can be
occupied by Tenant for the conduct of Tenant's business. The
completion of minor construction deficiencies or completion of
punch list items will not delay Substantial Completion.
4.37 Taxes. All (a) real and personal property and ad valorem taxes
or other tax levied in lieu of real property taxes, (b)
municipal taxes, special assessments or similar charges, and
(c) all other taxes, assessments and governmental charges
(including taxes on rents or services), levied or assessed
against the Building, the Land, or any other improvements,
fixtures or personal property owned by Landlord and located on
or incorporated into the Building. If any special assessments
are payable over a period of years, only that portion required
to be paid during a calendar year, together with interest
thereon, shall be treated as a Tax allocable to such year.
4.38 Tenant. The party executing this Lease in such capacity
and such party's permitted successors and
------
assigns.
<PAGE>
4.39 Tenant's Default or Default by Tenant. The events set forth
herein constituting a breach or default by Tenant hereunder
upon the failure of Tenant to cure the same within applicable
cure or grace periods.
4.40 Tenant's Construction Cost. That portion of the final
Construction Cost of the Leasehold Improvements to be paid by
Tenant pursuant to Paragraph 5.3, being an amount equal to the
Construction Cost minus the Improvement Allowance as adjusted
for any additional charges, credits or adjustments provided
herein or reflected in the Construction Agreement.
4.41 Tenant's Share. A fraction computed by Landlord having as the
numerator the Net Rentable Area contained within the Leased
Premises and as the denominator the Net Rentable Area for
office space in the Building. Tenant's Share is agreed by
Landlord and Tenant to be 3,978/321,312, or 1.24%, subject to
adjustment based upon the final determination of Net Rentable
Area.
50 Leasehold Improvements. Landlord and Tenant agree that the Leasehold
Improvements shall be constructed and ----------------------- installed in
accordance with the procedures and provisions set forth in this Paragraph 5.
5.1 Final Working Drawings. Landlord has prepared at Tenant's
expense Final Working Drawings for the Leasehold Improvements
to be installed on behalf of Tenant which Final Working
Drawings have been mutually approved by Landlord and Tenant
and are attached hereto as Schedule "2".
5.2 Construction Agreement. Within five (5) days after the
Effective Date Landlord will prepare and submit to Tenant the
Construction Agreement setting forth the Construction Cost.
Within five (5) days after Tenant's receipt of the
Construction Agreement and the Construction Cost, Tenant will
either: (a) approve the Construction Agreement and
Construction Cost in writing; or (b) deliver a written notice
to Landlord requesting specific changes. Thereafter Landlord
will have five (5) days within which to submit to Tenant a
revised Construction Agreement and final Construction Cost.
Landlord and Tenant agree to negotiate in good faith to reach
a mutually satisfactory Construction Agreement and
Construction Cost. In the event Landlord and Tenant are both
acting in good faith, but cannot agree on a mutually
acceptable final Construction Agreement and Construction Cost
within one hundred fifty (150) days from the Effective Date
then Landlord will have the right during a ten (10) day period
thereafter to terminate this Lease by written notice to
Tenant; and upon such notice of termination, neither Party
will have any further rights or obligations to the other
hereunder; provided, however, Tenant shall be obligated to pay
the costs incurred for preparation of the Final Working
Drawings. If no such notice of termination is given within
such 10-day period, this Lease shall continue in full force
and effect, and Landlord will have the final authority to
complete the Construction Agreement and the Construction Cost,
which Tenant shall execute within two (2) days of delivery of
the same to Tenant.
5.3 Construction. The Leasehold Improvements reflected in the
Final Working Drawings will be installed by Landlord at
Tenant's expense except that Landlord agrees to credit Tenant
with an improvement allowance against the Construction Cost in
an amount equal to the product of: (a) five and No/100 Dollars
($5.00); times (b) the square feet of Net Rentable Area in the
Leased Premises (the "Improvement Allowance"). The
Construction Cost reduced by the Improvement Allowance will be
"Tenant's Construction Cost." Subsequent to the approval and
the execution of the Construction Agreement, Landlord will
construct or cause to be constructed the Leasehold
Improvements. Landlord will have no obligation to commence
construction of the Leasehold Improvements until: (a) Landlord
and Tenant have approved the Construction Cost and executed
the Construction Agreement; and (b) Tenant has paid to
Landlord an amount equal to one-half (2) of Tenant's
Construction Cost in the amount set forth in the Construction
Agreement. The balance of Tenant's Construction Cost will be
paid by Tenant to Landlord within ten (10) days after receipt
by Tenant of written notice of the date of Substantial
Completion of the Leasehold Improvements. In the event Tenant
orders any change in or addition to the work called for by the
Final Working Drawings, all additional costs resulting
therefrom will be paid by Tenant within ten (10) days of
Tenant's receipt of an invoice from Landlord.
<PAGE>
5.4 Fixtures and Personalty. All fixtures (including trade
fixtures attached to the Leased Premises), equipment,
improvements, and appurtenances attached to, or built into,
the Leased Premises as reflected in the Final Working Drawings
or subsequently installed pursuant to any other provisions
hereof, whether by Landlord at Landlord's expense or at
Tenant's expense, or by the Tenant, shall be and remain part
of the Leased Premises and shall not be removed by Tenant at
the expiration of the Lease Term, unless otherwise expressly
provided in this Lease.
5.4.1 Fixtures. All electric ceiling and lighting
fixtures and outlets; plumbing; heating;
sprinkling; telephone, telegraph and built-in
communication systems; partitions, railings, doors,
panelling, molding, cabinetry, shelving, flooring,
floor and wall coverings; and all ventilating,
silencing, air conditioning, cooling and heating
equipment; where installed within or to interior
walls, floors and ceilings, shall be deemed as
fixtures and to comprise a part of the Leased
Premises and shall not be removed by Tenant except
as otherwise specifically provided herein.
5.4.2 Movable Items. Where not built into the Leased
Premises or attached to interior walls,
--------------
floors and ceilings, and if furnished by or at Tenant's expense without credit
by the Improvement Allowance, all readily removable electric fixtures,
non-attached carpets or rugs, electric fans, water coolers, kitchen appliances,
furniture, furnishings, movable trade fixtures and equipment shall not be deemed
fixtures and a part of the Leased Premises, and may be removed by Tenant upon
the condition that such removal does not damage the Leased Premises and upon
condition also that Tenant shall pay the cost of repairing any damage to the
Leased Premises arising from any such removal.
60 Tenant Deposit. Simultaneously with the execution of this Lease, Tenant shall
deposit with Landlord an amount equal to two (2) month's Base Rent. Such deposit
will be held by Landlord throughout the Lease Term without liability for
interest and as security for the performance by Tenant of Tenant's obligations
under this Lease. The deposit will not be considered an advance payment of Rent
or a measure of Landlord's damages for any Default by Tenant. Landlord may
commingle the deposit with Landlord's other funds and may, from time to time,
without prejudice to any other remedy, use the deposit to satisfy any arrearages
of Rent or any other obligation of Tenant hereunder. Following any such
application of the deposit, Tenant, on demand, shall restore the deposit to its
original amount and Tenant's failure to do so within five (5) days of written
notice from Landlord shall be a Default hereunder. If Tenant is not in Default
at the termination of this Lease, the balance of any such deposit remaining
after any such application will be returned to Tenant. If Landlord transfers
Landlord's interest in the Building during the Lease Term, Landlord shall assign
the deposit to the transferee and thereafter the transferor will have no further
liability with respect to any such deposit so assigned.
70 Payments. Tenant agrees to pay all Rent at the times and in the manner herein
provided. Tenant's obligation to pay Rent is an independent covenant and no act
or circumstance whatsoever (whether constituting a default by Landlord or not)
will release Tenant from the obligation to pay Rent timely or give rise to a
counterclaim, offset or deduction unless specifically otherwise provided herein.
Time is of the essence in the performance of each of Tenant's obligations
hereunder. In the event any payment of Rent is not made within five (5) days
after its due date, then Late Charges will be assessed as set forth in Paragraph
3.5 above, and in addition to Late Charges, such amount shall bear interest
daily until paid at the lesser of: (a) the rate of eighteen percent (18%) per
annum; or (b) the highest lawful rate per annum allowed under applicable Law,
with such interest accruing from the due date.
<PAGE>
80 Use. Tenant will occupy the Leased Premises continuously and in entirety and
will not use or permit any portion of the Leased Premises to be used for any
purpose other than for general office space and related administrative
activities. Tenant may not use the Leased Premises for any purpose which is
unlawful, disreputable, adversely affects Landlord's leasing of the Building or
increases the risk of casualty or the rate of fire or casualty insurance
covering the Building or its contents. In the event that any act of Tenant
results in any increase in the cost of insurance covering the Building or its
contents, Tenant agrees to pay to Landlord the amount of such increased cost as
Additional Rent. Tenant will conduct Tenant's business and will control Tenant's
agents, employees, licensees and invitees in such a manner as not to create any
nuisance, or interfere with, annoy or disturb other tenants or Landlord. Tenant
will maintain the Leased Premises in a clean and healthful condition. Tenant, at
Tenant's expense, shall comply and shall cause Tenant's agents, employees,
licensees and invitees to comply fully with: (a) the Building Regulations; (b)
all Laws pertaining to Tenant's use of the Leased Premises; (c) all other Legal
Requirements, including all applicable Laws pertaining to air and water quality,
hazardous materials, waste disposal, all emissions and other environmental
matters; and (d) all zoning and other land use matters and with any directive of
any Governmental Authority, pursuant to Law, which shall impose any duty upon
Landlord or Tenant with respect to the use or occupancy of the Leased Premises.
Tenant will not erect or install any sign or other type of display whatsoever,
either upon the exterior of the Building or on the Land, upon or in any window
of the Building, or any Common Area, without the prior written consent of
Landlord, which may be granted or withheld in Landlord's sole discretion. Any
signs or other type of display which Tenant installs without Landlord's prior
written consent may be removed by Landlord and Tenant shall reimburse Landlord
for such cost promptly upon receipt of an invoice from Landlord.
90 Americans With Disabilities Act Requirements. Landlord is responsible for and
will maintain the Common Areas of the Building in substantial compliance with
the public accommodations provisions of Title III of the Americans With
Disabilities Act of 1990, as amended (the "ADA"), and Landlord shall bear the
cost of any improvements, repairs, renovations or modifications to the Common
Areas that may from time to time be required to bring the Building into
compliance or maintain the Building's compliance with Title III of the ADA.
Tenant shall indemnify and hold Landlord harmless from and against any losses,
costs, damages or claims of whatever nature, arising out of or in connection
with the compliance requirements set forth in the ADA, as amended, relating to
the use and occupancy of the Leased Premises and/or alteration and/or renovation
of the Leasehold Improvements, including, but not limited to, any changes
necessitated because of the specific needs of Tenant's employees.
100 Landlord's Services and Other Obligations. Landlord and Tenant hereby agree
as follows:
-----------------------------------------
10.1 Standard Services. So long as Tenant is not in Default and
subject to the limitations prescribed by the Building
Regulations, Landlord agrees to furnish to Tenant during the
Business Hours the following services: (a) access to running
water at the points of supply generally provided in the
Building and in reasonable quantities consistent with
customary office usage; (b) heated and refrigerated air
conditioning at such times, temperatures and in such amounts
as Landlord regularly provides to tenants of the Building
(specifically excluding, however, service, if necessary, for
the operation of Tenant's supplemental heating, ventilation
and air conditioning system for Tenant's computer equipment or
similar high electricity consumption equipment, if any, all of
which is considered excess service and will be provided at
additional cost to Tenant in accordance with the following
subparagraph); (c) elevator service in common with other
tenants of the Building; (d) access to electrical power for
normal occupancy and general office use (i) at a capacity of
up to two and one-half (2.5) watts per month per square foot
of Net Rentable Area on 120 volt for power distribution
through outlets and for non-277 volt lighting fixtures; and
(ii) for 277-volt lighting at capacities Landlord reasonably
determines and Tenant agrees to be appropriate for normal
occupancy and general office use; (e) janitorial services as
Landlord regularly provides to other tenants of the Building;
(f) ordinary maintenance services as Landlord determines to be
reasonably required to maintain the exterior and mechanical
systems of the Building and the Common Areas; (g) electric
lighting for the Common Areas in the manner and to the extent
deemed by Landlord to be reasonably required; and (h) main
telephone service to the Building, such service to be made
available in a telecommunications equipment area located on
same floor of the Building as the Leased Premises.
10.2 Excess Services. To the extent Tenant requests, uses or
requires services: (a) in excess of the services regularly
provided by Landlord pursuant hereto, or (b) requests, uses or
requires services at times other than when such services are
regularly provided by Landlord pursuant hereto; then Tenant
agrees to pay to Landlord as Additional Rent such charges as
Landlord might from time to time prescribe for such additional
services.
<PAGE>
10.2.1 Excess Electricity Requirements. Tenant shall pay monthly in arrears as
Additional Rent for --------------------------------- any electrical consumption
costs in excess of the levels set forth in Paragraph 10.1 above. Consumption of
electricity supplied to the Leased Premises under subparagraph 10.1(d)(i) above
shall be separately metered through a meter installed by Landlord at Tenant's
expense and Tenant shall pay Landlord's actual costs incurred in connection with
the furnishing of such excess electrical consumption. Consumption of electricity
supplied to the Leased Premises under subparagraph 10.1(d)(ii) above shall be
monitored by the Building's lighting control system. All 277-volt lighting
service beyond the Business Hours of the Building relating to the Leased
Premises will be monitored by the lighting control system and will be billed
monthly to Tenant as Additional Rent, in an amount equal to Landlord's actual
costs incurred in connection with the furnishing of such excess lighting
service, payable in arrears. Unless previously included, installed and paid
pursuant to the Final Working Drawings, Tenant shall pay the cost of installing,
servicing and maintaining any special or additional lines, risers or other
equipment that may be required for Tenant's computer, electro-data processing or
other equipment requiring high electrical consumption, all of which will be
installed under Landlord's supervision.
10.2.2 Excess HVAC Services. Heating, ventilation and air conditioning services
("HVAC Services") -------------------- provided to the Leased Premises by
Landlord to Tenant beyond the Business Hours of the Building and not separately
metered will be monitored by Landlord's HVAC control system and will be provided
to Tenant at rates and charges established, from time to time, by Landlord for
such excess HVAC Services. On the Commencement Date, the initial rate and charge
for additional HVAC Service is Thirty Dollars ($30.00) per hour for the time
period beyond the Business Hours of the Building in which such additional HVAC
Service is provided. All invoices for Additional Rent attributable to excess
HVAC Services will be due and payable within five (5) days after receipt thereof
by Tenant.
10.3 Landlord's Services and Repairs. Landlord shall make all
inspections and repairs to the mechanical, electrical,
plumbing and HVAC systems within the Building or providing
service to the Leased Premises as customarily required for
such equipment to be functional for their intended purposes.
Landlord will promptly endeavor to repair any malfunction of
such equipment when required following any notice of
malfunction from Tenant, but the failure to any extent to
furnish or any stoppage or interruption of the foregoing
services will not render Landlord liable in any respect for
damages to Tenant or any other Person or be construed as an
eviction of Tenant or entitle Tenant to any abatement of Rent
or relieve Tenant from performing any obligation contained
herein. Tenant will promptly notify Landlord of any damage or
malfunction of such systems of which Tenant has knowledge. Any
such repairs made necessary by the act, neglect, fault or
omission of Tenant or Tenant's agents, employees, invitees, or
visitors shall be made by Landlord at Tenant's expense; and
Tenant promptly shall remit such cost to Landlord, as
Additional Rent, upon written demand therefor.
10.4 Landlord's Reservation. Notwithstanding the foregoing,
Landlord reserves the right, without any liability to Tenant
and without being in breach of any covenant or agreement of
this Lease, to temporarily interrupt or discontinue all or any
portion of Landlord's services hereunder at such times, and
for so long as may be necessary in Landlord's reasonable
judgment by reason of accident, unavailability of employees,
strikes, riots, acts of God or other events beyond the control
of Landlord. Reasonable advance notice shall be given to
Tenant for any anticipated interruption.
110 Quiet Enjoyment. If Tenant pays Rent herein reserved and performs the
obligations of Tenant hereunder, Tenant
----------------
will peacefully hold and enjoy the Leased Premises throughout the Lease Term.
120 Insurance. Tenant and Landlord shall each maintain during the Lease Term, at
their respective expense, the insurance coverages provided in this Paragraph 12.
<PAGE>
12.1 Tenant's Insurance. Tenant will maintain the following policy
or policies of insurance insuring Tenant and naming Landlord
as an additional insured: (a) fire and extended coverage
insurance covering the Leased Premises, the Leasehold
Improvements and Tenant's property located in the Leased
Premises for the full replacement cost thereof; and (b)
commercial general liability insurance, including contractual
liability insurance, for injury to or death of any person
occasioned by or arising out of or in connection with
occupancy of the Leased Premises, the limits of such policy or
policies to be in an amount of not less than $1,000,000.00
with respect to injuries to or death of any one person and in
an amount of not less than $3,000,000.00 with respect to any
one occurrence. 12.1.1 Evidence of Coverage. Tenant will
furnish to Landlord on or before the Commencement Date a
certificate of insurance satisfactory to Landlord
confirming the maintenance of such insurance and
the payment of all premiums. Renewal certificates
or copies of renewal policies will be delivered to
Landlord at least thirty (30) days prior to the
expiration of any policy. Tenant will obtain a
written obligation on the part of each insurance
company to notify Landlord at least ten (10) days
prior to cancellation of such insurance.
12.1.2 Carriers. All insurance required under this
Paragraph shall be issued by insurance companies
licensed to do business in the State of Oklahoma
and acceptable to Landlord.
12.2 Landlord's Insurance. Landlord will maintain the following
policy or policies of insurance: (a) fire and extended
coverage insurance covering the Building and the Common Areas
for the full insurable value thereof; and (b) commercial
general liability insurance insuring injury to or death of any
person occasioned by or arising out of or in connection with
the ownership, maintenance, management, leasing and operation
of the Building, the limits of such policy or policies to be
in an amount of not less than $1,000,000.00 with respect to
injuries to or death of any one person and in an amount of not
less than $3,000,000.00 with respect to any one occurrence.
12.3 Waiver of Certain Claims. Each of the parties hereby releases
the other from all liability for damage due to any act or
neglect of the other (except as hereinafter provided)
occasioned to property owned by said parties which is or might
be incident to or the result of any casualty for which either
of the parties is now carrying, is required by this Lease to
carry or may hereafter carry insurance; provided, however, the
releases herein contained shall not apply to any loss or
damage occasioned by the deliberate, harmful act of either of
the parties hereto or their agents, employees, or other
Persons acting on their behalf. Landlord and Tenant further
agree that any insurance they obtain pursuant hereto shall
contain an appropriate provision whereby the insurance
company, or companies, consent to the mutual release of
liability contained in this Paragraph and waive all right of
recovery by way of subrogation against Landlord or Tenant in
connection with any loss or damage covered by any such
policies. Upon request by either party, Tenant or Landlord
shall provide the other with proof of insurance containing
evidence of the insurer's acknowledgment of the provisions of
this Paragraph 12.3.
130 Acceptance. By taking possession of the Leased Premises, Tenant will be
deemed conclusively to have accepted the Leased Premises (including the
Leasehold Improvements) as being in substantial compliance with the Final
Working Drawings and as suitable for the purposes for which the same are leased,
to have accepted the Building and to have waived any defects therein, excepting
latent defects; subject, however, to the completion by Landlord within a
reasonable time after occupancy by Tenant of certain minor details or
deficiencies to the Leasehold Improvements reflected on a written punchlist
submitted by Tenant to Landlord within ten (10) days after the date of
Substantial Completion.
140 Maintenance and Alterations. Landlord and Tenant agree as follows:
---------------------------
<PAGE>
14.1 Landlord's Responsibilities. Subject to the provisions herein
regarding damage by fire or other casualty and to the
provisions of Paragraph 14.2, Landlord agrees to maintain the
Building and Common Areas in good order and repair and to make
all necessary structural repairs to the Building, including
the Leased Premises, as and when required. Landlord reserves
the right to connect to, maintain and repair pipes, ducts,
conduits, cables, plumbing, vents and wiring in, to and
through the Leased Premises as and to the extent Landlord
deems reasonably necessary, convenient or appropriate for the
proper operation and maintenance of the Building (including
the servicing of other tenants therein). Landlord shall not be
liable to Tenant for any damage or inconvenience and Tenant
shall not be entitled to any abatement or reduction of Rent by
reason of any repairs, alterations or additions made by
Landlord.
14.2 Tenant's Maintenance Obligations. Tenant will, at Tenant's
expense, maintain the non-structural portions of the interior
of the Leased Premises in sound condition and good repair.
Additionally, upon prior written approval of Landlord, Tenant
will repair or replace any damage done to the Building or the
Leased Premises by Tenant or Tenant's agents, employees,
licensees or invitees. Tenant will not commit or allow any
waste or damage to be committed on any portion of the Leased
Premises. If Tenant fails to make such repairs promptly,
Landlord, at Landlord's option, may make such repairs and
Tenant shall pay Landlord as Additional Rent, within five (5)
days following receipt of an invoice therefor, Landlord's
actual costs incurred in making the repairs plus a supervision
fee equal to ten percent (10%) of such cost to cover
Landlord's overhead.
14.3 Alterations. Tenant will make no alterations or additions to
the Leased Premises without the prior written consent of
Landlord. Any approved alterations or additions shall be
undertaken in compliance with the provisions of Schedule "5".
Tenant shall make no modifications or alterations to the
Building structure and systems without Landlord's prior
written approval, which Landlord may grant or withhold in
Landlord's sole discretion.
14.4 Work Performance. All repairs and permitted alterations or
additions to the Leased Premises will be performed by Landlord
or Persons designated by Landlord, or by Tenant or by Persons
designated by Tenant and approved by Landlord, at Tenant's
expense. If the projected costs for such repairs and permitted
alterations or additions to the Leased Premises are estimated
to exceed $5,000 Landlord shall obtain bids from at least two
parties and shall accept the lowest bid; provided, however,
Landlord shall not be required to accept the lowest bid if
Landlord, in Landlord's professional judgment, has a
reasonable basis to question the accuracy and industry
standard of the bid pricing and Landlord advises Tenant of the
reasoned basis on which Landlord questions the bid.
150 Assignment; Subletting. Tenant will not assign or encumber this Lease or any
interest herein or sublet the Leased Premises in whole or in part or suffer any
other person to occupy the Leased Premises or any portion thereof without the
prior written consent of Landlord. Any such assignment, encumbrance, subletting
or occupancy without such consent will be void. If Tenant desires to assign or
encumber this Lease or sublet the Leased Premises or any part thereof, Tenant
will give Landlord written notice of such desire specifying the name of the
proposed assignee, mortgagee, or sublessee, the proposed effective date and all
other terms of the proposed assignment, encumbrance or sublease at least sixty
(60) days prior to the date such assignment, encumbrance or sublease is proposed
to be effective. Landlord will have the option for a period of thirty (30) days
after receipt of such notice to: (a) terminate this Lease as of the proposed
effective date specified by Tenant as to all or the portion of the Leased
Premises affected; or (b) permit Tenant to assign, encumber or sublet such
portion of the Leased Premises; or (c) refuse to consent to the proposed
assignment, encumbrance or subletting and continue this Lease in effect as to
the entire Leased Premises. The failure by Landlord to exercise any of the
foregoing options within the time provided will be deemed an exercise of option
(c) above. Notwithstanding any consent granted by Landlord, Tenant and each
assignee, mortgagee, and sublessee will at all times remain fully liable for the
payment of Rent and for the performance of Tenant's obligations hereunder. No
consent granted by Landlord will constitute a waiver of the provisions of this
Lease except as to the specific instance covered thereby. Tenant shall pay for
the costs of Landlord's expenses in reviewing the proposal and drafting the
necessary documents, if any, including reasonable attorney fees incurred by
Landlord.
<PAGE>
160 Condemnation. If the Leased Premises or the Building is taken or condemned
in whole or part for any public use or purpose by right of eminent domain or is
transferred by agreement in connection with or in lieu of or under threat of
condemnation, the Lease Term and the leasehold estate created hereby will, at
the option of Landlord, terminate as of the date title vests in the condemnor or
transferee. Landlord will receive the entire award from such taking (or the
entire compensation paid on account of any transfer by agreement). Tenant will
have no claim to any such award and Tenant assigns any right it might have to
recover any money by the taking to Landlord. Tenant, however, shall be entitled
to claim, prove and receive in any condemnation proceeding such awards as may be
allowed under applicable Laws for fixtures and other equipment installed by
Tenant, but only if such award shall be made by the court in addition to (and
shall in no manner whatsoever reduce) the award made by the court to Landlord
for the Land and Building (including the Leasehold Improvements) or part thereof
so taken.
170 Casualty. The following provisions shall apply to damage or destruction to
the Building or the Leased Premises.
--------
17.1 Damage to Leased Premises Only. If the Leased Premises are
damaged by fire or other casualty, Tenant shall give prompt
written notice thereof to Landlord. If such damage cannot be
repaired within one hundred eighty (180) days from the date of
such casualty (as estimated by Landlord as soon as reasonably
practicable after the occurrence of such damage), this Lease,
at the option of either, exercised by giving written notice
thereof to the other within sixty (60) days after the
occurrence of such damage, will terminate as of the date such
notice is given. On such termination Tenant will pay Rent and
all other obligations of Tenant apportioned to the date on
which such damage occurred and will immediately surrender the
Leased Premises to Landlord. If the damage can be repaired
within one hundred eighty (180) days, or if the damage cannot
be repaired within one hundred eighty (180) days but neither
Landlord nor Tenant exercises the option to terminate this
Lease, Landlord will make the necessary repairs to the Leased
Premises and Leasehold Improvements, at Tenant's expense (to
the extent not covered by the proceeds of insurance carried by
either party pursuant to the terms hereof), and this Lease
will continue in effect, but Rent will be equitably reduced or
abated (as determined in the good faith judgment of Landlord)
until such repairs are made. Rent will not be abated or
reduced so long as Tenant's continued occupancy of the Leased
Premises is not materially interrupted.
17.2 Damage to Building. If the Building, but not the Leased
Premises, shall be so damaged by casualty that substantial
alteration or reconstruction of the Building shall, in
Landlord's sole judgment, be required or in the event of any
material uninsured loss to the Building, Landlord may, at
Landlord's option, terminate this Lease by notifying Tenant in
writing of such termination within one hundred eighty (180)
days after the date of casualty. On such termination Tenant
will pay Rent and all other obligations of Tenant apportioned
to the date of termination and Tenant will immediately
surrender the Leased Premises to Landlord. If Landlord does
not exercise the option to terminate this Lease within one
hundred eighty (180) days following such casualty, Landlord
will repair and restore the Building and the Common Areas at
Landlord's expense. Rent will not be abated or reduced during
such restoration or repair so long as Tenant's continued
occupancy of the Leased Premises is not materially
interrupted.
17.3 Damage to Building and Leased Premises. If damage to the
Building also includes damage to the Leased Premises and if
Landlord has not elected to terminate this Lease pursuant to
Paragraph 17.1, Landlord shall commence and proceed with
reasonable diligence to restore the Building, including the
Leased Premises, to substantially the same condition in which
it was immediately prior to the casualty. Landlord's
obligation to restore the Building shall not exceed the scope
of work required to be done by Landlord in originally
constructing the Building, nor shall Landlord be required to
spend for such restoration an amount in excess of insurance
proceeds actually received by Landlord as a result of the
casualty. All cost and expense of restoring the Leased
Premises and the Leasehold Improvements (to the extent not
covered by the proceeds of insurance carried by either party
pursuant to the terms hereof) shall be paid by Tenant.
17.4 No Liability. Landlord shall not be liable to Tenant for any
inconvenience or annoyance to Tenant or injury to the business
of Tenant resulting in any way from such damage or Landlord's
restoration work other than abatement of Rent as and when
applicable in accordance with this Paragraph 17.
Notwithstanding anything herein to the contrary, if the Leased
Premises or any other portion of the Building is damaged by
any casualty resulting from the fault or negligence of Tenant
or any of Tenant's agents, employees, or invitees, the Rent
hereunder shall not abate and Tenant shall be liable to
Landlord for the cost of repair and restoration of the
Building and Leased Premises to the extent such cost and
expenses are not covered by insurance proceeds.
<PAGE>
180 Entry. Landlord and Landlord's agents, employees and contractors will have
the right to enter the Leased Premises at all reasonable hours (or, in any
emergency, at any hour), to inspect, clean, repair or alter the Leased Premises
as Landlord may deem necessary or to comply with Legal Requirements. Tenant will
not be entitled to any abatement or reduction of Rent by reason thereby nor
shall any such entry for such purposes constitute an actual or constructive
eviction of Tenant. Landlord may also enter the Leased Premises at any time upon
reasonable notice to Tenant to conduct economic appraisal of the Building or to
show the Leased Premises to prospective purchasers, mortgagees, and tenants.
190 Security Interest. For valuable consideration and as security for the
payment of Rent and all other obligations of Tenant under this Lease, Tenant
hereby grants Landlord a security interest in all of Tenant's equipment,
furnishings, inventory, trade, fixtures, accounts receivable and intangible
property and all proceeds and products from such property located in or arising
out of Tenant's use of the Leased Premises (all such property is referred to as
"Collateral"). Upon the occurrence of a Default in any provision of this Lease,
Landlord shall be entitled to all remedies of a secured creditor under the
Uniform Commercial Code of the State of Oklahoma. Tenant agrees that adequate
notice of any public or private sale of Collateral under the Uniform Commercial
Code shall be five (5) days prior notice. Tenant agrees to sign any financing
statement, amendment, or continuation statement, Landlord may present to Tenant
covering the Collateral within ten (10) days of presentment. Tenant hereby
appoints Landlord as Tenant's attorney-in-fact to sign and file any and all such
financing statements, amendments or continuation statements at the expense of
Tenant in the event Tenant fails to do so.
200 Surrender of Leased Premises. Upon the Expiration Date or other termination
of this Lease, Tenant shall quit and surrender the Leased Premises, together
with all items comprising the Leasehold Improvements as set forth in Paragraph
5.4 herein, and such Leased Premises shall be broom clean and in good condition
and repair, reasonable wear and tear excepted. Tenant shall ascertain from
Landlord at least thirty (30) days prior to the Expiration Date or other
termination of this Lease whether Landlord requires Tenant to restore the Leased
Premises or any particular part thereof to the condition which existed at the
Commencement Date. Upon notification from Landlord, Tenant, at Tenant's sole
cost and expense, shall restore the same before the Expiration Date or other
termination date and Tenant shall remove from the Leased Premises all property
Tenant is entitled to remove under Paragraph 5.5 together with any alterations,
additions, and improvements which Landlord has given Tenant written instructions
to remove. Tenant, at Tenant's expense, shall immediately repair any damage to
the Leased Premises resulting from the removal of Tenant's unattached, movable
property or property Landlord has given Tenant written instructions to remove,
unless such damage is caused by Landlord's negligence. If the Leased Premises
are not surrendered as provided herein, Tenant shall indemnify Landlord against
any loss or liability resulting from the delay of Tenant in surrendering the
Leased Premises including, without limitation, any claims made by any succeeding
tenant whose occupancy of the Leased Premises has been delayed. Tenant's
obligation under the preceding sentence shall survive the Expiration Date or
other termination of the Lease.
20.1 Holding Over. If Tenant continues to occupy the Leased
Premises after the Expiration Date or other termination of the
Lease, such holding over will, unless otherwise agreed by
Landlord in writing, constitute a month to month tenancy and
Tenant shall pay to Landlord an amount equal to twice the
amount of Rent payable during the last month prior to the
scheduled Expiration Date or other termination of the Lease
and be subject to all of the other provisions set forth
herein.
<PAGE>
20.2 Abandoned Property. Landlord may, at Landlord's option, take
possession of all personal property not removed by Tenant from
the Leased Premises if no employee of Tenant enters the Leased
Premises for a period of twenty (20) days or if Landlord
receives notice or has a reasonable belief Tenant has
abandoned or failed to continue to occupy, the Leased
Premises. Additionally, any personal property not removed by
Tenant within five (5) days of the Expiration Date, or any
other termination of the Lease, will be conclusively presumed
to have been abandoned by Tenant. On the occurrence of any
such event Landlord may remove and store such property, at the
expense of Tenant, without being liable to Tenant therefor.
Landlord will thereafter comply with all notice requirements,
as applicable, and other procedures required by the Law of the
State of Oklahoma with respect to the disposition of abandoned
or unclaimed property and notify Tenant in writing, at the
notice address herein set forth or as otherwise required by
Law, of such event and if Tenant fails to recover such
property from Landlord within thirty (30) days after such
notice, Landlord may dispose of such property in any
commercially reasonable manner permitted by such Laws and
apply any net proceeds, after deducting any actual and direct
costs and fees incurred in securing, storing and selling such
property, against any Rent or other amounts due hereunder, or
if no amounts are due Landlord hereunder, then to Tenant.
210 Default. The following events shall be deemed to be events of default by
Tenant under this Lease ("Tenant Defaults" or "Default") if not cured within the
applicable cure period.
21.1 Monetary Default. Tenant's failure to pay any Rent or other sums payable by
Tenant hereunder within ----------------- five (5) days from the due date.
21.2 Non-Monetary Defaults. Tenant's failure to cure any of the following events
within thirty (30) days ----------------------
after written notice thereof to Tenant:
(a) material failure to comply with any term of this
Lease or the Building Regulations to be observed by
Tenant other than non-payment of any Rent when due;
(b) failure by Tenant to continue to occupy all of the
Leased Premises and to conduct and operate Tenant's
business within the Leased Premises during the
Business Hours of the Building for a period of more
than three (3) consecutive days;
(c) Tenant's abandonment of the Leased Premises;
(d) discovery of any material misrepresentation or omission made with respect to
Tenant's disclosure of Tenant's financial condition as submitted by Tenant to
Landlord; or
(e) the making by Tenant of a transfer in fraud of creditors or an assignment
for the benefit of
creditors.
21.3 Other Defaults. The following events shall also be deemed events of default
by Tenant if the same are
---------------
not dismissed within sixty (60) days of the filing thereof:
(a) the filing by or against Tenant of any proceeding under the federal
bankruptcy act or any
similar Law;
(b) the adjudication of Tenant as bankrupt or insolvent in proceedings filed
under the federal bankruptcy act or any similar Law; or
(c) the appointment of a receiver for Tenant or for any assets of Tenant.
220 Remedies. On the occurrence of any Default, Landlord has the option to do
any one or more of the following without any further notice or demand, in
addition to and not in limitation of any other remedy permitted by Law, in
equity, or by this Lease:
22.1 Application of Tenant Deposit. Landlord may apply Tenant's deposit held by
Landlord against any amounts ----------------------------- owing or to pay part
or all of the cost of remedying the Default.
22.2 Termination. Landlord may terminate this Lease by written
notice, in which event Tenant will immediately surrender the
Leased Premises to Landlord (in accordance with the provisions
set forth hereinabove), but if Tenant fails to do so, Landlord
may without notice and without prejudice to any other remedy
Landlord might have, enter and take possession of the Leased
Premises and remove Tenant and Tenant's property therefrom
without being liable to prosecution or any claim for damages
therefor.
<PAGE>
22.3 Reletting. Landlord may enter and take possession of the
Leased Premises without terminating this Lease and without
being liable to prosecution or any claim for damages therefor,
and Landlord may change the locks on the doors to the Leased
Premises to exclude Tenant therefrom and immediately
discontinue furnishing any utilities and other services
Landlord has been providing. If Landlord terminates Tenant's
possession of the Leased Premises, either with or without
terminating the Lease, then either: (a) the aggregate amount
of the Base Rent for the remainder of the Lease Term shall at
once mature and be immediately due and payable by Tenant to
Landlord, and Landlord shall have the right to immediate
recovery of all such amounts, together with interest thereon
as provided hereinabove; or (b) Landlord may relet the Leased
Premises either in the name of Landlord or as the agent of
Tenant and receive the rent therefor, in which event Tenant
will pay to Landlord, on demand, the costs of renovating,
repairing and altering the Leased Premises and any deficiency
that might arise by reason of such reletting. Such reletting,
if undertaken at Landlord's sole discretion, may be for such
term or terms (which may be greater or less than the then
balance of the Lease Term hereunder) and on such conditions
(which may include concessions or free rent) as Landlord in
Landlord's absolute discretion may determine. Landlord will
have no duty to relet the Leased Premises and the failure of
Landlord to relet the Leased Premises will not release or
affect Tenant's liability for Rent or for damages determined
as provided hereinbelow. In addition, Landlord shall have the
right, from time to time, to recover from Tenant all
Additional Rent thereafter accruing pursuant to Paragraph 3.2.
22.4 Rents from Reletting. Landlord may collect the rents from any
reletting and apply the same in the following order: (a) the
payment of the cost and expenses of reentry (including
reasonable attorney's fees), redecoration, repair and
alterations; and (b) to the payment of Rent accrued and to
accrue hereunder. Any excess shall belong solely to Landlord.
Landlord may, at any time and from time to time, sue and
recover judgment for any deficiencies remaining after the
application of the proceeds of reletting as provided above.
22.5 No Abatement. Any action committed by Landlord pursuant to this Paragraph
shall in no way cause or ------------- result in any abatement of Rent or any
other charge payable by Tenant under this Lease.
22.6 Liquidated Damages. Landlord may require Tenant to pay liquidated damages
in an amount equal to the sum ------------------- of the following:
(a) an amount equal to the product of:
(i) the sum of:
(aa) the monthly Base Rent; plus
(bb) the amount of Tenant's portion of the increase in Operating Cost
as determined under Paragraph 3.2 for the month in which the Default
occurs; times:
(ii) the average length of time that it has taken Landlord to lease
comparable space within the Park;
plus
(b) the then reasonable average cost of remodeling office space within
the Park (including a 10% supervision fee;
plus
(c) the attorney fees and other costs incurred by Landlord through the earlier
of: (i) the date of obtaining a judgment against Tenant for the liquidated
damages; or (ii) Tenant's voluntary payment of the liquidated damage amount as
determined hereunder;
plus
(d) the unamortized balance of Tenant's Construction
Cost loan, if any, owing by Tenant to Landlord
pursuant to Paragraph 5.
Nothing herein contained shall limit or prejudice the right of
Landlord to prove for and obtain as liquidated damages by
reason of such termination, an amount equal to the maximum
allowed by any Law in effect at any time when, and governing
the proceedings in which, such damages are to be proved,
whether or not such amount be greater, equal to, or less than
the amount of the difference referred to above.
<PAGE>
22.7 Option to Perform. Landlord may perform or cause to be
performed, but is under no obligation to perform, the
obligations of Tenant under this Lease and may enter the
Leased Premises to accomplish such purpose without being
liable to prosecution or any claim for damages therefor.
Tenant agrees to reimburse Landlord on demand for any expense
or cost, including reasonable attorneys' fees, which Landlord
might or does incur in effecting compliance with this Lease on
behalf of Tenant. Tenant further agrees that Landlord shall
not be liable or responsible for any loss, inconvenience,
annoyance or damage resulting to Tenant or anyone holding
under Tenant for any action taken by Landlord pursuant to this
Paragraph 22, whether caused by the negligence of Landlord or
otherwise.
22.8 Attorney Fees. If Landlord is the prevailing party in any
action under this Lease as a result of Tenant's Default or
consults or places this Lease or any amount payable by Tenant
hereunder with an attorney for the enforcement of any of
Landlord's rights hereunder, Tenant agrees in each such case
to pay to Landlord the reasonable fees and other expenses
incurred by Landlord in connection therewith (including
without limitation, all costs and reasonable attorney's fees
incurred by Landlord in enforcing and collecting on any
judgment rendered against Tenant in Landlord's favor) to the
extent permitted by Law.
22.9 Reservation of Rights. The rights granted to or reserved by
Landlord in this Lease are cumulative of every other right or
remedy which Landlord might otherwise have at law or in equity
and the exercise of one or more rights or remedies will not
prejudice the concurrent or subsequent exercise of other
rights or remedies.
22.10 Landlord Non-Waiver of Remedies. No action by Landlord during
the Lease Term will be deemed an acceptance of an attempted
surrender of the Leased Premises and no agreement to accept a
surrender of the Leased Premises will be valid unless made in
writing and signed by Landlord. No re-entry or taking
possession of the Leased Premises by Landlord will be
construed as an election by Landlord to terminate this Lease,
unless a written notice of termination is given to Tenant.
Notwithstanding any such reletting, re-entry or taking
possession, Landlord may at any time thereafter elect to
terminate this Lease for a previous Default. Landlord's
acceptance of Rent following the occurrence of a Default will
not be construed as Landlord's waiver of such Default. No
waiver by Landlord of any Default will be deemed to constitute
a waiver of any other or future Default hereunder. Forbearance
by Landlord to enforce one or more of the remedies herein
provided will not be deemed to constitute a waiver of any
Default. The failure of Landlord to enforce the Building
Regulations against Tenant or any other tenant in the Building
will not be deemed a waiver thereof. No provision of this
Lease will be deemed to have been waived by Landlord unless
such waiver is in writing signed by Landlord.
23. Landlord's Transfer. In the event Landlord transfers Landlord's interest in
the Building, Landlord will thereby be released from any further obligation
hereunder and the transferee will thereafter be liable for the performance of
any obligations of Landlord hereunder and Tenant agrees to attorn and look
solely to the transferee for the performance of such obligations. The agreement
of Tenant to attorn to the transferee of Landlord will survive any termination
of rights of Landlord in the Building and Tenant agrees to execute and deliver
to the transferee or Landlord from time to time within ten (10) days after
written request therefor all instruments which might be required by Landlord to
confirm such attornment.
24. Subordination. This Lease and all rights of Tenant hereunder will, at
Landlord's option, be subject and subordinate to all Encumbrances. Tenant agrees
to execute and deliver to Landlord from time to time within ten (10) days after
written request by Landlord all instruments which might be required by any
Holder to confirm such subordination. Notwithstanding the foregoing, Tenant
agrees that any Holder will have the right at any time to subordinate any rights
of such Holder to the rights of Tenant under this Lease on such terms and
subject to such conditions as such Holder deems appropriate in such Holder's
absolute discretion.
<PAGE>
25. Certificates. Tenant agrees to execute and deliver from time to time within
ten (10) days after written request by Landlord a certificate, to the extent
true or except as otherwise set forth in the certificate, certifying that: (a)
Tenant has entered into occupancy of the Leased Premises and is presently open
and conducting Tenant's business with the public in the Leased Premises; (b) the
amount of Base Rent payable by Tenant hereunder; (c) this Lease is in full force
and effect and has not been assigned, modified, supplemented or amended; (d)
neither Landlord nor Tenant is in default hereunder; (e) this Lease represents
the entire agreement between Landlord and Tenant pertaining to the Leased
Premises; (f) the Expiration Date; (g) all conditions under this Lease to be
performed by Landlord have been satisfied; (h) no Rent has been paid more than
thirty (30) days in advance of its due date; (i) no defense or offset currently
exists or is claimed by Tenant against Landlord or against enforcement of this
Lease by Landlord; (j) the address for notices to be sent to Tenant is as set
forth in such certificate or at the Leased Premises; (k) Tenant will look only
to Landlord for return of any deposit hereunder; (l) and such other
certifications which might reasonably be required by Landlord. The certificate
will also contain an agreement by Tenant with Holder that after the date of such
certificate, Tenant will not: pay any Rent more than thirty (30) days in advance
of its due date; surrender or consent to the modification, amendment or
termination of this Lease by Landlord without the prior written consent of the
Holder; or seek to terminate this Lease by reason of any default by Landlord
until Tenant has given thirty (30) days prior written notice of such default to
Holder and such default shall not have been cured within a reasonable time after
giving such notice. Tenant will furnish to Landlord from time to time when
requested by Landlord a statement of the financial condition of Tenant prepared
by an independent, certified public accountant the chief financial officer of
Tenant in form reasonably satisfactory to Landlord.
26. Hazardous Materials. Tenant shall not cause or permit any Hazardous Material
to be brought upon, kept or used in or about the Building or the Leased Premises
by Tenant, its agents, employees, contractors or invitees without the prior
written consent of Landlord, which Landlord shall not unreasonably withhold as
long as Tenant demonstrates to Landlord's reasonable satisfaction that such
Hazardous Material is necessary or useful to Tenant's business and will be used,
kept and stored within the Leased Premises in a manner that complies with all
Laws regulating any such Hazardous Material.
26.1 Indemnification. If Tenant breaches the obligations of this
Paragraph, or if the presence of Hazardous Material within the
Building or the Leased Premises caused or permitted by Tenant
results in contamination of the Leased Premises, or if
contamination of the Building or the Leased Premises by
Hazardous Material otherwise occurs for which Tenant is
legally liable to Landlord for damage resulting therefrom,
then Tenant shall indemnify, defend and hold Landlord harmless
from any and all claims, judgments, damages, penalties, fines,
costs, liabilities or losses incurred by Landlord (including
diminution in value of the Leased Premises, damages for the
loss or restriction on use of rentable or usable space or of
any amenity of the Leased Premises, damages arising from any
adverse impact on marketing of space, and sums paid in
settlement of claims, attorneys' fees, consultant fees and
expert fees) which arise during or after the Lease Term as a
result of such contamination. This indemnification of Landlord
by Tenant includes costs incurred by Landlord in connection
with any investigation of site conditions and any action to
remedy any contamination of the Land, Building or Leased
Premises (a "Discharge"), including any clean-up, remedial,
removal or restoration work required by any Governmental
Authority because of Hazardous Material present in the soil or
ground water on or under the Land. Without limiting the
foregoing, if the presence of any Hazardous Material within
the Building or the Leased Premises caused or permitted by
Tenant results in Discharge, Tenant shall promptly take all
actions at its sole expense as are necessary to return the
Land, Building or Leased Premises to the condition existing
prior to the Discharge; provided, that Landlord's approval of
such actions shall first be obtained. The foregoing indemnity
shall survive the Expiration Date or earlier termination of
this Lease.
26.2 Disclosure. Within thirty (30) days of receipt of written
request from Landlord, Tenant shall disclose to Landlord the
names and amounts of all Hazardous Materials, or any
combination thereof, which were stored, used or disposed of on
the Leased Premises, or which Tenant intends to store, use or
dispose of on the Leased Premises.
<PAGE>
26.3 Inspection. Landlord and its agents shall have the right, but
not the duty, to inspect the Leased Premises at any time to
determine Tenant's compliance with the terms of this
Paragraph. Notwithstanding any other provision of this Lease,
if Tenant is not in compliance with this Paragraph, Landlord
shall have the right to immediately enter upon the Leased
Premises to remedy any Discharge caused by Tenant's failure to
comply and Tenant shall reimburse Landlord for all costs and
expenses incurred by Landlord as provided in this Paragraph.
Landlord shall use reasonable efforts, under the
circumstances, to minimize interference with Tenant's
business, but shall not be liable for any interference caused
thereby.
26.4 Default. Any default under this Paragraph shall be a material Default
enabling Landlord to exercise any ------- of the remedies set forth herein.
27. Relocation. Landlord shall have the right, upon giving Tenant sixty (60)
days' written notice, to relocate Tenant to other space elsewhere in the
Building, of approximately the same size, configuration and decor as the Leased
Premises, and to move and place Tenant in such new space at Landlord's sole
expense; provided, however, Tenant shall have no obligation to move until such
remodeling is completed. Tenant shall acknowledge Landlord's right to relocate
Tenant and Tenant's acceptance of the new space within ten (10) days of receipt
by Tenant of Landlord's written relocation notice referenced above. In the event
Tenant does not sign such an acknowledgment within said ten (10) day period,
then at Landlord's option this Lease will automatically terminate at the
expiration of the relocation period. In the event Landlord moves Tenant to said
relocation space, then this Lease and each and all of the terms, covenants and
conditions hereof shall remain in full force and effect, such relocation space
will be deemed to be the Leased Premises hereunder and Landlord and Tenant will
promptly execute an amendment to the Lease evidencing such relocation.
28. Parking. So long as this Lease is in full force and effect and no Default
has occurred, Landlord will provide to Tenant, at no cost to Tenant, the
nonexclusive use of surface parking on a first-come, first-served basis, in the
designated parking areas located proximate to the Building. Such parking will be
provided on a basis of not less than one parking space for every two hundred
seventy-five (275) square feet of Net Rentable Area in the Leased Premises.
Tenant agrees to use its best efforts to prevent its employees, invitees and
licensees from utilizing more than one parking space for every two hundred
seventy-five (275) square feet of Net Rentable Area contained in the Leased
Premises. If Tenant's employees, invitees and licensees regularly use more than
the maximum number of parking spaces allocated to Tenant under this Paragraph,
Tenant agrees to remedy such excess use by complying with Landlord's direction
to either: (a) pay to Landlord as Additional Rent the actual cost incurred by
Landlord in providing such additional parking, or (b) relocate such excess
parking to an off-site location designated by Landlord.
29. Signage. Tenant will be provided, at Landlord's expense, one building
standard strip on the lobby directory per 2,500 square feet of Net Rentable Area
contained in the Leased Premises. Landlord will also provide, at Tenant's
expense, one suite identification sign adjacent to the main entry door of the
Leased Premises in Landlord's standard form. Tenant will pay Landlord's
reasonable charges for changing such building directory and identification sign
at Tenant's request.
30. Miscellaneous. Landlord and Tenant further agree as follows:
-------------
30.1 Park and Building Name. Landlord reserves the right at any time to change
the name of either the Park ------------------------ or the Building without
liability to Tenant.
30.2 Brokerage. Landlord and Tenant hereby acknowledge that the
lease of space contemplated herein was brought about solely by
the efforts of TMK/Hogan Joint Venture, doing business as
TMK/Hogan Commercial Real Estate Services ("Landlord's
Broker") and Leonard E. Sullivan and Company ("Tenant's
Broker") and Tenant has dealt with no other broker in
connection with the leasing of the Leased Premises. Landlord
agrees to pay the brokerage commission earned by each
Landlord's Broker and Tenant's Broker in accordance with
separate written agreements between Landlord and each such
broker. If any other claims for commissions are ever made
against either Landlord or Tenant in connection with this
Lease, all such claims shall be handled and paid by the party
whose actions form the basis of such claims, and such party
shall indemnify and hold harmless the other from and against
any and all such claims or demands with respect to any
commissions asserted by any Person in connection with this
Lease. Additionally, in the event Landlord has paid any
commission installment to Tenant's Broker, and (a) this Lease
is terminated by Tenant prior to the Commencement Date; or (b)
Tenant fails to occupy and accept the Leased Premises for any
reason constituting a Default by Tenant, Tenant promptly upon
written demand from Landlord shall reimburse Landlord for any
portion of such commission installment which has not been
cancelled and returned to Landlord. These reimbursement and
indemnification provisions shall survive any such termination
of this Lease.
<PAGE>
30.3 Notices. Any notice to be given hereunder will be deemed to be
given three (3) days after being deposited with the United
States Postal Service, certified or registered mail, return
receipt requested, with sufficient postage prepaid, addressed
as stated below, or on the day of its personal delivery to the
office of the respective party set forth below; and if
telecopied or delivered by overnight courier, such notice will
be deemed to be given on the business day immediately
following the day on which it was telecopied or deposited with
the courier.
Any Notice to Tenant shall be sent to:
ETHOS COMMUNICATIONS, INC.
Attention: Bob Crull, President and CEO
Telephone: (___)
Facsimile: (___)
Any Notice to Landlord shall be sent to:
TMK Income Properties, L.P.
Suite 300, 1950 Stonegate Drive
Vestavia Hills, Oklahoma 35242-2516
Attention: Robert C. McLean
Telephone: (205) 967-8362
Facsimile: (205) 969-1849
With a copy at the same time and in the same manner
to:
Lloyd T. Hardin, Jr., Esq.
Andrews Davis Legg Bixler Milsten & Price
Suite 500, 500 West Main Street
Oklahoma City, Oklahoma 73102
Telephone: (405) 272-9241
Facsimile: (405) 235-8786
Either party may at any time designate any other address for
notices by giving written notice thereof to the other party.
30.4 Joint and Several Liability. If Tenant comprises more than
one Person, Tenant's obligations hereunder
---------------------------
are joint and several.
30.5 Attorneys' Fees. If either party is required to hire an
attorney because of the breach by the other of any provision
of this Lease, then the prevailing party will be entitled to
receive its reasonable attorneys' fees and expenses from the
other to the extent permitted by Law.
30.6 Entire Agreement and Amendment. Tenant agrees that there are
no representations, understandings, stipulations, agreements
or promises pertaining to this Lease or the Leased Premises
which are not incorporated herein. This Lease will not be
altered, waived, amended or extended, except by a written
agreement signed by Landlord and Tenant.
30.7 Severability. If any clause or provision of this Lease is
illegal, invalid or unenforceable under any present or future
Law, the remainder of this Lease will not be affected thereby.
It is the intention of the parties that if any provision is
held to be illegal, invalid or unenforceable, there will be
added in lieu thereof a provision as similar in terms to such
provision as is possible and be legal, valid and enforceable.
30.8 Binding Effect. The provisions of this Lease will be
binding on and inure to the benefit of Landlord
---------------
and Tenant and their respective successors and permitted
assigns.
30.9 Governing Law. This Lease will be construed and enforced
according to the internal Laws of the State of Oklahoma. All
claims, disputes and other matters in question arising out of
or relating to this Lease, or the breach thereof, will be
decided by proceedings instituted and litigated in a court of
competent jurisdiction in the State of Oklahoma.
<PAGE>
18
30.10 Limitation of Damages to Tenant. In the event of any alleged
default of Landlord under this or any other provision of the
Lease, Tenant shall not seek to secure any claim for damages
or indemnification by any attachment, levy, judgment,
garnishment or other security proceedings against any property
of Landlord other than Landlord's interest in the Building, it
being agreed and understood, however, that the maximum
recovery of Tenant against Landlord shall be in an amount
equal to Landlord's equity interest in the Building. It is
understood and agreed that in no event shall Tenant have any
right to levy execution against any property of Landlord other
than its interest in the Building. Such right of execution
shall be subordinate and subject to any Encumbrance upon the
Building.
30.11 Time. Time is of the essence in the performance of
Landlord's and Tenant's respective obligations
----
hereunder.
IN WITNESS WHEREOF, this Lease has been executed and delivered at Quail
Springs Parkway Plaza, by the duly authorized officers of the parties on the
date first above written.
Landlord:
--------
TMK INCOME PROPERTIES, L.P.,
a Delaware limited partnership
By: Stonegate Realty Corporation,
a Delaware corporation,
as General Partner
By:
Robert C. McLean, Vice President
Tenant:
------
ETHOS COMMUNICATIONS, INC.,
a(n) __________________ corporation
By:
Name: Bob Crull, President and CEO
List of Attachments and Schedules:
Schedule 1: Description of Leased Premises
Schedule 2: Final Working Drawings
Schedule 3: Form of Construction Agreement
Schedule 4: Building Regulations
Schedule 5: Additional Construction Compliance Requirements
103086v1em.
<PAGE>
Schedule "1"
Page 1 of 1 Page
SCHEDULE "1"
Description of the Leased Premises
(floor plan to be inserted)
The Leased Premises consists of approximately 3,978 square feet of Net
Rentable Area located on the third (3rd) floor of the West Tower of the
Building, designated as Suite _____.
<PAGE>
Schedule "2"
Page 1 of 1 page
SCHEDULE "2"
Final Working Drawings
[Attached]
<PAGE>
103086v1em Schedule "3"
Page 1 of 2 Pages
SCHEDULE "3"
Construction Agreement
THIS AGREEMENT is made the _______ day of _____________, 1999,
between TMK INCOME PROPERTIES, L.P., a Delaware
------- -------------
limited partnership, having an office at 204 North Robinson, Suite 600, Oklahoma
City, Oklahoma 73102 (the "Landlord"), and ETHOS COMMUNICATIONS, INC., a(n)
__________________ corporation, having an office at
________________________________, Oklahoma ______________ (the "Tenant").
W I T N E S S E T H :
WHEREAS, Landlord and Tenant have heretofore executed and delivered a
certain Office Lease (the "Lease") dated __________________, ____, covering
certain space (the "Leased Premises") located on the third (3rd) floor of the
West Tower of the Quail Springs Office Building, and providing for a
Commencement Date of _____________, _____;
WHEREAS, Landlord has prepared the Final Working Drawings for
construction of the Leasehold Improvements which are more particularly described
at Exhibit "A" attached as a part hereof; and
WHEREAS, by means of this Agreement, Landlord and Tenant desire to
record their agreements with respect to the construction of the Leasehold
Improvements.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained it is agreed as follows:
1. Definitions. The capitalized terms used in this Agreement will have
the meanings indicated in the Lease.
-----------
2. Agreement to Construct. Landlord hereby agrees to diligently construct or
cause to be constructed the Leasehold Improvements in substantial compliance
with the Final Working Drawings. All instructions to contractors and workmen on
the Leased Premises to be made by Tenant, if any, will be made through Landlord
and Tenant will not issue any other directions to such contractors or workmen.
3. Construction Cost. The Construction Cost of the Leasehold
Improvements to be installed pursuant to the Final
------------------
Working Drawings will be the following:
Contractor's guaranteed maximum cost $___________
Less: The Improvement Allowance
($5.00 per square foot of
Net Rentable Area) ($___________)
Plus: Landlord's supervision fee $___________
of 10% of Contractor's
guaranteed maximum cost
Total Construction Cost to be
paid by Tenant
("Tenant's Construction Cost") $
4. Payment by Tenant. Tenant approves the foregoing Construction Cost. Tenant
agrees to pay one-half of Tenant's ----------------- Construction Cost upon the
execution of this Construction Agreement. The balance of Tenant's Construction
Cost will be paid to Landlord on the date of Substantial Completion of the
Leasehold Improvements.
5. Changes. In the event Tenant orders any change in or addition to the work
described in the Final Working ------- Drawings, all increased costs resulting
therefrom will be paid by Tenant.
<PAGE>
Schedule "3" Page 2 of 2 Pages
6. Tenant's Access for Finishes. Landlord will permit Tenant and its agents or
contractors (provided any such agents and/or contractors have been previously
approved by Landlord) to enter the Leased Premises no less than fifteen (15)
days prior to the date of Substantial Completion of the Leasehold Improvements
to perform finish work or such other work and decorations in the Leased Premises
in accordance with the approved Final Working Drawings or as otherwise approved
by Landlord. Tenant shall ensure that Tenant's agents and contractors do not
interfere with Landlord's agents, contractors and subcontractors in completing
the timely construction of the Leasehold Improvements. Any such access to the
Leased Premises prior to Substantial Completion of the Leasehold Improvements
will be at the sole risk of Tenant, its employees, agents and representatives
and Landlord shall have no liability therefor. Tenant shall save and hold
Landlord harmless from any claims and liabilities asserted by Tenant or other
Persons arising from the early access to the Leased Premises granted herein.
7. Substantial Completion. Landlord will certify to Tenant the date on which
Substantial Completion occurs. Tenant will thereafter inspect the Leased
Premises and provide to Landlord in writing a listing of any defects therein
observed by Tenant within ten (10) days after Tenant's first day of occupancy of
the Leased Premises. Landlord agrees to expeditiously cause such defects to be
cured to the reasonable satisfaction of Tenant.
IN WITNESS WHEREOF, this Agreement has been executed and delivered at
Oklahoma City, Oklahoma the date first above written.
Landlord:
--------
TMK INCOME PROPERTIES, L.P.,
a Delaware limited partnership
By: Stonegate Realty Corporation,
a Delaware corporation,
as General Partner
By:
Robert C. McLean, Vice President
Tenant
ETHOS COMMUNICATIONS, INC.,
a(n) corporation
------------------------------
By:
Name: Bob Crull, President and CEO
<PAGE>
Schedule "4"
Page 1 of 3 Pages
SCHEDULE "4"
Building Regulations
1. Access. The entrances, lobbies, passages, corridors, elevators, stairways and
other Common Areas will not be encumbered or obstructed by any Tenant or its
agents, employees, licensees or invitees or be used for any purpose other than
for access to the Leased Premises. Tenant will not use the Leased Premises to
engage or pay any employees who do not work in the Building, provide an address
in the Building in any advertisement seeking employees who will not actually
work in the Building or otherwise permit persons to visit the Leased Premises in
such numbers or under such conditions as to interfere with the use of the Common
Areas by other tenants. Landlord reserves the right to regulate the use of the
Common Areas of the Building by Tenant, its agents, employees, licenses and
invitees and by persons making deliveries to Tenant (including, without
limitation, the right to designate hours for deliveries, Building entrances and
elevators for such use). No showcases or other articles will be placed in the
Common Areas without the prior written consent of Landlord.
2. Air Conditioning. Heat and air conditioning will be provided by Landlord only
during the published Business Hours for the Building as set forth in the Lease.
Tenant may request heating or air conditioning during periods in addition to
such Business Hours by use of Tenant's telephone system to access procedures
with Landlord's HVAC control system computer in accordance with that systems
access procedures. Such request will state the beginning and ending hours of
such additional service. Tenant will submit to Landlord a list of all personnel
who are authorized to make such requests. Charges for such additional services
will be determined by Landlord for the hours of operation and will be based on
the operating costs incurred by Landlord by reason of such additional service.
3. Building Hours. Landlord from time to time will establish and provide Tenant
with a schedule of Business Hours for the Building. Landlord reserves the right
to exclude from the Building during nonbusiness hours all persons not authorized
in writing, by pass or otherwise, to have access to the Building and the Leased
Premises. Each Tenant will be responsible for all persons authorized by such
Tenant to have access to the Building and will be liable to Landlord for all
acts of such persons while in the Building. Landlord may require all persons
given access to the Building during nonbusiness hours to sign a register on
entering and leaving the Building. Any person whose presence in the Building at
any time might adversely affect, in the judgment of Landlord, the safety,
character, reputation or interests of the Building or its tenants may be denied
access to the Building or may be ejected therefrom. During the continuance of
any public disturbance, Landlord may prevent all access to the Building.
Landlord may require any person leaving any area of the Building with any
package or other object to exhibit a pass from Tenant authorizing such removal.
The failure to establish or enforce any of the foregoing requirements will not
impose any liability on Landlord to any Tenant for the removal of any property
from the Building or otherwise. Landlord will not be liable to any Tenant or
other person for damages or loss arising from the admission, exclusion or
ejection of any person to or from the Leased Premises or the Building.
4. Care. Tenant will not mark, paint, drill into or in any way deface any part
of the Leased Premises or the Building; provided, however, that the preceding
prohibition will not preclude Tenant from hanging typical frames and artwork, so
long as such is performed in a careful fashion and with appropriate wall hanging
attachments that reasonably would be expected to limit the damage or restoration
to the Leasehold Improvements. No boring, cutting or stringing of wires will be
permitted except with the prior written consent of Landlord and as Landlord
might direct. Tenant will not install any tile or other similar floor covering
without the prior written consent of Landlord. Tenant will refer all
contractors, representatives and installation technicians rendering any service
to Tenant to Landlord for Landlord's supervision, approval and control before
the performance of any such service (the foregoing provisions will apply to all
work performed in the Building at Tenant's request, including, but not limited
to, installations of telephone, telegraph equipment, electrical devices and all
installations of every nature affecting floors, walls, woodwork, trim, windows,
ceilings, equipment and any other portion of the Building).
5. Dangerous Substances. Neither Tenant nor its agents, employees, licensees or
invitees will at any time bring or keep on the Leased Premises any flammable,
combustible or explosive fluid, chemical or substance. No acids, vapors or other
damaging materials will be discharged into the waste lines, vents or flues of
the Building.
6. Doors. Corridor doors, when not in use, will be kept closed. Each Tenant on
leaving the Leased Premises will ----- lock all corridor doors.
<PAGE>
Schedule "4"
Page 2 of 3 Pages
7. Drapes. No awnings or other projections will be attached to the outside walls
of the Building. No curtains, blinds, shades, screens or covering other than
those approved by Landlord will be attached to, hung in, or used in connection
with any window or door of the Leased Premises without the prior written consent
of Landlord. Such coverings will be of a quality, type, design and color
approved by Landlord and attached in the manner approved by Landlord.
8. Equipment. Without first obtaining Landlord's written permission, Tenant will
not install, attach or bring into the Leased Premises any machinery or
equipment, other than normal office equipment, or any instrument, duct,
refrigerator, air conditioner, heater, water cooler or other appliance
(excepting normal kitchen appliances such as microwave ovens, coffee pots, and
dishwasher) requiring the use of gas, electric current or water. Tenant agrees
to limit the use of electric current to the capacity of existing feeders, risers
and wiring installation. All additional electrical wiring will be done by or
supervised by Landlord and Tenant will bear the expense of any additional
installation. Any breach of the foregoing will authorize Landlord to enter the
Leased Premises, remove what Tenant has installed and charge the cost of such
removal and any damage that may be sustained thereby to Tenant.
9. Exterminators. From time to time, Landlord will cause the Leased
Premises to be exterminated to the satisfaction
-------------
of and by exterminators approved by Landlord.
10. Food. Tenant will not, without Landlord's prior written approval, permit any
cooking (other than the conduct of cooking and heating of items in microwave
ovens, toasters and coffee makers which is customary for offices similar to the
type being leased by Tenant under the Lease), conduct any restaurant,
luncheonette or cafeteria for the sale or service of food or beverages to
Tenant's employees or to others, or cause or permit any odors of cooking or
other processes or any unusual or objectionable odors to emanate from the Leased
Premises. Tenant will not, without Landlord's prior written approval, install or
permit the installation or use of any food, beverage, cigarette, cigar or stamp
dispensing and/or vending machine, or permit the delivery of any food or
beverages (except for take out lunch delivery services) to the Leased Premises,
except by such persons as are approved by Landlord. No food or beverages will be
carried in the Common Areas or elevators except in closed containers.
11. Locks. Landlord will provide all locks in the Leased Premises and no
additional locks or bolts of any kind will be placed on any door or window by
Tenant, nor will any changes be made in existing locks or the mechanism thereof
without the prior written consent of Landlord. A reasonable number of keys to
such locks will be furnished by Landlord to each Tenant and Tenant will not
permit any duplicate keys to be made by any person other than Landlord. Tenant
will, on the termination of its Lease, restore to Landlord all keys furnished to
Tenant and in the event of the loss of any keys so furnished Tenant will pay
Landlord the cost thereof.
12. Maintenance. Tenant will promptly notify Landlord of any accident which
occurs and any defect or maintenance required on the Leased Premises. The
requests of Tenant will be attended to only on application to Landlord's office
and Landlord's employees will not perform any work unless under instructions
from Landlord's office.
13. Moving. No load shall be placed on the Leased Premises exceeding an average
weight of eighty (80) pounds of live load per square foot of floor area. All
movement of safes, freight, furniture or bulky items of any description will be
performed by persons approved by Landlord under the supervision of Landlord
during the hours and according to such routes and methods as Landlord designates
from time to time. Each Tenant will notify Landlord prior to the delivery of any
such items and Landlord will approve the weight and position of safes and other
heavy items, which will in all cases stand on weight distribution devises
approved by Landlord. Landlord reserves the right to inspect all freight to be
brought into the Building and to exclude from the Building all freight which
violates any of these Regulations or Tenant's Lease. All damages done to the
Building by the movement or positioning of any property of a Tenant will be
repaired at the expense of such Tenant and Landlord will not be liable for the
acts of any person engaged in or any damage or loss of any property or person
resulting from any act in connection with such movement or positioning.
14. Noise. Tenant will not make or permit to be made any unseemly or disturbing
noises or disturb or interfere with
-----
other Tenants of the Building.
15. Plumbing. The water closets and other plumbing fixtures will not be used for
any purpose other than that for which they were constructed and no improper
substances will be thrown therein. Landlord will have the right to regulate and
limit the water usage of Tenant and to impose such charges as might be required
to prevent waste thereof. All damages resulting from the misuse of any plumbing
fixture by Tenant, its agents, employees, licensees or invitees will be borne by
Tenant.
<PAGE>
103086v1em. Schedule "4"
Page 3 of 3 Pages
16. Prohibited Use. No space in the Building will be used for manufacturing or
for lodging, sleeping or any immoral or illegal purpose. No space other than
space so designated by Landlord will be used for the storage of merchandise or
for the sale of merchandise, goods or property and no auction sales will be
conducted by Tenant without the prior written consent of Landlord. Tenant will
not occupy or permit any portion of the Leased Premises to be occupied for any
purpose or in any manner which is contrary to the provisions of the "Declaration
of Protective Covenants of Quail Springs Office Park" and any amendments thereto
all as filed in the Office of the County Clerk of Oklahoma County, Oklahoma, or
any zoning, building code or other law or regulation governing the Building.
17. Services. Unless expressly permitted by Landlord, no person will be employed
by any Tenant to perform janitorial or maintenance services on the Leased
Premises. Each Tenant and its agents, employees, licensees and invitees will
cooperate with Landlord in keeping the Building neat and clean. Tenant will not
throw or sweep anything into the Common Areas of the Building. Each Tenant will
provide light, electrical power and water to the employees of Landlord
performing janitorial services and maintenance in the Leased Premises. Landlord
will be in no way responsible to any Tenant (a) for theft, mysterious
disappearance or loss of property from the Leased Premises, however occurring,
or (b) for damage done to the furniture or other effects of any Tenant arising
from the gross negligence of Landlord's agents, employees or contractors working
in the Leased Premises.
18. Signs. One Building directory will be furnished in the main lobby of the
Building at the expense of Landlord and Landlord will determine the number of
listings thereon for each Tenant. No sign, advertisement, notice or other
lettering will be exhibited, inscribed, painted or affixed by Tenant on any
window or other part of the Leased Premises or the Building without the prior
written consent of Landlord. In the event of the violation of the foregoing by
Tenant, Landlord may remove the same without any liability and may charge the
expense incurred in such removal to Tenant. All markings on the doors in the
Leased Premises will be inscribed, painted or affixed for Tenant by Landlord or
by personnel approved by Landlord, at the expense of Tenant, and will be of a
size, color, style and location acceptable to Landlord. Landlord will have the
right to prohibit any advertising by any Tenant which, in Landlord's opinion,
tends to impair the reputation of the Building or its desirability as an office
building and on written notice from Landlord, Tenant will refrain from or
discontinue such advertising. Tenant will not use the name of the Building or
Landlord in any advertising without the express written consent of Landlord.
19. Vendors. Canvassing, soliciting and peddling in the Building are prohibited
and Tenant will cooperate with
-------
Landlord to prevent the same. No Tenant will purchase water, ice, towels or
other like services from any person not
approved by Landlord.
20. Vehicles and/or Animals. No bicycles, vehicles or animals of any kind will
be brought into the Building or kept in the Leased Premises. Only hand trucks
equipped with rubber tires and side guards will be used in the Building by
Tenant or its agents, employees, licensees or invitees.
21. Windows. The windows, doors and vents which admit light and/or air into the
Common Areas or the Building will not be obstructed by Tenant and no bottles,
parcels, plants or other articles will be placed on any windowsills. Tenant will
at all times keep draperies adjusted to block the direct rays of the sun and to
reduce the Building's air conditioning requirements.
22. Modification. Landlord reserves the right to rescind any of the foregoing
regulations and to make such other and further reasonable regulations as in
Landlord's judgment are needed from time to time for the safety, protection,
care and cleanliness of the Building, the operation thereof, the preservation of
good order therein and the protection and comfort of Tenants and their agents,
employees, licensees and invitees. Such additional regulations will be binding
on Tenant when written notice thereof is given to Tenant by Landlord.
<PAGE>
Schedule "5"
Page 1 of 1 Page
SCHEDULE "5"
Additional Construction Compliance Requirements
(a) Tenant's Obligations. In the event Tenant in any instance is
permitted under the Lease to separately construct or contract for the
construction of all or any portion of the Leasehold Improvements (including any
fixtures or equipment to be installed by Tenant and attached to the walls,
floors or ceiling) or to make alterations thereto, Tenant will cause such
installation, construction or alteration ("Tenant Installations") to be
performed on the following basis: (a) Tenant will have previously furnished the
identity of Tenant's proposed general contractor to Landlord for approval, which
approval by Landlord will not be unreasonably withheld; (b) such Tenant
Installations shall not weaken, impair or in any other way have a detrimental
impact on the structural integrity of the Leased Premises, the Building or the
leasehold improvements of other tenants of the Building or in any way adversely
affect the mechanical or electrical systems of the Building; (c) Tenant shall
obtain all necessary licenses, permits and similar authorizations from
Governmental Authorities in a timely manner and shall further cause all such
Tenant Installations to comply with all applicable Laws and other Legal
Requirements; (d) all Tenant Installations shall be completed with due
diligence, in a good and workmanlike manner and in compliance with the Final
Working Drawings (approved by Landlord, whether in compliance with the following
procedure, or otherwise); (e) prior to commencing construction and at all times
during construction, Tenant shall cause Tenant's contractor to obtain and
maintain builder's risk insurance in form, amounts and from carriers reasonably
acceptable to Landlord, naming such contractor, Tenant, Landlord, and any Holder
as additional insureds, as their interests appear; (f) Tenant shall obtain and
furnish lien waivers from all mechanics, materialmen and laborers involved in
the Tenant Installations and Tenant hereby further agrees to indemnify and hold
Landlord harmless from and against any and all mechanics', materialmen's and
laborers' liens which may be filed on the basis of any work performed or
materials supplied in connection with such Tenant Installations; (g) with
respect to such Tenant Installations, Tenant agrees to protect, indemnify,
defend and hold Landlord and its agents, employees, invitees and licensees
(including all other tenants of the Building and their respective agents,
employees, licensees and invitees) free and harmless from and against any and
all claims, liens, demands, and causes of action of every kind and character,
including, without limitation, the amounts of judgments, penalties, interest,
court costs and legal fees incurred by Landlord in defense of same, arising in
favor of any third person (including employees of any contractor or any
subcontractor) or Governmental Authority on account of taxes, claims, liens,
debts, personal injuries, death or damage occurring or in any wise instant to,
whether direct or indirect, or in connection with or arising out of such Tenant
Installations; and (h) Tenant shall cause the construction to be performed in a
manner that will (i) occur either at times other than the Building Hours for the
Building as established in accordance with the Building Regulations or at times
as otherwise approved in writing by Landlord; and (ii) not interfere with other
tenants' use and occupancy of the Building and the Park, as determined by
Landlord in Landlord's sole discretion.
(b) Additional Final Working Drawing Requirements. In the event Tenant
is in any instance after the Commencement Date obligated to furnish Final
Working Drawings, then the following provisions shall apply: (a) Tenant shall
prepare, at Tenant's expense, Final Working Drawings for the applicable space
and shall submit the same to Landlord for approval on or before the date within
thirty (30) days subsequent to the event requiring preparation of Final Working
Drawings; (b) Landlord shall have fifteen (15) days from its receipt of the
Final Working Drawings to either approve them in writing or provide Tenant with
a request for specific changes, together with an explanation of the need for
such changes; (c) Tenant shall have fifteen (15) days from its receipt of
Landlord's written request for changes in which to respond with revised Final
Working Drawings incorporating Landlord's requirements and/or a written
objection to making such changes on the grounds that Landlord's requirements are
unreasonable; (d) Landlord and Tenant will diligently work together in good
faith to resolve any differences in the Final Working Drawings; provided,
however, Landlord shall have final authority with respect to the Final Working
Drawings in the event, in Landlord's reasonable opinion, Tenant's proposed
Tenant Installations: (i) threaten to weaken or impair the structural integrity
of the Building or the Leased Premises or the leasehold improvements of other
tenants of the Building; (ii) will increase the risk of casualty to, or the
rates of insurance coverages for, the Building; or (iii) are visible from either
the Common Areas or from the exterior of the Building.
Consent of Counsel
Phillips McFall McCaffrey McVay & Murrah, P.C. hereby consents to the use of its
name under the heading "Legal Matters" in the Prospectus constituting a part of
the Form SB-2 Registration Statement of Catalog.com, Inc. ("Catalog.com") for
the registration of 1,000,000 shares of Catalog.com common stock (1,150,000
assuming the exercise in full of the overallotment option), and further consents
to the filing of its opinion of counsel as an exhibit to such Registration
Statement.
Phillips McFall McCaffrey
McVay & Murrah, P.C.
Oklahoma City, Oklahoma
May 26, 2000
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our reports
and to all references to our Firm included in or made a part of this
Registration Statement.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma
May 24, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE REGISTRANT'S FINANCIAL STATEMENTS AS OF AND FOR THE YEAR
ENDED DECEMBER 31, 1999 AND AS OF AND FOR THE THREE MONTHS ENDED
MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001092824
<NAME> Catalog.com, Inc.
<CURRENCY> U.S. Dollars
<S> <C> <C>
<PERIOD-TYPE> 12-mos 3-mos
<FISCAL-YEAR-END> Dec-31-1999 Dec-31-2000
<PERIOD-START> Jan-1-1999 Jan-1-2000
<PERIOD-END> Dec-31-1999 Mar-31-2000
<EXCHANGE-RATE> 1 1
<CASH> 1,650,994 1,329,424
<SECURITIES> 0 0
<RECEIVABLES> 121,688 168,071
<ALLOWANCES> 2,437 2,437
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,775,999 1,516,934
<PP&E> 1,324,937 1,437,465
<DEPRECIATION> 779,417 867,262
<TOTAL-ASSETS> 3,905,662 3,615,112
<CURRENT-LIABILITIES> 690,169 745,509
<BONDS> 613,471 577,412
3,573,891 3,573,891
0 0
<COMMON> 33,953 33,953
<OTHER-SE> (1,005,822) (1,315,653)
<TOTAL-LIABILITY-AND-EQUITY> 3,905,662 3,615,112
<SALES> 0 0
<TOTAL-REVENUES> 2,837,683 898,387
<CGS> 0 0
<TOTAL-COSTS> 674,864 202,380
<OTHER-EXPENSES> 3,094,787 990,454
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 132,179 20,918
<INCOME-PRETAX> (1,016,762) (294,136)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,016,762) (294,136)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,016,762) (294,136)
<EPS-BASIC> (0.37) (0.09)
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