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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM 10-SB
General Form for Registration of Securities of Small
Business Issuers Under Section 12(b) or 12(g) of
the Securities Act of 1934.
QORUS.COM, INC.
(Name of Small Business Issuer in its Charter)
FLORIDA 65-0358792
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
9800 SOUTH SEPULVEDA BOULEVARD, SUITE 318, LOS ANGELES, CALIFORNIA 90045
(Address of Principal Executive Offices) (Zip Code)
(310) 258-8450
(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act:
NONE
Securities to be registered under Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE
(Title of Class)
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
PART I
A Note About Forward-Looking Statements
The statements, other than statements of historical fact, included in
this registration statement are forward-looking statements. Forward-looking
statements generally can be identified by the use of forward-looking terminology
such as "may," "will," "estimate," "anticipate," "believe," "plan," "expect,"
"intends" or "seek." We believe that the expectations reflected in such
forward-looking statements are accurate. However, we cannot assure you that such
expectations will occur. Our actual future performance could differ materially
from such statements. Factors that could cause or contribute to such differences
include, but are not limited to:
o adverse economic conditions;
o competition in the Internet telecommunications industries generally;
o the passage of legislation or court decisions adversely affecting the
Internet telecommunications industries;
o the advent of new technology; and
o our ability to develop and maintain relationships with third parties
to distribute our service.
ITEM 1. DESCRIPTION OF BUSINESS
Summary
Qorus.com, Inc. intends to offer "unified messaging" services. To date,
Qorus has entered into distribution partnerships for its product, but has
generated no significant revenues. Qorus will require substantial additional
financing to execute its business plan and has been issued a "going concern"
opinion from its accountants.
Qorus intends to consolidate and simplify voice, e-mail, paging, and
fax messaging. According to a recent survey conducted by Pitney Bowes in May
1998, the average worker manages 190 messages a day, including e-mail, faxes,
voice mail and standard mail. According to Sounding Board Magazine, there were
over 2.8 trillion e-mail messages sent to and from U.S. mailboxes in 1998 and
approximately 2 trillion minutes of usage on the public phone network in 1997.
In addition to desktop devices, there were 55.3 million pagers, 56 million cell
phones, and 8 million personal communications services phones in use in 1998
according to Sounding Board Magazine. The simple fact is that the number of
messages and mediums is growing out of control.
Qorus' service will simplify sending and receiving messages by
consolidating all inbound messages and letting the user select the most
effective and suitable mode for receiving and responding to these messages.
Specifically, it will enable the user to send, receive, sort and filter voice
mail, e-mail, faxes, and pages from any phone or Internet ready device in the
world. In addition, it will enable the user to listen to text-based messages,
such as e-mail, and reply to them by voice. Advanced features will even
translate voice and text from one language into another. Qorus' distribution
partners are currently testing the service. Qorus expects the service to be
operational by early first quarter 2000. We plan to market our services to
Internet service providers and small to medium sized telecommunications
carriers.
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Our Parents and Affiliates
We are controlled by Thurston Group, Inc., a privately owned merchant
banking firm located in Chicago, Illinois. Thurston Group, directly and
indirectly through its various investment limited partnerships, beneficially
owns approximately 25% of our common stock.
Thurston Group is controlled by Patrick J. Haynes, III, our Chairman
and the Chairman of the Executive Committee of our board, and Russell T. Stern,
Jr., who does not participate in our management. Mr. Haynes actively
participates in our management and is effectively our senior executive officer.
Our board has granted Mr. Haynes broad authority to manage our day-to-day
affairs. Mr. Haynes, however, does not have an employment contract with us and
does not receive any cash compensation for providing his services to us.
Background of our Formation
Thurston Group and its affiliates and Deloitte & Touche Co. founded
NetDox, Inc. in 1997 with an initial aggregate capital investment of
approximately $35 million. NetDox was formed to develop secure messaging and
electronic trust services using Internet technologies.
Thurston Group and its affiliates founded a privately held Delaware
corporation named "Qorus.com, Inc." in early 1999 to develop and provide unified
messaging services. At or about this same time, Thurston Group and Deloitte &
Touche determined to discontinue their joint venture in NetDox, and Thurston
Group acquired Deloitte & Touche's interest. The key employees of NetDox,
Michael Sohn, our chief executive officer, and Neil Ludwig, our vice president
of operations, joined Qorus, the privately held Delaware corporation. In
mid-July 1999, Qorus acquired substantially all of the operating assets of
NetDox to use in its unified messaging business.
Thurston Group and its affiliates have directly or indirectly provided
substantially all of our funds for operating activities since March 1999. As
more fully described below, we have received minimal revenues from operations to
date.
Formation History
Qorus was originally incorporated under the laws of the State of
Florida on January 23, 1991, under the name "Speak Up America Association, Inc."
and changed its name to "Golf Ball World, Inc." on January 16, 1996. Golf Ball
World changed its name to "Qorus.com, Inc." on May 7, 1999, in connection with
its acquisition of all of the issued and outstanding capital stock of Qorus.com,
Inc., a Delaware corporation.
Qorus.com, Inc., the Delaware corporation, was incorporated under the
laws of the State of Delaware on March 10, 1999, under the name "GOBIG, Inc."
for the purpose of engaging in the telecommunications services business. GOBIG
changed its name to "Qorus.com, Inc." on March 24, 1999. To avoid confusion, we
will refer to Qorus.com, Inc., the Delaware corporation, as Qorus Delaware. On
or about April 15, 1999, Qorus Delaware entered into certain transactions with
Tornado Development, Inc. and commenced business operations. Qorus Delaware was
founded by Thurston Group, Inc. and its affiliates. Patrick J. Haynes, III is
the Senior Managing Director of Thurston Group, Inc. and is Qorus' Chairman of
the Board and Chairman of the Executive Committee.
On or about May 19, 1999, the stockholders of Qorus.com, Inc., the
Delaware corporation, entered into an Acquisition Agreement with Golf Ball
World. Pursuant to the Acquisition Agreement, each of those stockholders
exchanged their shares of Qorus Delaware common stock for an aggregate of
5,333,145 shares of the common stock of Golf Ball World. As a result of such
exchange, Qorus Delaware became a wholly owned subsidiary of Golf Ball World and
the former stockholders of Qorus Delaware acquired approximately 71.5% of the
issued and outstanding shares of Qorus. As provided in the Acquisition
Agreement, Golf Ball World changed its name to "Qorus.com, Inc." On or about
October 5, 1999, Qorus Delaware was merged with and into Qorus.
Our Product
We market our services to Internet service providers and
telecommunications companies. These Internet service providers and
telecommunications companies often desire to offer additional services to
complement their basic product but do not have the capability to offer such
additional services. We offer our customers the unified messaging service to
enhance their basic telephone services. Our unified messaging service can be
customized or branded to meet the unique needs of each customer. We believe we
can offer services to our customers on a timelier basis than our hardware-based
competitors and offer more variety of features than our service based
competitors.
Unified Messaging
Our initial service offering will be unified messaging. This service
consolidates in-bound voice, e-mail, and fax messages and enables the user to
receive these messages by either voice or text. One of the powerful features of
this system is that it can translate voice to text and text to voice. As a
result, the user can pick the medium through which they receive messages and the
medium through which they send messages. For example, a user can listen to an
e-mail via a mobile phone and respond by voice and have the system translate and
reply in an e-mail communication.
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The software is built on an Oracle database and has the ability to
manage vast amounts of information efficiently. The key to the system, and what
differentiates it from similar software products, is that it stores all
information as "objects" instead of medium specific data. Audio, text, video, or
any input medium is received and transformed into a neutral object that is then
identified and catalogued into the database. Each of these objects is labeled
with information describing their contents. For example, the input medium might
be labeled by owner, mime type, sub type, size, date, subject, from or to. With
this information, the database is able to determine what to do with these
objects quickly. For example, the software can save, copy, forward to others,
send or schedule for future delivery. The software includes the ability to
manipulate these objects based on the instruction from the database accepting
whatever it receives through its input and translating it into something that is
compatible with its output and sending it to its next destination.
The software provides many features and can be accessed from multiple
devices such as computer, telephone, and personal data assistants. Additional
features and access devices can be quickly added because the underlying engine,
Oracle database, is based on open architecture standards. We intend to add new
features continually both from Tornado Development and other developers with the
goal of providing the best products in the marketplace.
We also intend to offer enhanced services to our basic unified
messaging offering. Initial enhanced services will include secure message
delivery services. These features include:
o Encrypted delivery
o Delivery certification (confirmed)
o Postmarking
o Tracking/audit trail
o Sender confidentiality
o Transaction archiving
o High reliability mass/multi-medium delivery
Enhanced Business Services
Our plan is to take advantage of the messaging software by providing
the e-commerce market with communications management products. We are in the
process of designing messaging and verification products for companies that are
implementing "paperless" or electronic services. For example, we are currently
working on providing an e-ticket service for a major U.S. based airline. In this
case, the airline is seeking to reduce its cost of delivering e-ticket
information while building its frequent flyer program. Our solution accomplishes
both and is expected to be implemented during the first quarter.
Over the next two years we intend to add services in the following
areas:
o User Conveniences (calendaring, event notification, "follow-me
phone")
o Personal Time Management
o Language and Linguistics Communication (multiple language
translation of e-mail, voice mail, fax, and page at object level;
voice activated commands)
o Business Services (digital identity, notary services, certified
mail, archiving, safety deposit box, control and distribution of
valued content, whiteboard collaboration, conferencing, e-mail
conference rooms)
For a description of our plans to finance this business plan, please
see Item 2. Management's Discussion and Analysis or Plan of Operation.
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Software License
Our service is based on software obtained through a global license from
Tornado Development, Inc. We also made an equity investment in Tornado
Development to secure access to the technology, influence development priorities
and provide corporate direction. On July 15, 1999, Qorus acquired 127,324 shares
of the Series B Preferred Stock of Tornado Development. At the same time, we
also acquired 50,000 warrants to purchase common stock of Tornado Development.
Since that time, we transferred 63,581 shares of Series B Preferred Stock and
25,000 warrants to purchase common stock back to Tornado Development in payment
of $432,222 in accrued expenses owed to Tornado Development and a credit of
$67,778 to be applied to future services or fees due from us to Tornado
Development. Mr. Haynes served as a Director of Tornado Development as a
representative for Qorus from April 1999 until he resigned in October 1999.
Neither Thurston Group nor any of its affiliates has any claim of investment or
ownership in Tornado Development.
On April 15, 1999, Tornado Development granted Qorus a non-exclusive
license to use the software developed by Tornado Development that enables a
universal messaging solution permitting integration of e-mail, fax, pager and
voice mediums, via the Internet, via personal computer and via telephone
systems. Under the terms of the license, Qorus may use the software anywhere in
the United States, the United Kingdom and any additional countries or
jurisdictions identified by us in writing to Tornado. The initial term of the
license is 36 months. The term will be automatically extended for an additional
36 month period. Two types of fees are payable by Qorus to Tornado for the
license. A license fee in the amount of $15 per subscriber is payable and is
based on the monthly average number of subscribers. There is a 10,000 subscriber
minimum on the initial server and 5,000 subscriber minimum for each additional
server. A royalty fee in the amount of $380 per channel is payable and is based
on the number of channels in use.
The license may be terminated as follows:
o By either party upon a material breach of the license agreement by the
other party if such breaching party has not cured the breach within 30
days of receipt of notice of the breach.
o By Qorus if Qorus determines in its sole discretion that it is no
longer in Qorus' best interest to market the service by providing
written notice to Tornado Development.
o By Tornado Development if Qorus fails to timely pay any fees due under
the license agreement and such failure is not cured within ten days.
o By Tornado Development immediately if Qorus slanders or libels Tornado
Development in a manner which has a material adverse impact on Tornado
Development or misappropriates or misuses Tornado Development's
trademarks or service marks.
Qorus recently entered into an agreement with Exodus Communications for
operation and management of Qorus' software. Exodus Communications is a leader
in internet hosting and managed services. None of Qorus, Thurston Group or any
of their affiliates has any ownership of or investment in Exodus Communications.
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Marketing Strategy
Our strategic objective is to become a leader in the development and
marketing of communications management products. We intend to focus on the small
and home office market and rapidly obtain market penetration by developing
distribution relationships.
According to the U.S. Unified Messaging Services Market Assessment and
Forecast, 1998-2003 published by International Data Corp., analysts found that
50% of small businesses have access to the Internet and over 70% have access to
a fax machine. We believe that these businesses will be seeking to combine
e-mail and fax communications. We believe our basic service offering will
provide a simple, cost-effective solution for this market. Once Qorus
establishes a presence with its basic service offering, we will market
additional Internet document delivery services for e-commerce such as secure
message delivery and delivery certification services.
To obtain market penetration rapidly, we intend to establish
distribution relationships with organizations that provide products and services
to the small and home office market. We believe that utilizing this distribution
method will enable us to reach the largest possible target customer base with
our current limited sales and marketing resources. We have targeted Internet
service providers, commonly called ISPs, and small and medium telecommunications
companies as our distribution partners. Our current distribution partners
include Alpha Telecom, C2C Telecom and Cybergate.
ISPs provide small and home office markets with access to the Internet.
Most offer basic e-mail services. Adding our unified messaging service to their
existing service permits the ISP to distinguish itself from its competitors. In
addition, most ISPs have little or no experience in voice and voice mail
systems. Our service provides them with an effective message management tool
that does not require a large investment.
Small and medium telecommunications carriers target the small and home
office market. These carriers often offer customers voice mail as an enhanced
service. Our service will enhance these offerings and help reduce customer
churn. An executive at Call Sciences Corp. stated in Phone+ Magazine that
CallNet Data Systems, Inc., a subsidiary of British Telecommunications plc,
reduced its customer churn by 80% over a six-month period by using unified
messaging. In addition, unified messaging is expected to provide two to three
times more direct revenue than voice mail alone and indirect revenue through
increased usage. As Qorus penetrates the small and home office market, we intend
to expand into the mass consumer and large enterprise market. Both provide
opportunity and challenges.
The mass consumer market is a large but fragmented market. Analysts
expect that consumers will move to unified messaging as a means to simplify
communications at home. The challenge in this market is reaching the consumer
and providing convenience at a reasonable price. Qorus believes that the
consumer market is best reached through direct marketing. We will use our
distribution partner relationships to reach this segment but recognize that even
with the support of our distribution partners, we will require additional
resources to properly enter this market.
We will also market our service to the large enterprise market. This
market presents the biggest challenge. These organizations are more likely to
purchase customer premise equipment based solutions and manage them internally.
In addition, they have significant investment in existing systems.
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We intend to enter this market by targeting branch offices and parts of
the organizations that travel extensively. We intend to develop relationships
with systems integrators and telecommunications companies to assist with this
market. We will utilize a direct sales force to market directly to our
distribution partners. We will develop standard and custom service packages
designed for specific markets and needs. We believe that this market will
require significant additional resources.
In order to enter the consumer and large enterprise market, we will
need to obtain additional funding through existing operations or outside
sources. Such funding sources may or may not be available at the appropriate
time.
Distribution Partners
Below is a brief description of the agreements entered into with our
distribution partners. None of these agreements grant exclusive rights to the
distributor. We may enter into agreements with other parties covering the same
or different territory at any time.
On or about July 8, 1999, Qorus entered into an authorized reseller
agreement with U.K. based Alpha Telecom to offer unified messaging services in
the United Kingdom, Germany and Switzerland. Alpha Telecom is based in the
United Kingdom and is one of the fastest growing European telecommunications
service providers in Europe. Alpha Telecom will offer our services to more than
500,000 of its customers in the United Kingdom and continental Europe. The term
of the agreement is three years and will be automatically extended for
additional one year periods unless one party gives the other party notice of
termination six months prior to the then current expiration date. We will share
the revenue earned for our service equally with Alpha Telecom. The monthly fee
for the service is (pound)9.95 per month per subscriber and may be changed only
with the written consent of both Qorus and Alpha Telecom. Alpha Telecom is
expected to begin offering Qorus' service in the first quarter of 2000. None of
Qorus, Thurston Group or their affiliates have any ownership or investment in
Alpha Telecom.
On October 21, 1999, Qorus entered into an authorized reseller agreement
with CyberGate. The term of the agreement is one year and will be automatically
extended for additional one year periods unless one party gives the other party
notice of termination 90 days prior to the then current expiration date.
CyberGate will pay us $8.00 per month per subscriber. We have agreed to
participate with CyberGate in developing and implementing appropriate incentive
programs to accelerate acceptance of the unified messaging product by the
market. Each of Qorus and CyberGate will contribute $25,000 in marketing funds
to be used in encouraging subscription to the service. These funds will be used
in programs jointly developed by us and CyberGate. CyberGate is a subsidiary of
e.spire Communications. e.spire Communications, formerly known as American
Communications Services, was founded by Thurston Group, Inc. and its affiliates
in 1992. Mr. Haynes served as president of American Communications Services
until 1993. Russell T. Stern, Jr., a principal of Thurston Group and its
affiliates, served on e.spire's Board of Directors from 1992 to 1994. Thurston
Group and its affiliates currently own less than 1% of the total shares
outstanding in e.spire Communications. William Salatich, a member of the board
of directors of Qorus, currently owns less than 1% of e.spire Communications'
outstanding stock. George Middlemas, a member of the board of directors of
Qorus, is a former director of e.spire and currently owns, directly or
indirectly, approximately 2.4% (on a fully diluted basis) of the total shares
outstanding in e.spire Communications' outstanding stock. Qorus has no ownership
or investment in e.spire Communications.
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On September 21, 1999, Qorus entered into an authorized reseller
agreement with C2C Telecom, Inc. to offer unified messaging services in the
United States. The term of the agreement is one year and will be automatically
extended for additional one year periods unless one party gives the other party
notice of termination three months prior to the then current expiration date.
C2C will pay us 20% of its advertising revenue from the C2C website
(pincity.com) on a monthly basis. In addition, we will earn a fee of 50% of the
gross margin earned through unified messaging accounts. Gross margin is defined
as revenue less operating costs (excluding interest, depreciation, amortization
and payments or distributions to the owners of C2C).
On September 10, 1999, we entered into a master agreement with Moore
Business Communications Services to provide electronic messaging services. The
agreement does not obligate Moore Business Communications Services to order any
services from us, or us to agree to provide services, but establishes the terms
and conditions controlling if, as and when a statement of work is entered into
by the parties and services are ordered. We entered into a statement of work
under the master agreement on December 29, 1999. The statement of work relates
to the development and operation of an electronic ticketing process for
Northwest Airlines. We will adapt our product to fax or e-mail a trip summary
and receipt to Northwest Airlines' customers. The statement of work is for a
three year term. Moore Business Communications Services may terminate the
statement of work at any time for a termination fee of 25% of the total amount
to be paid under the statement of work. However, Moore Business Communications
Services may terminate the statement of work and a termination fee will not be
payable if Northwest Airlines terminates its agreement with Moore Business
Communications Services.
Competition
The industry is new and rapidly evolving. We expect competition to
intensify as the market grows. There are three segments in the market, those
that offer customer premise equipment based products, software based products
and outsource providers.
The customer premise equipment based product providers are the large
telecommunications equipment vendors such as Lucent and Nortel and the large
communications carriers such as AT&T
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and MCI/WorldCom. The target market for these competitors is large enterprises
where they already provide products and services. The challenge in this market
is integration of the customer premise equipment product with the customers'
existing systems, both voice and data.
There are several new competitors that offer software based products.
Most of these are relatively small and are focused on selling software licenses
to large enterprises. Some of the competitors in this segment include iPost,
Orchestrate, General Magic Portico, UPA, Wildfire, and Jfax. These competitors
face the same challenge of dealing with the large enterprise market integration
and sales and support requirements.
Recently, several new competitors have entered our market. These
include Linx Communications and Call Sciences. They tend to be regionally
focused and are competing directly with the ISPs and the telecommunications
carriers. These competitors lack distribution and rely exclusively on Internet
search engines to market their products.
We believe Qorus has several advantages over our competition. Our
solution is an Internet based solution that offers more features and supports
more communication mediums than any one competitor. Some competitors offer
Internet based solutions, but none of these systems is Java based, and therefore
not independent of the user's type of computer and software. We are committed to
maintaining a technical advantage over our competitors. We have chosen this
software as the basis of our service because of our strong belief of the
proliferation of the Internet and the combination of voice, video, and data
capabilities on the Internet.
Most of our competitors are targeting large organizations and selling
customer premise equipment products or licensing software. We believe that this
market will be slow to adopt enhanced messaging services. Most of the companies
in this market are working on Y2K initiatives or upgrading existing systems to
new technology. Buyers in these organizations include the information technology
and communications departments, two groups that are difficult to coordinate.
They require significant sales and support resources to service long sales lead
times. Our target market is more likely to use an Internet based product and
plan to use it in the near future. In addition, smaller organizations do not
have the existing system problem and are willing to outsource a non-revenue
producing activity of their business.
We recognize that rapidly building market share is critical to the
success of Qorus. Most of our competitors are relying on an internal sales force
or direct marketing through the Internet for their distribution. We believe we
can offer significant value to our distribution partners by enabling them to
differentiate themselves in the market place by offering our unified messaging
service.
Industry
The communications industry is undergoing significant change and rapid
growth. This is being fueled by four key elements:
o Deregulation and the introduction of competition on a global basis
o Rapid advancement of computer and communications technology that
is increasing speed, capacity, and quality
o The emergence of the Internet as a significant communications
medium
o A deflationary environment that has reduced cost and stimulated
demand
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In this industry, the Internet is the fastest growing segment.
According to analysts at Wit Capital, the number of web users is expected to
grow from 142 million in 1998 to over 500 million by the year 2003. The
cornerstone of activity of these users is e-mail. Electronic Mail and Messaging
Systems estimates that the total number of global e-mail boxes has increased to
325 million at the end of 1998 from 198 million at the end of 1997. By the year
2001, the number of mailboxes is expected to continue to grow and in the U.S.
analysts anticipate that there will be more than 6.8 trillion electronic
messages according to Sounding Board Magazine.
In addition to e-mail, the Internet is starting to attract fax and
voice traffic. For example, making telephone calls using the Internet, commonly
referred to as Internet telephony, represented about $2 billion of revenue in
1998 according to Sounding Board Magazine. Analysts expect that by the year
2002, Internet telephony revenue will approach $25 billion according to Sounding
Board Magazine. Fax traffic is also growing. Sounding Board Magazine reports
that the Internet fax market was estimated at over $120 million in 1998 and is
expected to grow to over $420 million by 2002.
In 1998, service revenue from e-mail was estimated at approximately $6
billion according to International Data Corp.'s Unified Messaging Report and
revenue from voice-mail services was estimated at approximately $2 billion
according to Sounding Board Magazine. Analysts estimate that by 2002 service
revenue for these applications will approach $12 billion and $1-5 billion for
the unified messaging market as reported in the Unified Messaging Report.
The Internet is rapidly maturing into a global communications medium.
It is evolving from passive publishing to an interactive communications and
applications environment. It will continue to play an increasingly important
role in electronic commerce, become the dominant source of information, and we
believe it will be the medium of choice for voice, data, and video
communications.
We believe that the combination of voice and data networks will be the
most significant event to impact the information and communications industry
over the next few years. We also believe that the market for services and
applications based on the combined networks will grow exponentially. We believe
our software-based service will position us to participate in this growth by
enabling us to offer enhanced services above and beyond unified messaging. We
believe the rapidly evolving e-commerce industry offers especially promising
opportunities for new services and we intend to actively focus on developing
messaging solutions for the e-commerce market.
Year 2000 Compliance
Many currently installed computer systems and software products are
unable to distinguish between twentieth century dates and twenty-first century
dates. As a result, many companies' software and computer systems may need to be
upgraded or replaced to comply with these "Year 2000" requirements. Qorus'
business is dependent upon on the operation of numerous systems that could
potentially be impacted by Year 2000 related problems.
The third-party vendor upon which we materially rely is Tornado
Development, which provides the software on which our service is based. Tornado
Development has responded to our inquiries into its Year 2000 readiness. Tornado
Development has warranted to Qorus that the unified messaging and related
software provided by Tornado Development is Year 2000 compliant. To our
knowledge, our other key vendors, distributors and suppliers are Year 2000
compliant.
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Qorus has also conducted an internal assessment of all material
information technology and non-information technology systems at our
headquarters for Year 2000 compliance. Our internal assessment involved the
analysis of both mission critical and non-critical systems. The assessment of
all mission critical and non-critical systems is complete and we believe all
such systems are Year 2000 compliant. However, due to the complex nature of our
services and the fact that our systems are interconnected with other carriers
and suppliers, both domestic and international, Qorus is unable to guarantee
Year 2000 compliance or provide Year 2000 warranties.
To date, we have not incurred and do not expect to incur any material
costs in identifying or evaluating Year 2000 compliance issues. Most of our
expenses have related to, and are expected to continue to relate to, the
upgrades or replacements, when necessary, of software or hardware, as well as
costs associated with time spent by employees in the evaluation process and Year
2000 compliance matters generally. These expenses are not expected to be
material to our financial position or results of operation. These expenses,
however, if higher than anticipated, could have a material and adverse effect on
our business, results of operations and financial condition.
Based upon the Year 2000 disclosure statements that we have received
from Tornado Development there can be no assurance that we will not discover
Year 2000 compliance problems in our systems that will require substantial
revisions or replacements. In the event that the operational facilities are not
Year 2000 compliant, we may be unable to deliver services to our customers. In
addition, there can be no assurance that third-party software, hardware or
services incorporated into our material systems, especially of those vendors
that have indicated that they cannot assure Year 2000 compliance, will not need
to be revised or replaced, which could be time-consuming and expensive. Our
inability to fix or replace third-party software, hardware or services on a
timely basis could result in lost revenues, increased operating costs and other
business interruptions, any of which could have a material adverse effect on our
business, results of operations and financial condition. Moreover, the failure
to address Year 2000 compliance issues in our software, hardware or systems
adequately could result in claims of mismanagement, misrepresentation or breach
of contract and related litigation, which could be costly and time-consuming to
defend.
In addition, there can be no assurance that governmental agencies,
utility companies, Internet access companies and others outside our control will
be Year 2000 compliant. The failure by these entities to be Year 2000 compliant
could result in a systemic failure beyond our control, including, for example, a
prolonged Internet, telecommunications or electrical failure, which could also
prevent us from delivering our services to our users, decrease the use of the
Internet or prevent users from accessing our services, any of which would have a
material adverse effect on our business, results of operations and financial
condition.
Currently, we do not have a contingency plan to deal with the worst
case scenario that might occur if technologies on which we depend are not Year
2000 compliant and fail to operate effectively after the Year 2000. The results
of our Year 2000 compliance evaluation and the responses received from
distributors, suppliers and other third parties with which we conduct business,
especially of those vendors that have indicated that they cannot assure Year
2000 compliance, will be taken into account in determining the need for and
nature and extent of any contingency plans.
If our present efforts to address the Year 2000 compliance issues
discussed above are not successful, or if distributors, suppliers and other
third parties with which we conduct business do not successfully address such
issues, our users could seek alternate suppliers of our products and services.
Any material Year 2000 problem could require us to incur significant
unanticipated expenses to
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<PAGE> 12
remedy and could divert our management's time and attention, either of which
could have a material adverse effect on our business, operating results and
financial condition.
As of January 20, 2000, none of our or Tornado Development's mission
critical systems has experienced any Year 2000 problems.
Government Regulation
There are presently few laws and regulations that apply specifically to
access to, or commerce on, the Internet. Due to the increasing popularity and
use of the Internet, however, it is possible that laws and regulations with
respect to the Internet may be adopted at federal, state, provincial and even
local levels, covering issues such as user privacy, freedom of expression,
pricing, characteristics and quality of products and services, taxation,
advertising, intellectual property rights, information security and the
convergence of traditional telecommunications services with Internet
communications. Such future regulations may have a material adverse effect on
Qorus and its business.
Although sections of the U.S. Communications Decency Act of 1996 that,
among other things, 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, similar laws may be proposed, adopted and upheld in
the U.S. or other jurisdiction. 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
Qorus or its customers to potential liability, which in turn could have a
material adverse effect on our business, results of operations and financial
condition.
The adoption of any such laws or regulations might decrease the growth
of the Internet, which in turn could decrease the demand for the services of
Qorus or increase the cost of doing business or in some other manner have a
material adverse effect on our business, results of operations and financial
condition.
In addition, applicability to the Internet of existing laws governing
issues such as property ownership, copyright and other intellectual property
issues, taxation, libel, obscenity and personal privacy is uncertain. The vast
majority of such laws were adopted prior to the advent of the Internet and
related technologies and, as a result, do not contemplate or address the unique
issues of the Internet and related technologies. Changes to such laws intended
to address these issues could create uncertainty in the marketplace that could
reduce demand for the services of Qorus or increase the cost of doing business
as a result of costs of litigation or increased service delivery costs, or could
in some other manner have a material adverse effect on our business, results of
operations and financial condition.
Qorus is not currently subject to direct regulation by the Federal
Communications Commission or any other governmental agency, other than
regulations applicable to businesses in general. However, in the future, we may
become subject to regulation by the FCC or another regulatory agency. Our
business could suffer depending on the extent to which our activities are
regulated or proposed to be regulated.
Qorus collects sales and other taxes in the states and countries in
which we have offices and are required by law to do so. One or more
jurisdictions have sought to impose sales or other tax obligations on companies
that engage in online commerce within their jurisdictions. A successful
assertion by one or more jurisdictions that we should collect sales or other
taxes on our products and services, or remit payment of sales or other taxes for
prior periods, could have an adverse effect on
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<PAGE> 13
our business. It is possible that U.S. states may impose taxes on Internet based
commerce after October 21, 2001 after the moratorium on such taxes imposed by
the Internet Freedom Act expires. The materiality of such taxes on our results
of operations cannot be estimated at this time.
The growth of the Internet, coupled with publicity regarding Internet
fraud, may lead to the enactment of more stringent consumer protection laws. If
Qorus becomes subject to claims that we have violated any laws, even if we
successfully defend against these claims, our business could suffer. Moreover,
new laws that impose restrictions on our ability to follow current business
practices or increase our costs of doing business could hurt our business.
Employees
As of December 31, 1999, we employed nine people, two of whom are
engaged in marketing and sales, four in customer service and operations, and
three in management and administration. Our employees are not represented by a
collective bargaining unit. We consider relations with our employees to be good.
Risk Factors
In addition to the other information set forth elsewhere in this
registration statement, you should carefully consider the following risk factors
in evaluating the merits of an investment in Qorus.
WE ARE IN THE INITIAL STAGES OF DEVELOPING AND MARKETING OUR PRODUCT AND HAVE
HAD MINIMAL REVENUES. OUR FAILURE TO GENERATE REVENUE IN THE FUTURE WOULD
MATERIALLY ADVERSELY AFFECT OUR ABILITY TO CONTINUE AS A GOING CONCERN.
Qorus began its present business in early 1999 and, as of the date of
this registration statement, has not generated significant revenue.
WE MAY NEED SUBSTANTIAL ADDITIONAL FINANCING TO CONTINUE AS A GOING CONCERN. WE
HAVE NO PRESENT COMMITMENTS TO OBTAIN SUCH FINANCING.
In addition, our failure to obtain substantial additional financing
would materially adversely affect our ability to implement our business plan and
to develop our services and products.
OUR UNIFIED MESSAGING SERVICE IS IN THE EARLY STAGE OF DEVELOPMENT. OUR FAILURE
TO DEVELOP OUR UNIFIED MESSAGING SERVICE, OR TO DEVELOP IT IN A TIMELY MANNER,
WOULD MATERIALLY ADVERSELY AFFECT OUR FUTURE RESULTS OF OPERATIONS.
Qorus' services are designed as an electronic messaging system which
affords effective and efficient communication among e-mail, fax, pager and voice
mediums, via the Internet or over the phone. The market for Qorus' services is
at an early stage of development, is rapidly evolving and is characterized by an
increasing number and size of market entrants who have introduced or are
developing competing products or services. Demand and market acceptance for
recently introduced services is subject to a high level of uncertainty. There
can be no assurance that unified messaging related products and services
developed by others will not adversely affect our competitive position or render
our services noncompetitive.
OUR BUSINESS IS DEPENDENT ON THE FUTURE SUCCESS OF THE INTERNET.
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<PAGE> 14
We are dependent on the future success of the Internet and whether it
continues to grow and be utilized as a communications medium. If consumers lack
confidence in utilizing Internet based services, because of inadequate
development of the necessary infrastructure or as a result of security issues,
and the Internet does not become or continue as a viable communication medium,
our business, operating results and financial condition will be materially
adversely affected.
WE FACE SUBSTANTIAL COMPETITION IN THE TELECOMMUNICATIONS INDUSTRY, AND MANY OF
OUR COMPETITORS ARE LARGER AND HAVE MORE RESOURCES THAN WE HAVE. OUR FAILURE TO
COMPETE SUCCESSFULLY WITH EXISTING OR FUTURE COMPETITORS WOULD MATERIALLY
ADVERSELY AFFECT OUR FUTURE RESULTS OF OPERATIONS.
The market for our services is extremely competitive, subject to rapid
change and characterized by constant demand for new features, new enhancements,
and lower prices. Possible competitors range from small companies with limited
resources to very large companies with substantially greater financial,
technical, managerial, and marketing resources. Competitors may be able to
develop and offer products and services that are comparable or superior to those
offered by Qorus or adapt more quickly than Qorus to new technologies or
evolving customer requirements.
FUTURE REGULATION OF THE INTERNET OR E-COMMERCE BY VARIOUS GOVERNMENT
AUTHORITIES COULD ADVERSELY AFFECT OUR BUSINESS AND FINANCIAL RESULTS.
Only a small body of laws and regulations currently apply specifically
to content of, access to, or commerce on, the Internet. However, laws and
regulations with respect to the Internet may be adopted by governments in any of
the jurisdictions in which Qorus can sell its services and products, covering
issues such as user privacy, freedom of expression, pricing, characteristics and
quality of products and services, taxation, advertising, intellectual property
rights, information security and the convergence of traditional
telecommunications services with Internet communications. To the extent the
adoption of such laws and regulations increases our costs or expenses or
decreases the demand for our services and products, our business and financial
results would be adversely affected.
A SIGNIFICANT PERCENTAGE OF OUR OUTSTANDING COMMON STOCK IS CONTROLLED BY
INSIDERS. THEREFORE, CURRENT MANAGEMENT CAN CONTINUE TO GOVERN THE COMPANY AND
MAY DETER A CHANGE IN CONTROL WHICH COULD BE BENEFICIAL TO OTHER STOCKHOLDERS.
Qorus' executive officers and directors, in the aggregate, beneficially
own approximately 45.04% of Qorus' outstanding common stock. As a result, such
persons, acting together, will have the ability to control most matters
submitted to stockholders of Qorus for approval (including the election and
removal of directors) and to control the management and affairs of Qorus.
Accordingly, such concentration of ownership may have the effect of delaying,
deferring or preventing a change in control of Qorus, impeding a merger,
consolidation, takeover or other business combination involving Qorus or
discouraging a potential acquirer from making a tender offer or otherwise
attempting to obtain control of Qorus, which in turn could have a material
adverse effect on Qorus' market value.
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<PAGE> 15
OUR COMMON STOCK TRADES ONLY SPORADICALLY AND HAS EXPERIENCED IN THE PAST, AND
IS EXPECTED TO EXPERIENCE IN THE FUTURE, SIGNIFICANT PRICE AND VOLUME
VOLATILITY, WHICH SUBSTANTIALLY INCREASES THE RISK OF LOSS TO PERSONS OWNING OUR
COMMON STOCK.
Because of the limited trading market for our common stock, and because
of the possible price volatility, you may not be able to purchase or sell shares
of our common stock when you desire to do so. The inability to sell your shares
in a rapidly declining market may substantially increase your risk of loss
because of such illiquidity and because the price for our common stock may
suffer greater declines because of its price volatility.
OUR STOCK NO LONGER IS ELIGIBLE FOR TRADING ON THE OTC BULLETIN BOARD, AND THERE
CAN BE NO ASSURANCE THAT OUR STOCK WILL BE TRADED ON THE OTC BULLETIN BOARD IN
THE FUTURE.
On December 1, 1999, our stock became ineligible for trading on the
OTCBB because of our failure to comply with the NASD's eligibility rule. Even if
we once again become eligible for trading on the OTCBB, there is no assurance
that any market maker will take the actions necessary for our stock to resume
trading. The price of our stock has declined materially since December 1, 1999,
and, even if our stock resumed trading on the OTCBB, there can be no assurance
that the price of our stock will be positively affected.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
SAFE HARBOR LANGUAGE
In addition to historical information, the information included in this
Registration Statement contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, such as those pertaining to Qorus' capital resources,
performance and results of operations. Forward-looking statements involve
numerous risks and uncertainties and should not be relied upon as predictions of
future events. Certain such forward-looking statements can be identified by the
use of forward-looking terminology such as "believe", "expects", "may", "will",
"should", "seeks", "approximately", "intends", "plans", "pro forma", "estimates"
or "anticipates" or the negative thereof or other variations thereof or
comparable terminology, or by discussions of strategy, plans or intentions. Such
forward-looking statements are necessarily dependent on assumptions, data or
methods that may be incorrect or imprecise and may be incapable of being
realized. The following factors, among others, could cause actual results and
future events to differ materially from those set forth or contemplated in the
forward-looking statements: market acceptance of Qorus' product, limited
experience in marketing this product, uncertainty of product acceptance in the
marketplace, dependence upon new technology, dependence on performance of
third-party software provider, and competition. The success of Qorus also
depends upon economic trends and the increase use of the Internet as a
communications medium. Readers are cautioned not to place undue reliance on
forward-looking statements, which reflect management's analysis only. Qorus
assumes no obligation to update forward-looking statements. See also Qorus'
reports filed from time to time with the Securities and Exchange Commission
pursuant to the Securities Act or the Exchange Act.
DESCRIPTION OF BUSINESS
Qorus.com, Inc., a Florida corporation, was incorporated on January 23,
1991 as "Speak Up America Association, Inc." On December 22, 1995, a shareholder
contributed 100% of the common stock of Golf Balls N' Golf Balls, Inc. to the
company and the company changed its name to "Golf Ball World, Inc." The company
operated through December 30, 1998, at which time it distributed 100% of the
common stock of its subsidiary, Golf Balls N' Golf Balls, Inc., to its
shareholders as a dividend. Qorus' current service offering, an internet-based,
voice, e-mail, paging, and fax messaging under one mode of communication service
("unified messaging service"), was commenced by Qorus.com, Inc., a Delaware
corporation ("Qorus-Delaware"). Qorus currently has a non-exclusive software
license from a related party that allows it to provide the unified messaging
service and a non-exclusive license that allows it to provide a message system
for distribution of fax
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<PAGE> 16
messages. Qorus has limited capability to customize the software to meet
the specific requirements of each customer.
On May 4, 1999, the company's board of directors adopted a resolution
to amend the articles of incorporation and change the name of the corporation to
Qorus.com, Inc. On May 19, 1999, Qorus acquired 100% of the common stock of
Qorus-Delaware, in exchange for 5,333,145 shares of its common stock. The
acquisition was accounted for using the reverse purchase method of accounting,
pursuant to which Qorus-Delaware was treated as the acquiring entity for
accounting purposes. The assets, liabilities and shareholders' equity have been
recorded at their historical values. The net assets acquired were $3,191,234 at
May 19, 1999.
Furthermore, the unified messaging service commenced by Qorus-Delaware
is the only business service that was offered by Qorus in 1999. Accordingly, the
former business operations of Golf Ball World, Inc. were not continued and have
no relevancy to the current business operations of Qorus. Unless the context
otherwise requires, references to Qorus refer to the current unified messaging
business commenced by Qorus-Delaware beginning March 1999.
Qorus' revenue to date is from one customer who is a distributor that
has paid for services related to customizing the service offering of Qorus with
the intent of providing the service to its customers. Qorus expects to receive
revenue from this customer related to the provision of messaging services in the
first quarter of 2000.
Qorus also has agreements with two telecommunications companies and one
Internet service provider, all three of which intend to use the Qorus service to
provide unified messaging to their customers. Qorus expects to receive revenue
from the two telecommunications companies in the first quarter of 2000 and also
expects to receive revenues from the ISP in the first or second quarter of 2000.
Qorus' expenses have exceeded net revenues since inception. For the period ended
September 30, 1999, Qorus sustained net losses of $1,857,755. Qorus expects to
sustain net losses in excess of $3,000,000 for the year ended December 31, 1999.
Inasmuch as Qorus will continue to have a high level of operating
expenses, Qorus will continue to be required to make certain up-front
expenditures in connection with its system engineering efforts to prepare the
messaging service for each customer's service launch. It will also incur
up-front expenses to continue its sales and marketing effort. Qorus anticipates
that losses will continue for the foreseeable future.
Qorus records as revenue the service fee charged for system engineering
required to customize the product for specific electronic messaging applications
beyond its core unified messaging product. Qorus intends to record as revenue
the service fee charged to customers using the unified messaging service and
other enhanced business services as they are offered by Qorus. Although revenues
generated from system engineering accounted for 100% of revenues for the period
ended September 30, 1999, Qorus anticipates that the revenues generated from the
messaging services and other enhanced business services will eventually become
the larger source of future revenues for its unified messaging service segment.
Management believes that Qorus must either acquire or merge with
another company that will provide additional complimentary services to its
messaging services in order to compete with companies offering similar services.
As such, Qorus is currently in preliminary negotiations with a
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<PAGE> 17
potential merger partner that would complement the unified messaging service
business and add related business segments. If negotiations are not successful
with this company, another company will need to be identified that will provide
the desired results mentioned above. Qorus intends to raise additional capital
based on a successful acquisition or merger and the additional Internet and
telecommunications services that the acquisition or merger will provide.
RESULTS OF OPERATIONS
The following selected financial data should be read in conjunction
with the financial statements of Qorus and the related notes thereto included
elsewhere in this registration statement. The statements of operations set forth
below with respect to the interim nine-month period ended September 30, 1999 and
the years ended December 31, 1998 and 1997 are derived from the audited
financial statements of Qorus included elsewhere in this registration statement.
<TABLE>
<CAPTION>
September 30, December 31, December 31,
BALANCE SHEET DATA 1999 1998 1997
<S> <C> <C> <C>
Cash and cash equivalents $ 32,332 $ 11 $ 1,750
Total Assets 3,535,510 11 11,190
Notes payable to related parties 519,776
Total Liabilities 1,527,480
Accumulated deficit (2,066,375) (208,620) (120,668)
Total stockholders' equity (deficit) 2,008,030 11 (11,923)
</TABLE>
<TABLE>
<CAPTION>
September 30, December 31, December 31,
STATEMENT OF OPERATIONS 1999 1998 1997
<S> <C> <C> <C>
Revenues $ 62,000 $ 0
Total costs and expenses 1,985,362 76,458
Loss from operations (1,923,362) (40,770) (43,464)
Other income (expense), net 65,607 -- --
Loss from discontinued operations (47,182
Net Loss $(1,857,755) $ (87,952) $ (43,464)
Basic loss per share continuing operations (0.2400) (0.0186) (0.0201)
Basic loss per share discontinued operations $ (0.0213)
Total basic loss per share $ (0.2400) $ (0.0399) $ (0.0201)
Shares used in computing loss per share 7,781,490 2,209,108 1,840,000
</TABLE>
During the nine months ended September 30, 1999, Qorus incurred
significant expenses in developing its product, software and market. The
majority of these expenses are salaries and professional fees. Salaries and
wages for the period approximate $413,000. Professional fees included $203,000
for
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<PAGE> 18
marketing consultants and legal services totaling $263,000. Management expects
to continue incurring significant professional fees for additional capital
requirements, marketing and legal services. Interest income of approximately
$93,000 was related to a note receivable from a related party and from cash and
cash equivalents. Interest expense of $28,000 was attributable to notes payable
to related parties.
Qorus will need to raise additional funds to meet its cash requirements
for continuing operations in the next 12 months both to meet working capital
requirements and to buy additional products that will enhance the services that
are currently offered and meet additional customer requirements. Qorus intends
to hire from 12 to 20 additional employees by the fourth quarter of 2000.
As a result of the foregoing, net losses for the period ended September
30, 1999 were $1,857,755.
LIQUIDITY AND CAPITAL RESOURCES
Qorus' capital requirements have been and will continue to be
significant and its cash requirements have been exceeding its cash flow from
operations. At September 30, 1999, Qorus had working capital of $829,553 and
unrestricted cash and cash equivalents of $32,332. Since inception, Qorus has
satisfied its working capital requirements through limited cash flow generated
from operations, the issuance of equity and debt securities, and loans from
stockholders and related parties. Net cash used in operating activities was
$1,427,944 for the period ended September 30, 1999, primarily as a result of
significant operating losses. Qorus also prepaid approximately $220,000 for
software license fees.
Net cash used by investing activities was $1,126,636 for the period
ended September 30, 1999. $1,018,752 was used for an investment in Tornado
Development and $107,884 for the purchase of equipment. Financing activities
provided $2,223,901 in cash. Issuance of common stock and capital contributions
accounted for $3,865,774 of the cash provided. In addition, Qorus borrowed
approximately $500,000 from Thurston Bridge Fund II, a related party and accrued
certain software license expenses to Tornado Development, a related party,
amounting to $432,222. Qorus also loaned NetDox, a related party, $2,370,346 in
exchange for a note receivable which accrues interest at 10% per annum. The note
receivable was paid in full in the fourth quarter of 1999.
In addition to the $519,776 borrowed from the Thurston Bridge Fund II
and the software license expenses to Tornado Development, both of which were
paid in full in the fourth quarter of 1999, Qorus has operating leases payable
to a third-party leasing company. One such lease is for the telephone-related
equipment necessary to operate the unified messaging service. This 36-month
operating lease which began in July 1999 and ends June 2002 requires a monthly
payment of $6,842 plus appropriate taxes. The other operating leases are for
computer equipment necessary to operating the messaging systems. These two
simultaneous 18-month operating leases began September 1999 and end February
2001 and require a total monthly payment of $21,806 plus appropriate taxes.
Qorus also has property leases. For more information on property leases and
future lease commitments, please see the Notes to the Financial Statements.
Qorus had approximately $32,000 in cash and cash equivalents remaining
as of September 30, 1999. In the time period between September 30, 1999 and
December 31, 1999, Qorus has transferred $500,000 worth of its investment in
Tornado Development stock back to Tornado Development in exchange for a
reduction in the accrued expenses owed by $432,222 and a credit against future
expenses of $67,778. In addition, Qorus has received $555,000 in payments
relating to its note receivable. On or
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<PAGE> 19
about December 31, 1999, as part of the rescission agreement with NetDox, Inc.,
NetDox paid the total amount due on its note to Qorus and Qorus paid the total
amount due on its note to Thurston Bridge Fund II. This resulted in
approximately $950,000 net cash to Qorus. Qorus intends to use this money to pay
accrued expenses, current payroll and operating expenses. Management believes
that the current cash and receivables will enable it to operate through March
2000. Prior to March 2000, Qorus intends to merge with or acquire another
company as mentioned above and will be required to offer an equity private
placement to institutional investors for approximately $5,000,000 to $10,000,000
through the issuance of convertible preferred stock or other securities. This
new capital will be raised based on the successful merger or acquisition of a
company that will expand the service offering for Internet and
telecommunications services. There can be no assurance that the merger or
acquisition can be completed in a sufficient time period required for the
financing activity to be completed or that this financing or an adequate bridge
loan will be will be completed.
Based on Qorus' current proposed plans and assumptions, Qorus
anticipates that the net proceeds of its private offering, if successful, will
be sufficient to satisfy its contemplated cash requirements for approximately 9
to 12 months. In the event that Qorus' plans change or its assumptions prove to
be inaccurate (due to unanticipated expenses, increased competition, unfavorable
general economic conditions, decreased demand for its services or otherwise),
Qorus could be required to seek additional financing sooner than currently
anticipated. Qorus is dependent upon the Thurston Group, a related party, to
provide potential sources of additional financing. There can be no assurance
that any additional financing will be available to Qorus when needed, on
commercially reasonable terms, or at all.
GOING CONCERN
Qorus' independent auditors included an explanatory paragraph in their
report for the period ended September 30, 1999, which indicated a substantial
doubt as to the ability of Qorus to continue as a going concern. Qorus has
suffered significant losses from operations during its start up phase. See
independent auditors' report and Notes to the Financial Statements.
YEAR 2000 EFFECT
Qorus, like most other companies, is faced with the Year 2000 issue.
The Year 2000 issue has developed because some computer programs were written
using a two-digit field rather than a four-digit field to define the applicable
year. As a result any computer program that affects Qorus' activities may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a variety of problems depending upon the system(s) affected.
Potential problems include temporary inability to process transactions, transfer
funds, or engage in similar business activities. The potential problems
associated with the Year 2000 issue may cause widespread disruption of business
worldwide because of the interdependence on computer and communication systems.
Qorus has completed an initial assessment of potential Year 2000 issues for its
own computer systems and business processes. Based upon this assessment, Qorus
believes its computer software, hardware, and the embedded technologies will
present limited Year 2000 issues. Additionally, Qorus has assurances from its
software providers that the software used to provide the unified messaging
services is not expected to incur any material problems with the Year 2000
change. Qorus has not been able to completely evaluate whether the software,
hardware and embedded technologies used by the third parties, with whom it
conducts business, are Year 2000
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<PAGE> 20
compliant. If third parties fail to address Year 2000 issues, then Qorus may
experience business interruptions, and in a worst case scenario, the inability
to engage in the normal course of business. The effect of such related
difficulties could have a materially adverse impact on the financial condition
of Qorus. Qorus does not believe that any material expenditure will be required
to complete its internal assessment regarding this issue. Qorus does recognize
the need for Year 2000 contingency plans because of the uncertainty associated
with this global issue. Furthermore, Qorus believes that it will not be able to
require the third parties or governmental agencies with which it conducts
business to resolve all Year 2000 issues. Qorus has not developed comprehensive
contingency plans that will assure that it will not be adversely impacted by the
effect of the Year 2000 issue. Qorus does not intend to prepare such plans. To
date, Qorus has experienced no problems related to the Year 2000 issue.
IMPACT OF ACCOUNTING STANDARDS
New Accounting Standards Statements of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" (SFAS No. 130) issued by the FASB is
effective for financial statements with fiscal years beginning after December
15, 1997. Earlier application is permitted. SFAS No. 130 establishes standards
for reporting and display of comprehensive income and its components in a full
set of general purpose financial statements. There was no effect on Qorus'
financial position or results of operations from the adoption of this statement.
Statements of Financial Accounting Standards No. 131, "Disclosure about Segments
of an Enterprise and Related Information" (SFAS No. 131) issued by the FASB is
effective for financial statements beginning after December 15, 1997. The new
standard requires that public business enterprises report certain information
about operation segments in complete sets of financial statements of the
enterprise and in condensed financial statements of interim periods issued to
shareholders. It also requires that public business enterprises report certain
information about their products and services, the geographic areas in which
they operate and their major customers. The adoption of SFAS No. 131 had no
material effect, on Qorus' results of operations. Statement of Financial
Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities"
(SFAS No. 133) issued by the FASB is effective for financial statements with
fiscal quarters of fiscal years beginning after June 15, 1999. The new standard
provides for standardized accounting and reporting for derivative instruments,
including derivative instruments embedded in other contracts, and for hedging
activities. The guidance applies to all entities. SFAS 133 requires companies to
recognize all derivative contracts as either assets or liabilities in the
balance sheet and to measure them at fair value. Fair value measurements are
based on the guidance contained in SFAS 107, Disclosures about Fair Value of
Financial Instruments. Qorus does not expect adoption of SFAS No. 133 to have a
material effect on its results of operations.
ITEM 3. DESCRIPTION OF PROPERTY
Our executive offices are located at 9800 South Sepulveda Boulevard,
Suite 318, Los Angeles, California. The lease, with a non-affiliated third
party, expires June 15, 2002. Monthly rental is $3,714. In addition, we have
entered into a short term lease for a business office suite located in Fairfax,
Virginia.
We believe that existing facilities are adequate for our current
needs. Should we require additional space at that time, or earlier, we believe
that such space can be secured on commercially reasonable terms and without
undue operational disruption.
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<PAGE> 21
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
We have set forth in the following table certain information regarding
our common stock beneficially owned on January 18, 2000 for (i) each shareholder
we know to be the beneficial owner of 5% or more of our outstanding common
stock, (ii) each of our executive officers and directors, and (iii) all
executive officers and directors as a group. In general, a person is deemed to
be a "beneficial owner" of a security if that person has or shares the power to
vote or direct the voting of such security, or the power to dispose or to direct
the disposition of such security. A person is also deemed to be a beneficial
owner of any securities of which the person has the right to acquire beneficial
ownership within 60 days. At January 18, 2000, 11,354,407 shares of our common
stock were outstanding.
<TABLE>
<CAPTION>
Name and Address of Amount of Beneficial
Beneficial Owner Ownership Percent of Class(1)
------------------- -------------------- -------------------
<S> <C> <C>
Thurston Interests LLC 2,821,787(2) 24.85%
190 South LaSalle Street
Suite 1710
Chicago, IL 60606
Apex Investment Fund III 1,641,672 14.46%
233 S. Wacker Dr.
Suite 9500
Chicago, IL 60606
Thomson Kernaghan 1,400,000 12.33%
365 Bay Street
Toronto, ON
M5H2V2 Canada
Spear Leeds & Kellogg 869,019 7.65%
120 Broadway
New York, NY 10271
Patrick J. Haynes, III 2,890,420(3) 25.34%
190 South LaSalle St
Suite 1710
Chicago, IL 60606
George M. Middlemas 1,806,699(4) 15.84%
233 S. Wacker Dr.
Suite 9500
Chicago, IL 60603
</TABLE>
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<PAGE> 22
<TABLE>
<S> <C> <C>
William G. Salatich 108,259(5) *
77 Brandon Road
Northfield, IL 60093
Robert T. Isham, Jr. 530,645(6) 4.65%
190 South LaSalle St
Suite 1710
Chicago, IL 60606
Michael D. Sohn 416,666(7) 3.54%
9800 South Sepulveda Blvd
Los Angeles, CA 90045
Richard E. Burton 50,000(5) *
9800 South Sepulveda Blvd
Los Angeles, CA 90045
Jack Woodruff 108,333(8) *
9800 South Sepulveda Blvd
Los Angeles, CA 90045
All Executive Officers and Directors 5,463,250(9) 45.04%
as a group
</TABLE>
*Less than 1%
(1) Calculation of percentage beneficial ownership assumes the exercise by
only the respective named stockholder of all options to purchase common
stock held by such stockholder which are exercisable within 60 days.
- 22 -
<PAGE> 23
(2) Includes 89,682 shares held of record by Thurston Capital, LLC, 243,837
shares held of record by Thurston Group, Inc., 105,253 shares held of
record by Thurston Offshore Bridge Ltd., 4,000 shares held of record by
Asset Management Partners and 5,000 shares held of record by Southern
European Communications Corp. As a principal of each of Thurston
Capital, LLC, Thurston Group, Inc., Thurston Offshore Bridge Ltd.,
Asset Management Partners and Southern European Communications Corp.,
Thurston Interests LLC shares voting and investment power with respect
to, and may be deemed a beneficial owner of, the shares held by each
such entity.
(3) Includes 2,374,015 shares held of record by Thurston Interests, LLC,
18,633 shares held of record by Haynes Interests, LLC, 89,682 shares
held of record by Thurston Capital, LLC, 243,837 shares held of record
by Thurston Group, Inc., 105,253 shares held of record by Thurston
Offshore Bridge Ltd., 4,000 shares held of record by Asset Management
Partners, 5,000 shares held of record by Southern European
Communications Corp. and 50,000 shares issuable upon the exercise of
options within 60 days. As a principal of each of Thurston Interests,
LLC, Haynes Interests, LLC, Thurston Capital, LLC, Thurston Group,
Inc., Thurston Offshore Bridge Ltd., Asset Management Partners and
Southern European Communications Corp., Mr. Haynes shares voting and
investment power with respect to, and may be deemed a beneficial owner
of, the shares held by each such entity.
(4) Includes 1,641,672 shares held of record by Apex Investment Fund III,
108,756 shares held of record by Apex Strategic Partners and 50,000
shares issuable upon the exercise of options within 60 days. As a
principal of each of Apex Investment Fund III and Apex Strategic
Partners, Mr. Middlemas shares voting and investment power with respect
to, and may be deemed a beneficial owner of, the shares held by each
such entity.
(5) Includes 50,000 shares issuable upon the exercise of options within 60
days.
(6) Includes 89,682 shares held of record by Thurston Capital, LLC, 243,837
shares held of record by Thurston Group, Inc., 105,253 shares held of
record by Thurston Offshore Bridge Ltd., 4,000 shares held of record by
Asset Management Partners, 5,000 shares held of record by Southern
European Communications Corp., 32,873 shares held of record by Robert
T. Isham, Jr. Trust and 50,000 shares issuable upon the exercise of
options within 60 days. As a principal of each of Thurston Capital,
LLC, Thurston Offshore Bridge Ltd., Asset Management Partners and
Southern European Communications Corp., and as trustee of Robert T.
Isham, Jr. Trust, Mr. Isham shares voting and investment power with
respect to, and may be deemed a beneficial owner of, the shares held by
each such entity.
(7) Includes 416,666 shares issuable upon the exercise of options within 60
days.
(8) Includes 108,333 shares issuable upon the exercise of options within 60
days.
(9) Includes 774,999 shares issuable upon the exercise of options within 60
days.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the names, positions and ages of our
executive officers and directors. All of our directors serve until the next
annual meeting of stockholders or until their successors are elected and
qualify. Officers are elected by the board of directors and their terms of
office are, except to the extent governed by employment contract, at the
discretion of the board of directors. There is no family relationship between
any director, executive officer or person nominated or chosen by Qorus to become
a director or executive officer.
- 23 -
<PAGE> 24
<TABLE>
<CAPTION>
Name Age Position Held Since
---- --- -------- ----------
<S> <C> <C> <C>
Patrick J. Haynes, III 50 Chairman and Chairman of the 1999
Executive Committee
George M. Middlemas 53 Director 1999
William Salatich 77 Director 1999
Robert T. Isham, Jr. 47 Director 1999
Michael D. Sohn 53 Director, Chief Executive Officer 1999
Richard E. Burton 46 President 1999
Jack Woodruff 42 Chief Financial Officer 1999
</TABLE>
Patrick J. Haynes III, Chairman and Chairman of the Executive
Committee, is the co-founder and Senior Managing Director of Thurston Group,
Inc., a private merchant bank in Chicago. Mr. Haynes has held his position with
Thurston Group, Inc. since 1988. In 1992, Mr. Haynes founded e.spire
Communications (formerly American Communications) and held the position of
President until 1993. Mr. Haynes currently serves as Chairman of Avery
Communications, Inc., a position he has held since 1995. Prior to 1988, Mr.
Haynes was associated with Merrill Lynch & Company, Oppenheimer & Company and
Lehman Brothers, Inc. as an investment banker.
George M. Middlemas, Director, is a general partner of APEX Management,
L.P., which is the General Partner of the venture capital funds Apex Investment
Fund II, L.P. and Apex Investment Fund Limited Partnership. Mr. Middlemas has
held this position since January 1992. From March 1991 to December 1991, Mr.
Middlemas acted as an independent consultant providing fund raising and other
advisory services. From 1985 until March 1991, Mr. Middlemas was a senior Vice
President and Principal of Inco Venture Capital Management, a venture capital
firm. He also serves on the Board of Directors of PureCycle Corporation,
Security Dynamics Technologies, Inc., Tut Systems, Online Resources &
Communications and several privately held companies.
William Salatich, Director, was President of Gillette North America and
Vice Chairman of the Gillette Company from 1970 to 1979, and was associated with
Gillette for 33 years. Mr. Salatich is currently retired. He has served on the
Board of Directors of the Gillette Co., Motorola, Eastern Enterprises, New
England Merchants Bank of Boston, Digivision Corporation, Forsythe-McArthur and
e.spire Communications. Mr. Salatich is a member of the America Society of
Corporate
- 24 -
<PAGE> 25
Executives. Mr. Salatich was the recipient of the Citation of Merit from the
National Conference of Christians and Jews and is a Horatio Alger awardee.
Robert T. Isham, Jr., Director, is a Managing Director of the Thurston
Group, a private merchant bank in Chicago, a position he has held since 1997.
From 1993 to 1996, Mr. Isham ran his own commercial law practice, concentrating
on bankruptcy, workout, debtor-creditor relations and futures, commodities and
securities law. Previously, he was a partner at McDermott, Will & Emery in
Chicago. Mr. Isham is a Director of Avery Communications, Inc.
Michael D. Sohn, Chief Executive Officer, joined Qorus in May 1999.
Prior to joining Qorus, Mr. Sohn had been President of NetDox, Inc., a secure
messaging and trust service company, from December 1996 to April 1999. Prior to
joining NetDox, Mr. Sohn worked as an independent consultant helping
technology-based companies, in medical equipment and recreational leisure goods
industries, raise capital and develop their business plans. From 1990 to 1993,
he was the President and Chief Executive Officer of Visual Edge, a systems
developer of digital printing systems. Prior to that, Mr. Sohn was a founder and
served as President of International Operations of Print Technology, a marketer
of a small footprint, retail photo-development franchise from 1988 to 1990. From
1985 to 1988, Mr. Sohn was President of Eastman Communication, a Kodak company
that provided network products worldwide. During his career, Mr. Sohn has worked
with United Technologies and Arthur D. Little & Co., Inc.
Richard E. Burton, President, joined Qorus in May 1999. Prior to
joining Qorus, Mr. Burton had been Vice President of Sales and Marketing of
Telinet Technologies, LLC, a unified messaging software developer, from October
1996 to March 1999. From August 1995 to July 1996, Mr. Burton was a network
services marketing executive for Xerox in Atlanta, where he was involved in
developing a new line of business within the company to provide network
consulting, integration, and multi-vendor services to clients. Prior to that,
Mr. Burton spent six years in major account sales with Novell, during which time
Mr. Burton managed accounts with such clients as Eastman Kodak, Bausch & Lomb,
Xerox, Corning, Delta, Coca-Cola, NationsBank and Federal Express. The company
recognized him for his outstanding leadership skills and sales performance. In
addition, Mr. Burton has held senior management positions with RG Engineering in
Rochester, New York, and Entre Computer Center in Columbus, Georgia.
Jack Woodruff, Chief Financial Officer, joined Qorus in March 1999.
Prior to joining Qorus, Mr. Woodruff was a founder and Chief Financial Officer
of National Data Cabling, Inc., a national provider of data cabling services for
high-speed network infrastructures, from January 1998 to March 1999. From March
1992 to December 1997, Mr. Woodruff served as Corporate Controller and then
Treasurer for Kinko's, Inc., an international chain of 1000 copy stores. Prior
to Kinko's, Mr. Woodruff served four years at Print Technology, from 1988 to
1992, first as Director of Strategic Planning, then as Director of Finance and
Director of Field Operations. From 1985 to 1988, Mr. Woodruff served as Vice
President Finance at Motivational Media, a production company specializing in
media events for education and business. Mr. Woodruff began his career at UCLA
Center for the Health Sciences from 1980 to 1985 as Senior Administrative
Analyst and then as Assistant Director.
- 25 -
<PAGE> 26
Qorus is controlled by Thurston Group, its affiliates and Patrick J.
Haynes, the founders of Qorus. For a description of these entities, please see
the information under the caption "Our Parents and Affiliates" in Item 1.
Description of Business.
ITEM 6. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM COMPENSATION
COMPENSATION ----------------------
NAME AND ------------ SECURITIES UNDERLYING
PRINCIPAL POSITION YEAR SALARY OPTIONS
- ------------------------ ---- ------------ ----------------------
<S> <C> <C> <C>
Michael D. Sohn
Chief Executive Officer 1999 $ 164,167 500,000
Richard E. Burton
President 1999 $ 123,125 300,000
</TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE
OPTIONS/SARS TO EMPLOYEES PRICE EXPIRATION
NAME GRANTED IN FISCAL YEAR ($/SHARE) DATE
- ----------------- ------------ ---------------- --------- ------------
<S> <C> <C> <C> <C>
Michael D. Sohn 500,000 33.22% $1.00 May 23, 2004
Richard E. Burton 300,000 19.93% $1.00 May 23, 2004
</TABLE>
Stock Option Plan
In May 1999, our board of directors adopted our 1999 stock option plan
as a means of attracting and retaining superior personnel for positions of
substantial responsibility with Qorus and to provide directors, officers,
employees and consultants with an additional incentive to contribute to the
success of Qorus.
Under the plan, we have reserved an aggregate of 2,000,000 shares of
common stock for issuance pursuant to options. Our board of directors or a
committee of our board of directors will administer the plan, including the
selection of the persons who will be granted options under the plan, the type of
options to be granted, the number of shares subject to each option and the
option price.
Option Grants
The following table sets forth information with respect to options to
purchase shares of common stock granted to date under the 1999 Stock Option
Plan.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Number of
Securities
Underlying Exercise
Options/SARs Vesting Price
Name Granted Schedule ($/Share) Expiration Date
---- ------------ -------- --------- ---------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Michael D. Sohn 500,000 May 24, 1999 400,000 shares $1.00 May 23, 2004
- --------------------------------------------------------------------------------------------------------------------
November 24, 1999 16,666 shares
- --------------------------------------------------------------------------------------------------------------------
May 24, 2000 16,666 shares
- --------------------------------------------------------------------------------------------------------------------
November 24, 2000 16,667 shares
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
- 26 -
<PAGE> 27
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Number of
Securities
Underlying Exercise
Options/SARs Vesting Price
Name Granted Schedule ($/Share) Expiration Date
---- ------------ -------- --------- ---------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
May 24, 2001 16,667 shares
- --------------------------------------------------------------------------------------------------------------------
November 24, 2001 16,667 shares
- --------------------------------------------------------------------------------------------------------------------
May 24, 2002 16,667 shares
- --------------------------------------------------------------------------------------------------------------------
Richard E. Burton 300,000 November 24, 1999 50,000 shares $1.00 May 23, 2004
- --------------------------------------------------------------------------------------------------------------------
May 24, 2000 50,000 shares
- --------------------------------------------------------------------------------------------------------------------
November 24, 2000 50,000 shares
- --------------------------------------------------------------------------------------------------------------------
May 24, 2001 50,000 shares
- --------------------------------------------------------------------------------------------------------------------
November 24, 2001 50,000 shares
- --------------------------------------------------------------------------------------------------------------------
May 24, 2002 50,000 shares
- --------------------------------------------------------------------------------------------------------------------
Jack N. Woodruff 150,000 May 24, 1999 100,000 shares $1.00 May 23, 2004
- --------------------------------------------------------------------------------------------------------------------
November 24, 1999 8,333 shares
- --------------------------------------------------------------------------------------------------------------------
May 24, 2000 8,333 shares
- --------------------------------------------------------------------------------------------------------------------
November 24, 2000 8,334 shares
- --------------------------------------------------------------------------------------------------------------------
May 24, 2001 8,333 shares
- --------------------------------------------------------------------------------------------------------------------
November 24, 2001 8,333 shares
- --------------------------------------------------------------------------------------------------------------------
May 24, 2002 8,334 shares
- --------------------------------------------------------------------------------------------------------------------
John R. Kemp 125,000 May 24, 1999 25,000 shares $1.00 May 23, 2004
- --------------------------------------------------------------------------------------------------------------------
November 24, 1999 16,666 shares
- --------------------------------------------------------------------------------------------------------------------
May 24, 2000 16,666 shares
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
- 27 -
<PAGE> 28
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Number of
Securities
Underlying Exercise
Options/SARs Vesting Price
Name Granted Schedule ($/Share) Expiration Date
---- ------------ -------- --------- ---------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
November 24, 2000 16,667 shares
- --------------------------------------------------------------------------------------------------------------------
May 24, 2001 16,667 shares
- --------------------------------------------------------------------------------------------------------------------
November 24, 2001 16,667 shares
- --------------------------------------------------------------------------------------------------------------------
May 24, 2002 16,667 shares
- --------------------------------------------------------------------------------------------------------------------
Neil C. Ludwig 125,000 May 24, 1999 50,000 shares $1.00 May 23, 2004
- --------------------------------------------------------------------------------------------------------------------
November 24, 1999 12,500 shares
- --------------------------------------------------------------------------------------------------------------------
May 24, 2000 12,500 shares
- --------------------------------------------------------------------------------------------------------------------
November 24, 2000 12,500 shares
- --------------------------------------------------------------------------------------------------------------------
May 24, 2001 12,500 shares
- --------------------------------------------------------------------------------------------------------------------
November 24, 2001 12,500 shares
- --------------------------------------------------------------------------------------------------------------------
May 24, 2002 12,500 shares
- --------------------------------------------------------------------------------------------------------------------
J. Alan Lindauer 25,000 May 24, 1999 25,000 shares $1.00 May 23, 2004
- --------------------------------------------------------------------------------------------------------------------
Barbara J. Phillips 10,000 May 24, 1999 10,000 shares $1.00 May 23, 2004
- --------------------------------------------------------------------------------------------------------------------
William Long 35,000 April 1, 2000 5,833 shares $5.25 September 30,
2004
- --------------------------------------------------------------------------------------------------------------------
October 1, 2000 5,833 shares
- --------------------------------------------------------------------------------------------------------------------
April 1, 2001 5,833 shares
- --------------------------------------------------------------------------------------------------------------------
October 1, 2001 5,833 shares
- --------------------------------------------------------------------------------------------------------------------
April 1, 2002 5,834 shares
- --------------------------------------------------------------------------------------------------------------------
October 1, 2002 5,834 shares
- --------------------------------------------------------------------------------------------------------------------
Alan Paige 15,000 April 1, 2000 2,500 shares $5.25 September 30,
2004
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
- 28 -
<PAGE> 29
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Number of
Securities
Underlying Exercise
Options/SARs Vesting Price
Name Granted Schedule ($/Share) Expiration Date
---- ------------ -------- --------- ---------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
October 1, 2000 2,500 shares
- --------------------------------------------------------------------------------------------------------------------
April 1, 2001 2,500 shares
- --------------------------------------------------------------------------------------------------------------------
October 1, 2001 2,500 shares
- --------------------------------------------------------------------------------------------------------------------
April 1, 2002 2,500 shares
- --------------------------------------------------------------------------------------------------------------------
October 1, 2002 2,500 shares
- --------------------------------------------------------------------------------------------------------------------
Hoa Le 15,000 April 1, 2000 2,500 shares $5.25 September 30,
2004
- --------------------------------------------------------------------------------------------------------------------
October 1, 2000 2,500 shares
- --------------------------------------------------------------------------------------------------------------------
April 1, 2001 2,500 shares
- --------------------------------------------------------------------------------------------------------------------
October 1, 2001 2,500 shares
- --------------------------------------------------------------------------------------------------------------------
April 1, 2002 2,500 shares
- --------------------------------------------------------------------------------------------------------------------
October 1, 2002 2,500 shares
- --------------------------------------------------------------------------------------------------------------------
Lisa Moore 5,000 April 1, 2000 833 shares $5.25 September 30,
2004
- --------------------------------------------------------------------------------------------------------------------
October 1, 2000 833 shares
- --------------------------------------------------------------------------------------------------------------------
April 1, 2001 833 shares
- --------------------------------------------------------------------------------------------------------------------
October 1, 2001 833 shares
- --------------------------------------------------------------------------------------------------------------------
April 1, 2002 834 shares
- --------------------------------------------------------------------------------------------------------------------
October 1, 2002 834 shares
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
In addition, on May 24, 1999, each non-employee director was granted an
option to purchase 50,000 shares at $1.00 per share. Each option is immediately
exercisable in full and expires on May 23, 2004.
- 29 -
<PAGE> 30
Executive Employment Agreements
We have entered into an employment agreement with Michael Sohn pursuant
to which he is employed as the Chief Executive Officer of Qorus. The term
expires on May 31, 2000. The agreement provides for a salary of $25,000 per
month plus 400,000 options immediately exercisable at $1.00 per share. In
addition, Mr. Sohn was granted an additional 100,000 options exercisable at
$1.00 per share, which vest over a three year period. One-sixth of the total
amount vests each six months. The agreement may be terminated by Qorus for good
cause. Good cause means:
o death or disability of Mr. Sohn (unless Mr. Sohn remains able to
perform his essential job duties, with or without reasonable
accommodations)
o the commission by Mr. Sohn of any unlawful act in connection with
his employment
o the commission by Mr. Sohn of a felony or other act of moral
turpitude during his employment (regardless of whether it is related to
the performance of his job duties)
o the voluntary abandonment by Mr. Sohn of his position
o the willful refusal by Mr. Sohn to perform his job
responsibilities
If the agreement is terminated by Qorus during the one-year term for
reasons other than good cause, Mr. Sohn is entitled to continue to receive his
base salary on regular payroll dates for the remainder of the term as if he
continued to be employed under the terms of the agreement. The agreement
automatically terminates at the end of the one-year term. Mr. Sohn may resign
voluntarily at any time but he must give at least ninety (90) days advance
notice of his resignation.
For one year following the termination of Mr. Sohn's employment, he has
agreed not to solicit business from any client of Qorus or to induce or attempt
to induce any employee of Qorus or any of its affiliates or subsidiaries to
leave its or their employ or in any way interfere with the relationship between
Qorus, its affiliates and subsidiaries and employees thereof.
We have not entered into employment agreements with any other named
individuals.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On July 15, 1999, Qorus acquired certain assets of NetDox, Inc.,
including the NetDox brand name, equipment, and customer lists. Thurston Group,
Inc. and its affiliates co-founded NetDox with Deloitte & Touche L.L.C. in 1997
with an initial aggregate capital investment of approximately $35 million. In
early 1999, Thurston Group acquired Deloitte & Touche's interest in Netdox. In
consideration of the transfer of the assets to us by NetDox, we assumed certain
liabilities of NetDox and forgave $2,100,000 of indebtedness owed to us by
NetDox. On December 31, 1999, the transaction was rescinded pursuant to a
Rescission Agreement. All of the assets (except equipment valued at $350,000)
were conveyed back to NetDox and NetDox assumed all of the liabilities that had
been assumed by us. The balance due us under the note as of December 31, 1999 is
$1,488,987. As part of the rescission, Messrs. Haynes and Stern agreed to
personally guarantee approximately $2.5 million in loans to a commercial bank on
behalf of NetDox. We also entered into a Commission Agreement with NetDox to
compensate NetDox for its efforts in securing the contract with Moore Business
Communications Services. Under the Commission Agreement,
- 30 -
<PAGE> 31
NetDox will be entitled to a commission in the amount of 20% of all gross
revenues (excluding development fees or other non-recurring revenues) received
by us under the Master Agreement with Moore Business Communications Services.
During the nine months ended September 30, 1999, we have compensated
Thurston Group, Inc. for professional services in the amount of $255,000, which
related to the acquisition of funding and certain other investment activity. We
entered into a Consulting Agreement dated March 1, 1999 with Thurston Group,
Inc. Qorus engaged Thurston Group until March 31, 2002 as an independent
contractor to advise Qorus on and with respect to obtaining financing of any
type and to advise us and act as our agent in connection with any business
combination, merger, acquisition or sale. Thurston Group agreed to provide the
following services to us:
o Distribute an informational memorandum outlining our business
plans and expectations and/or contemplating specific transactions for
business combinations;
o Identify potential sources of capital;
o Provide sale, merger and acquisition financial analysis;
o Advise on structure of any potential transaction;
o Assist with negotiations; and
o Assist with due diligence.
Thurston Group will earn a fee in the amount of 8% of the amount of any
financing raised by us during the term of this agreement, or 8% of the value to
us of any business combination transaction such as a merger, acquisition or
sale. The Consulting Agreement may be terminated by the written consent of both
parties, upon the consummation of an offering by us of securities registered
under the Securities Act of 1933, by Qorus upon Thurston Group's breach of the
Consulting Agreement which is not cured within 30 days of notice of such breach,
or by Thurston Group in the event of Qorus' failure to make any payments due
under the Consulting Agreement within 10 days of notice or upon Qorus' breach of
the Consulting Agreement which is not cured within 30 days of notice of such
breach. In addition, a non-defaulting party may terminate the Consulting
Agreement upon 30 days prior written notice to the defaulting party. For
purposes of the Consulting Agreement, the bankruptcy or reorganization of a
party, the appointment of a receiver with respect to a party or its assets or
any similar action is a default.
We have agreed to assume the responsibilities of Southern European
Communications Corp. under a Lease and Service Agreement dated December 23,
1999. The lease covers office space located at 11350 Random Hills Road, Fairfax,
Virginia 22030. Monthly rental is $5,302 plus $1,170 in furniture rental fees,
phone charges and fees for business support services. The term of the lease
begins on January 3, 2000 and expires June 30, 2000. Thurston Group, Inc. and
its affiliates own a majority of the outstanding capital stock of Southern
European Communications Corp. Messrs. Haynes and Salatich, directors of Qorus,
are also directors of Southern European Communications Corp. Our board of
directors has determined that the assumption of the lease and the release of
Southern European Communications Corp. from its obligations under the lease is
fair to Qorus.
Patrick J. Haynes, III and Robert T. Isham, Jr., directors of Qorus,
are principals of Thurston Group, Inc. and its affiliates.
Mr. Haynes and Thurston Group, Inc. and their respective affiliates are
the founders of Qorus. None of Mr. Haynes, Thurston Group or any of their
respective affiliates have received anything of value other than fees Thurston
Group has earned under the Consulting
- 31 -
<PAGE> 32
Agreement. No assets were acquired by us from Mr. Haynes, Thurston Group or any
of their respective affiliates other than the assets acquired from NetDox.
ITEM 8. DESCRIPTION OF SECURITIES
Under our articles of incorporation, we are authorized to issue up to
50,000,000 shares of common stock, par value $.001 per share, of which
11,354,407 shares were outstanding as of January 18, 2000. We are also
authorized to issue up to 5,000,000 shares of preferred stock, par value $.01
per share of which no shares were issued and outstanding as of January 18, 2000.
Common Stock
Each shareholder is entitled to one vote for each share of common stock
owned of record. The holders of shares of common stock do not possess cumulative
voting rights, which means that the holders of more than 50% of the outstanding
shares voting for the election of directors can elect all of the directors, and
in such event the holders of the remaining shares will be unable to elect any of
our directors. Holders of outstanding shares of common stock are entitled to
receive dividends out of assets legally available at such times and in such
amounts as our board of directors may determine. Upon our liquidation,
dissolution, or winding up, the assets legally available for distribution to our
shareholders will be distributed ratably among the holders of the shares
outstanding at the time. Holders of our shares of common stock have no
preemptive, conversion, or subscription rights, and our shares of common stock
are not subject to redemption. All of our outstanding shares of common stock are
fully paid and non-assessable.
Preferred Stock
Under our articles of incorporation, we are authorized to issue
preferred stock with such designations, rights and preferences as our board of
directors may from time to time determine. Accordingly, our board of directors
is empowered, without stockholder approval, to issue preferred stock with
dividend, liquidation, conversion, voting or other rights which could adversely
affect the voting power or other rights of the holders of our stock. We could
issue preferred stock as a method of discouraging, delaying or preventing a
change of control of Qorus. Our board of directors has not created any series of
preferred stock as of the date of this registration statement.
There are no other provisions in our articles of incorporation or
bylaws that would have an effect of delaying, deferring or preventing a change
in control of Qorus.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Our shares of common stock are traded in the over-the-counter market,
and quotations may be found in the "pink sheets" published by the National
Quotation Bureau, LLC. Our common stock trades only sporadically and has
experienced in the past, and is expected to experience in the future,
significant price and volume volatility. On December 1, 1999, our common stock
became ineligible for trading on the OTC Bulletin Board because of our failure
to comply with the NASD's eligibility rule. Since becoming ineligible for
trading, the price and trading volume of our stock has fallen materially. Prior
to May 17, 1999, our shares of common stock were traded under the symbol "GBLL".
The reported high and low bid prices for the common stock as reported by the
National Quotation Bureau are shown below for each quarter in the previous two
fiscal years. The reported high and low bid prices for the common stock for 1998
and the first two quarters of 1999 have been adjusted to reflect a 1-for-3 stock
split declared on May 17, 1999. The quotations reflect inter-dealer prices and
do not include retail mark-ups, mark-downs or commissions. The prices do not
necessarily reflect actual transactions.
- 32 -
<PAGE> 33
<TABLE>
<CAPTION>
Bid Price
High Low
---- ---
<S> <C> <C>
1998
First Quarter N/A N/A
Second Quarter N/A N/A
Third Quarter 0.03 0.03
(First available, August 5)
Fourth Quarter 0.03 0.03
1999
First Quarter 0.03 0.03
Second Quarter 4.75 0.03
Third Quarter 6.5 5
Fourth Quarter 5.5 1
</TABLE>
The last reported sale of our common stock was on January 12, 2000, at
a price of $2.00, as reported on the National Quotation Bureau Pink Sheets. As
of January 18, 2000, there were 11,354,407 shares of common stock outstanding
and 155 shareholders of record.
Our transfer agent is Florida Atlantic Stock Transfer, Inc., 7130 Nob
Hill Road, Tamarac, Florida 33321.
We have never paid cash dividends on our common stock and we presently
intend to retain future earnings, if any, to finance the expansion of our
business. We do not anticipate that any cash dividends will be paid in the
foreseeable future. Future dividend policy will depend on our earnings, capital
requirements, expansion plans, financial condition and other relevant factors.
ITEM 2. LEGAL PROCEEDINGS
Not applicable.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not applicable.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In 1998, Qorus issued an aggregate of 37,833 shares of common stock (as
adjusted for the 1-for-3 stock split in 1999) to the original investors in Qorus
Florida upon the exercise of outstanding warrants. Each of the warrantholders
represented that he was an "accredited investor" and was acquiring such shares
for investment and not with a view to distributing such shares. A legend to such
effect was placed on the certificates representing such shares, and appropriate
"stop transfer"
- 33 -
<PAGE> 34
instructions were given to Qorus' transfer agent. The issuance of such shares
was made without registration under the Securities Act in reliance on the
exemption afforded by Section 4(2) under the Securities Act.
Subsequent to March 25, 1999, but before April 15, 1999, Qorus Delaware
issued an aggregate of 5,333,145 shares of its common stock, $.001 par value per
share, for a purchase price of $.001 per share to Thurston Group and twelve of
its affiliated entities, none of which was formed for the purpose of making the
investment. Each of such stockholders represented and warranted that it was an
"accredited investor" and was acquiring such shares for investment and not with
a view to distributing such shares. A legend to such effect was placed on the
certificates representing such shares, and appropriate "stop transfer"
instructions were given to Qorus Delaware's transfer agent. The issuance was
made without registration under the Securities Act of 1933 in reliance upon the
exemption from registration afforded by Section 4(2) under Securities Act.
On May 19, 1999, Qorus entered into an Acquisition Agreement with the
thirteen stockholders of Qorus Delaware pursuant to which we issued an aggregate
of 5,333,145 shares of our common stock to them in exchange for 100% of the
issued and outstanding common stock of Qorus Delaware. Each of such stockholders
again represented and warranted that it was an "accredited investor" and was
acquiring such shares for investment and not with a view to distributing such
shares. A legend to such effect was placed on the certificates representing such
shares, and appropriate "stop transfer" instructions were given to Qorus'
transfer agent. The issuance was made without registration under the Securities
Act of 1933 in reliance upon the exemption from registration afforded by Section
4(2) under the Securities Act.
On May 19, 1999, Qorus issued an aggregate of 3,896,231 shares of its
common stock to thirty-two investors for a purchase price of $1.00 per share.
Each of such investors was, at the time, a beneficial owner of shares of common
stock of Qorus. Each of such investors also represented and warranted that such
investor was an "accredited investor" and was acquiring the shares for
investment and not with a view to distributing such shares. A legend to such
effect was placed on the certificates representing such shares, and appropriate
"stop transfer" instructions were given to Qorus' transfer agent. The issuance
was made without registration under the Securities Act in reliance upon the
exemption from registration afforded by Section 4(2) under the Securities Act.
At various times between May 19, 1999, and October 1, 1999, Qorus
granted options to purchase an aggregate of 1,505,000 shares of Qorus' common
stock to Qorus' directors, officers and employees pursuant to Qorus' 1999 stock
option plan. Such options were granted in reliance upon the exemption provided
in Rule 701 under the Securities Act. Information regarding these options is set
forth under the caption Stock Option Plan above.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The articles of incorporation and bylaws of Qorus provide that Qorus
will indemnify, to the full extent and in the manner permitted under the laws of
the State of Florida and any other applicable laws, any person made or
threatened to be made a party to an action or proceeding, whether criminal,
civil, administrative or investigative, by reason of the fact that he is or was
a director or officer of this corporation or served any other enterprise as a
director or officer at the request of this corporation. These rights of
indemnification are not exclusive of any other rights to which any director or
officer or his legal representative may be entitled.
- 34 -
<PAGE> 35
PART F/S
Index to Financial Statements
of Qorus.Com, Inc.
<TABLE>
<CAPTION>
Page
------
<S> <C>
INDEPENDENT AUDITORS' REPORT - FARBER & HASS LLP F-1
BALANCE SHEET, SEPTEMBER 30, 1999 F-2
STATEMENT OF OPERATIONS FOR THE PERIOD JANUARY 1, 1999 TO SEPTEMBER 30, 1999 F-4
STATEMENT OF STOCKHOLDERS' EQUITY FOR THE PERIOD JANUARY 1, 1999 TO SEPTEMBER 30, F-5
1999
STATEMENT OF CASH FLOWS FOR THE PERIOD JANUARY 1, 1999 TO SEPTEMBER 30, 1999 F-6
NOTES TO FINANCIAL STATEMENTS F-8
REPORT OF JOHN J. FAIRCLOTH, C.P.A. F-16
CONSOLIDATED BALANCE SHEETS FOR THE PERIODS ENDED DECEMBER 31, 1998 AND 1997 F-17
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE PERIODS ENDED DECEMBER 31, 1998 AND F-18
1997
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIODS ENDED DECEMBER 31, 1998 AND F-19
1997
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE PERIOD ENDED F-20
DECEMBER 31, 1998
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-21
</TABLE>
<PAGE> 36
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
of Qorus.com, Inc.:
We have audited the accompanying balance sheet of Qorus.com, Inc. (the
"Company") as of September 30, 1999 and the related statements of operations,
stockholders' equity and cash flows for the period January 1, 1999 to September
30, 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements present fairly, in all material
respects, the financial position of Qorus.com, Inc. as of September 30, 1999
and the results of its operations and its cash flows for the period January 1,
1999 to September 30, 1999 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has had minimal revenues and incurred losses
from operations since inception. These conditions raise substantial doubt about
its ability to continue as a going concern. Management's plans regarding those
matters also are described in Note 9. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ Farber & Hass LLP
December 30, 1999
Oxnard, California
F-1
<PAGE> 37
QORUS.COM, INC.
BALANCE SHEET
SEPTEMBER 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 32,332
Accounts receivable 62,000
Related party note receivable 1,930,346
Accrued interest on note receivable 70,921
Prepaid expenses and other current assets 261,434
------------
Total current assets 2,357,033
------------
PROPERTY AND EQUIPMENT:
Furniture and fixtures 5,014
Office equipment 15,429
Production equipment 77,719
Leasehold improvements 9,722
------------
Total property and equipment 107,884
Less accumulated depreciation (4,897)
------------
Property and equipment, net 102,987
------------
INVESTMENT 1,018,752
------------
OTHER ASSETS 56,738
------------
TOTAL ASSETS $ 3,535,510
============
(Continued)
</TABLE>
F-2
<PAGE> 38
QORUS.COM, INC.
BALANCE SHEET - CONTINUED
SEPTEMBER 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
CURRENT LIABILITIES:
Accrued expenses and other current liabilities $ 575,482
Accrued expenses to related parties 451,998
Notes payable to related parties 500,000
------------
Total current liabilities 1,527,480
------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01; 5,000,000 shares
authorized and no shares issued
Common stock, par value $.001; 50,000,000 shares
authorized and 11,354,407 shares issued and
outstanding 11,354
Additional paid-in capital 4,068,383
Accumulated deficit (2,066,375)
Less common stock notes receivable (5,332)
------------
Total stockholders' equity 2,008,030
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,535,510
============
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 39
QORUS.COM, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD JANUARY 1, 1999 TO SEPTEMBER 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
REVENUES $ 62,000
COST OF REVENUES 437,886
------------
GROSS LOSS (375,886)
------------
OPERATING EXPENSES:
Selling and marketing 229,978
General and administrative 1,036,749
Impairment loss 280,749
------------
Total operating expenses 1,547,476
------------
LOSS FROM OPERATIONS (1,923,362)
------------
OTHER INCOME (EXPENSE):
Interest income 93,295
Interest expense (27,688)
------------
Other income, net 65,607
------------
NET LOSS $ (1,857,755)
============
BASIC LOSS PER SHARE $ (0.24)
============
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 40
QORUS.COM, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD JANUARY 1, 1999 TO SEPTEMBER 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Total
Shares Additional Stockholders' Stock Notes Stockholders'
Outstanding Common Stock Paid-in Capital Deficit Receivable Equity
----------- ------------ --------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1999 6,633,100 $ 663 $ 207,968 $ (208,620) $ 11
ADDITIONAL CAPITAL
CONTRIBUTED 280,749 280,749
ISSUANCE OF COMMON
STOCK:
Cash (Net of fees of $311,198) 3,895,412 3,895 3,581,130 3,585,025
Acquisition of Qorus.com, Inc.
(a Delaware corporation) 5,333,145 5,333 $ (5,333)
ONE-FOR-THREE REVERSE (4,422,067) (442) 442
STOCK SPLIT
TREASURY STOCK RETIRED (85,183) (9) 9
CHANGE IN PAR VALUE FROM
$.0001 to $.001 1,914 (1,914)
NET LOSS (1,857,755) (1,857,755)
----------- ------------ ----------- ------------- ------------ -------------
BALANCE, SEPTEMBER 30,
1999 11,354,407 $ 11,354 $ 4,068,384 $ (2,066,375) $ (5,333) $ 2,008,030
=========== ============ =========== ============= ============ =============
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 41
QORUS.COM, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD JANUARY 1, 1999 TO SEPTEMBER 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Net loss $ (1,857,755)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 4,897
Amortization 192,840
Impairment loss 280,749
Changes in operating assets and liabilities:
Accounts receivable (62,000)
Prepaid expenses and other assets (562,157)
Accrued expenses 575,482
-------------
Net cash used by operating activities (1,427,944)
-------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (107,884)
Sale of property 350,000
Purchase of investment (1,018,752)
-------------
Net cash used by investing activities (776,636)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable borrowings 500,000
Accrued expenses to related party 432,222
Proceeds from issuance of common stock, net 5,358
Related party notes receivable issued (2,370,346)
Payment on note receivable 90,000
Contributions to capital 3,579,667
-------------
Net cash provided by financing activities 2,236,901
-------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 32,321
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 11
-------------
CASH AND CASH EQUIVALENTS, AT SEPTEMBER 30, 1999 $ 32,332
=============
</TABLE>
(Continued)
F-6
<PAGE> 42
QORUS.COM, INC.
STATEMENT OF CASH FLOWS - CONTINUED
FOR THE PERIOD JANUARY 1, 1999 TO SEPTEMBER 30, 1999
- -------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 1,770
Income taxes $ -0-
NON-CASH FINANCING ACTIVITY:
For the period ending September 30, 1999, the Company entered into a sale and
operating leaseback of computer hardware in the amount of $350,000.
See accompanying notes to financial statements.
F-7
<PAGE> 43
QORUS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS - Qorus.com, Inc., a Florida corporation (the
"Company" or "Qorus"), provides internet-based, voice, e-mail, paging
and fax messaging under one mode of communication ("unified messaging
service"). The Company was incorporated in 1991 and operated under the
name Golf Ball World, Inc. until the articles of incorporation were
amended in May 1999 to change the name to Qorus.com, Inc.
On May 19, 1999, the Company acquired 100% of the common stock of
Qorus.com, Inc., a Delaware corporation ("Qorus-Delaware") in exchange
for 5,332,334 shares of its common stock. The acquisition was
accounted for using the reverse purchase method of accounting,
pursuant to which Qorus-Delaware was treated as the acquiring entity
for accounting purposes. The assets, liabilities and shareholders'
equity have been recorded at their historical values. The net assets
acquired were $3,191,234 at May 19, 1999.
The Company was dormant from January 1, 1999 to May 18, 1999 and
effectively had no assets or liabilities, thus the results of
operations for the period January 1, 1999 to September 30, 1999
represents the same results for the period of Qorus-Delaware's
inception (March 10, 1999) to September 30, 1999.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid
investments with an original maturity of three months or less to be
cash equivalents.
CONCENTRATION OF CREDIT RISK - Financial instruments which potentially
subject the Company to concentrations of credit risk consist
principally of temporary cash investments and a note receivable. The
Company places its temporary cash investments in certificates of
deposit and with high-quality financial institutions. At September 30,
1999, substantially all cash and cash equivalents were on deposit with
two financial institutions.
The note receivable represents a short-term loan to a related party
(see Note 2).
F-8
<PAGE> 44
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation is provided using the straight-line method over the
estimated useful lives of the assets, which range from two to five
years. Leasehold improvements are amortized over the shorter of the
useful life of the asset or the term of the related lease.
LICENSES - The Company has an agreement with a related party (Tornado
Development, Inc.; see Note 3) which licenses certain technology. The
term of the license is for three years (expiring May 2002). The
agreement provides for a prepaid license fee totalling $150,000 for
the minimum number of subscribers to the Company's product in the
first year. Additional fees are due for subscribers over the minimum
number in the first year. License fees for the remaining term are
based on a sliding scale for the number of subscribers. License
expense to the related party for the nine-month period ended September
30, 1999 totalled $50,000. The agreement also provides for a royalty
fee on certain components utilized by the Company to service the
subscribers. The minimum royalty for the first year is $86,400 with
additional royalties due based on a sliding scale over the term of the
agreement. Royalty expense totalled $28,800 for the period ended
September 30, 1999.
The Company also has license agreements with third parties for the
software programming and internet support. The aggregate license fee
for these agreements totalled $156,000. The agreements provide for
varying terms from 2 years to perpetual. License expense to third
parties for the period ended September 30, 1999 totalled $91,000.
SIGNIFICANT CUSTOMER - One customer accounted for all revenues during
the period and total accounts receivable at September 30, 1999.
ADVERTISING - Costs incurred for producing and communicating
advertising are expensed when incurred and included in selling and
marketing expenses. Advertising expense amounted to $137,000 for the
period ending September 30, 1999.
INCOME TAXES - Income taxes are provided based on earnings reported
for financial statement purposes. In accordance with FASB Statement
No. 109, the asset and liability method requires the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between tax bases and financial
reporting bases of assets and liabilities.
F-9
<PAGE> 45
NET LOSS PER SHARE - The Company adopted the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share" that established standards for the computation, presentation
and disclosure of earnings per share ("EPS"), replacing the
presentation of Primary EPS with a presentation of Basic EPS. It also
requires dual presentation of Basic EPS and Diluted EPS on the face of
the income statement for entities with complex capital structures.
Diluted EPS has not been presented since the result of including the
stock options would be anti-dilutive. Basic EPS is based on the
weighted average number of common shares outstanding during the
period, which totalled 7,781,490 for the period ended September 30,
1999.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The Company has financial
instruments consisting of cash equivalents, investments, receivables
(including those from related parties), accounts and notes payable.
The carrying value of the Company's financial instruments, based on
current market and other indicators, approximate their fair value.
ACCOUNTING FOR STOCK-BASED COMPENSATION - Stock option grants are set
at the closing price of the Company's common stock on the day prior to
the date of grant. Therefore, under the principles of APB Opinion No.
25, the Company does not recognize compensation expense associated
with the grant of stock options. SFAS No. 123, "Accounting for
Stock-Based Compensation", requires the use of option valuation models
to provide supplemental information regarding options granted after
1994. Pro forma information regarding net loss and loss per share have
not been presented since valuation of the options would be
anti-dilutive.
Information regarding stock options outstanding as of September 30,
1999 is as follows:
<TABLE>
<CAPTION>
Options Outstanding
--------------------------------------------------------
Weighted Weighted Average
Average Remaining
Price Range Shares Exercise Price Contractual Life
----------- ------- ------------------- -----------------
<S> <C> <C> <C>
$1.00 810,000 $1.00 2.6 years
</TABLE>
<TABLE>
<CAPTION>
Options Exercisable
-------------------
Weighted
Average
Price Range Shares Exercise Price
----------- ------- -------------------
<S> <C> <C>
$1.00 810,000 $1.00
</TABLE>
F-10
<PAGE> 46
PERVASIVENESS OF ESTIMATES - The preparation of financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
GOING CONCERN - The Company has not received significant revenues and
has incurred significant expenses in developing its product and
strategic relationships. The financial statements have been prepared
assuming the Company will continue to operate as a going concern which
contemplates the realization of assets and the settlement of
liabilities in the normal course of business. No adjustment has been
made to the recorded amount of assets or the recorded amount or
classification of liabilities which would be required if the Company
were unable to continue its operations. As discussed in Note 9,
management has developed an operating plan which they believe will
generate sufficient cash to meet its obligations in the normal course
of business.
NEW ACCOUNTING PRONOUNCEMENTS - SFAS No. 130, "Reporting Comprehensive
Income", establishes standards for reporting and displaying
comprehensive income and its components in financial statements. The
Company adopted the provisions of SFAS No. 130 in 1998, but had no
elements of comprehensive income in 1999.
SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information", establishes a new model for segment reporting,
called the "management approach" and requires certain disclosures for
each segment. The management approach is based on the way the chief
operating decision-maker organizes segments within a company for
making operating decisions and assessing performance. The Company
adopted the provisions of SFAS No. 131 in 1998, but currently operates
in one industry segment.
2. NOTE RECEIVABLE FROM A RELATED PARTY
The revolving note receivable amounting to $1,930,346, accrues
interest at 10% per annum and is due from NetDox, Inc., a related
party. NetDox, Inc. and the Company are entities under the common
control of Thurston Group. The note and accrued interest were
satisfied in full in December 1999.
F-11
<PAGE> 47
3. INVESTMENT
The Company has an investment in Tornado Development, Inc.,
("Tornado"). The investment relates to a note receivable which was
converted (along with accrued interest totalling $18,752) to 127,324
shares of Tornado's series B preferred stock and 50,000 warrants to
purchase common stock on July 15, 1999. Subsequent to September 30,
1999, the Company transferred 63,581 shares and 25,000 warrants back
to Tornado in exchange for $432,222 in accrued expenses owed to
Tornado and a credit of $67,778 to be applied to future services or
fees due by the Company.
4. STOCKHOLDERS' EQUITY
1999 STOCK OPTION PLAN
The Company's Board of Directors adopted the 1999 Stock Option Plan
(the "Plan") whereby directors, officers, employees and consultants
may receive option grants as additional incentive to contribute to the
success of the Company.
Under the Plan, an aggregate of 2,000,000 shares of common stock has
been reserved for issuance pursuant to options ("Plan Options"). The
Plan is administered by the Company's Board of Directors or a
Committee of the Board of Directors ("Committee").
Options granted under the Plan may either be options qualifying as
incentive stock options ("Incentive Options") under Section 422 of the
Internal Revenue Code of 1986, as amended, or options that do not
qualify ("Non-qualified Options"). The term of each Option and the
manner in which it may be exercised is determined by the Company's
Board of Directors or the Committee, provided that no Option may be
exercisable more than 10 years after the date of its grant and, in the
case of an Incentive Option granted to an eligible employee owning
more than 10% of the Company's common stock, no more than five years
after the date of grant.
At September 30, 1999, 1,435,000 Plan Options exercisable at $1.00 per
share have been granted, 810,000 of which are immediately exercisable
and 625,000 of which vest over a three-year period from date of grant
(1/6 of the total amount each six months). Subsequent to September 30,
1999, an additional 70,000 plan options exercisable at $5.25 per share
were granted which vest over a three-year period from the date of the
grant (1/6 of the total amount each six months). During the nine-month
period ended September 30, 1999, no incentive options were outstanding.
F-12
<PAGE> 48
NON-QUALIFIED STOCK OPTIONS
<TABLE>
<CAPTION>
Option Price
Shares per Share
----------- ------------
<S> <C> <C>
Outstanding at
January 1, 1999 -0- -0-
Cancelled -0- -0-
Granted during the period 1,435,000 $ 1.00
----------- -----------
Outstanding at
September 30, 1999 1,435,000 $ 1.00
=========== ===========
</TABLE>
5. NOTE PAYABLE TO RELATED PARTY
The Company has a note payable of $500,000 at September 30, 1999 due
to Thurston Bridge Fund II, a related party, which accrues interest at
8% per annum and is due on March 31, 2000. The note and accrued
interest were satisfied in full in December 1999.
6. INCOME TAXES
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at September 30, 1999 are
substantially composed of the Company's net operating loss
carryforwards, for which the Company has made a full valuation
allowance. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those
temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future
taxable income and tax planning strategies in making this assessment.
At September 30, 1999, the Company had net operating loss
carryforwards for Federal tax purposes of approximately $1.8 million,
which is available to offset future taxable income, if any, through
2014.
F-13
<PAGE> 49
7. RELATED PARTY TRANSACTIONS
During the period ended September 30, 1999, the Company has
compensated the Thurston Group, a related party, for professional
services in the amount of $255,000 which related to the acquisition of
funding and certain other investment activity.
During the period ended September 30, 1999, the Company purchased
$25,000 of property and leasehold improvements from a vendor that
utilized an officer of the Company as a consultant.
8. COMMITMENTS AND CONTINGENCIES
The Company leases its office facility for $3,714 per month in Los
Angeles, California. The lease term is three years and expires on May
31, 2002.
During July 1999, the Company purchased certain equipment from NetDox.
Based on the common ownership of the companies, the equipment was
recorded at the historical cost of $630,000. Concurrent with this
transaction, the Company entered into an agreement for the sale and
operating leaseback of the equipment with a third party for $350,000.
The difference in value of approximately $280,000 has been recorded in
the period ended September 30, 1999 as an impairment in value.
Lease expense totalled $64,996 in the period ended September 30, 1999.
Future minimum payments under the leases are as follows:
<TABLE>
<CAPTION>
Calendar Year Ended:
-------------------
<S> <C> <C>
1999 $ 104,867
2000 434,904
2001 180,654
2002 70,414
----------
Total $ 790,839
==========
</TABLE>
9. MANAGEMENT PLANS
During the period ended September 30, 1999, the Company commenced
marketing and sales of its unified messaging service. Management
believes that available cash resources and increased sales will be
insufficient to meet its cash flow requirements through September
2000. Management has developed alternate plans which include, but are
not limited to, raising additional equity financing and identifying
companies with additional complimentary services for merger or
acquisition with the Company.
F-14
<PAGE> 50
10. YEAR 2000 COMPLIANCE (UNAUDITED)
The Company utilizes computer hardware and software in its operations.
Any of the Company's programs that recognize a date using "00" as the
year 1900 rather than the year 2000 could result in errors or system
failures.
The Company has completed an evaluation of its computer hardware and
software and believes that its mission critical systems are Year 2000
compliant.
11. SUBSEQUENT EVENTS (UNAUDITED)
The Company entered into an advertising consulting agreement in May
1999. In exchange for services, the Company agreed to compensation of
5,000 free trading common voting shares to be issued by January 31,
2000.
The Company entered into a subscription agreement for bridge financing
in October 1999. The convertible promissory note of $100,000 accrues
interest at 10% and is due on or before April 30, 2000. In
consideration for the financing, 20,000 shares of common stock were
sold at par.
F-15
<PAGE> 51
John J. Faircloth, C.P.A.
402 North Howard Avenue
Tampa, Florida 33606
Phone: (813) 254-5602
Fax: (813) 251-0272
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To The Board of Directors Golf Ball World, Inc.
I have audited the accompanying consolidated balance sheets of Golf Ball World,
Inc. as of December 31, 1997 and 1998 and the related statements of operations,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the company's management. My responsibility
is to express an opinion on these financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audits provide a reasonable basis for my opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Golf Ball World,
Inc. as of December 31, 1997 and 1998 and the results of its operations and its
cash flows for the years then ended, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has not received significant revenue and has
incurred losses since inception. Accordingly, there is substantial doubt about
the Company's ability to continue as a going concern, unless additional funds
are raised. The financial statements do not include adjustments that might
result from the outcome of this uncertainty.
John J. Faircloth, C.P.A.
Tampa, Florida
February 15, 1999
F-16
<PAGE> 52
QORUS.COM, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 2000
1998 1997
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 11 $ 1,750
Accounts Receivable 1475
Inventories 4469
Prepaid expenses
Total current assets $ 11 7694
Property and equipment, net 3266
Notes receivable from related parties
Investments
Deposits and other assets 230
Total Assets $ 11 $ 11,190
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,903
Accrued expenses
Notes payable to related parties
Notes payable to shareholder 20210
Total current liabilities 0 23113
SHAREHOLDERS' EQUITY
Common stock -- par value $.001; 221 217
50,000,000, 24,000,000 and 24,000,000
shares authorized and 11,353,596,
2,211,033 and 2,173,333 issued and
outstanding at June 30, 1999,
December 31, 1998 and 1997
respectively
Preferred stock -- par value $.01 at
June 30, 1999; 5,000,000 share authorized
and no share issued and Outstanding.
Paid-in capital 208,410 108,528
Accumulated deficit (208,620) $(120,668)
Total shareholders' equity 11 (11,923)
Total Liabilities and $ 11 11,190
shareholders' equity
</TABLE>
F-17
<PAGE> 53
QORUS.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
December 31,
1998 1997
<S> <C> <C>
Revenues $ 0 $ 32,994
Cost and expenses:
Cost of sales 28,795
Selling and administrative expenses 40,770 44,746
Depreciation 2,917
Total costs and expenses 40,770 76,458
Loss from continuing operations (40,770) (43,464)
Other income (expense), net -- --
Loss from discontinued operations (47,182)
Net Loss $(87,952) $(43,464)
Basic loss per share:
Continuing operations (0.0186) (0.0201)
Discontinued operations (0.0231)
Total basic loss per share $(0.0399) $(0.0201)
</TABLE>
F-18
<PAGE> 54
QORUS.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
December 31
1998 1997
<S> <C> <C>
Cash flows from operating activities
Net loss (87,952) (43,464)
Adjustments to reconcile net loss to net cash provided
(used) by operations:
Depreciation and amortization expense 933 2,917
Property and deposits of discontinued operations 2,563
Changes in operating assets and liabilities:
Accounts receivable 1,475 (1,475)
Inventories 4,469 3,619
Prepaid expenses
Deposits and other assets
Accounts payable (2,903) (6,046)
Accrued expenses
Other liabilities
Net cash provided (used) by operating activities 3,041 (3,902)
INVESTING ACTIVITIES:
Purchase of property and equipment
Purchase of investments
Issuance of notes receivable 14,000
Net cash provided (used) by investing activities -- 14,000
FINANCING ACTIVITIES:
Borrowings from notes payable -- 11,956
Proceeds from issuance of common stock, net 28,275
Contribution to capital 51,401 19,326
Net cash provided by financing activities 79,676 31,282
Net increase (decrease) in cash & cash equivalents $ (1,739) $ 833
Cash & cash equivalents, beginning of period 1,750 917
Cash & cash equivalents, end of period $ 11 $ 1,750
</TABLE>
F-19
<PAGE> 55
QORUS.COM, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Total
Shares Common Paid-in- Accumulated Shareholders'
Outstanding Stock Capital Deficit Equity (Deficit)
----------- -------- ---------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 6,520,000 $ 652 $88,767 $(77,204) $12,215
Additional Capital contributed 19,326 19,326
Net loss (43,464) (43,464)
BALANCE, DECEMBER 31, 1997 6,520,000 652 108,093 (120,668) (11,923)
Issuance of common stock 113,100 11 28,264 28,275
Additional Capital contributed 71,611 71,611
Net loss
(87,952) (87,952)
BALANCE, DECEMBER 31, 1998 6,633,100 663 207,968 (208,620) 11
</TABLE>
F-20
<PAGE> 56
QORUS.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY
Qorus.com, Inc., a Florida corporation ("Company" or "Qorus"), provides
value-added Internet based communications solutions using a ubiquitous Internet
based services platform to offer a variety of solutions targeted at the
convergence of the internet and telecommunications.
The Company was incorporated on January 23, 1991 as "Speak Up America
Association, Inc." On December 22, 1995 a shareholder contributed 100% of the
common stock of Golf Balls N' Golf Balls, Inc. to the Company and the Company
changed its name to "Golf Ball World, Inc." The Company operated through
December 30, 1998, at which time the Company distributed 100% of the common
stock of Golf Balls N' Golf Balls, Inc. to its shareholders as a dividend.
On May 4, 1999 the Company's board of directors adopted a resolution to amend
the articles of incorporation and change the name of the corporation to
"Qorus.com, Inc." On May 19, 1999 the Company acquired 100% of the common stock
of Qorus.com, Inc., a Delaware corporation, in exchange for 5,332,334 shares of
the Company's common stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements for the six months ended June 30,
1999 include the accounts of Qorus.com and its wholly-owned subsidiary,
Qorus.com, Inc., a Delaware corporation. All significant intercompany accounts
and transactions have been eliminated.
The consolidated financial statements for the years ended December 31,
1998 and 1997 include the accounts of Golf Ball World, Inc. and its wholly-owned
subsidiary, Golf Balls N' Golf Balls, Inc. All significant intercompany accounts
and transactions have been eliminated.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
CONCENTRATIONS OF CREDIT RISK
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of temporary cash
investments. The Company places its temporary cash investments in certificates
of deposit and with high-quality financial institutions. At June 30, 1999,
substantially all cash and cash equivalents were on deposit with two financial
institutions.
INVENTORIES
Inventories at December 31, 1997, consisted of golf balls and are
stated at lower of cost or market.
F-21
<PAGE> 57
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided
using the straight-line method over the estimated useful lives of the assets,
which range from two to five years. During the six months ended June 30, 1999,
depreciation expense totaled $5,910. Leasehold improvements are amortized over
the shorter of the useful life of the asset or the term of the related lease.
Property and equipment at June 30, 1999 consists of:
<TABLE>
<S> <C>
Furniture and fixtures $ 3,504
Office equipment 14,440
Production equipment 212,257
Leasehold improvements 9,722
Total 239,923
Less accumulated depreciation (5,910)
Net property and equipment 234,013
</TABLE>
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has financial instruments consisting of cash equivalents,
investments, receivables (including those from related parties), accounts and
notes payable. The carrying value of the Company's financial instruments, based
on current market and other indicators, approximate their fair value.
NET LOSS PER SHARE
The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings Per Share" that established standards for
the computation, presentation and disclosure of earnings per share ("EPS"),
replacing the presentation of Primary EPS with a presentation of Basic EPS. It
also requires dual presentation of Basic EPS and Diluted EPS on the face of the
income statement for entities with complex capital structures. Basic EPS is
based on the weighted average number of common shares outstanding during the
period, which totaled 3,759,863 for the period ended June 30, 1998.
COMPREHENSIVE INCOME
The only component of comprehensive income the Company has is net
income.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Ultimate results could differ from those estimates.
F-22
<PAGE> 58
THE COMPANY AS A GOING CONCERN
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate continuation of
the Company as a going concern. However, the Company has not received
significant revenues and has incurred significant expenses in developing its
product and strategic relationships.
3. NOTE RECEIVABLE FROM A RELATED PARTY
The note receivable amounting to $2,370,346 accrues interest at 10% per
annum and is due from NetDox, Inc., a related party. NetDox, Inc. and Qorus.com,
Inc. are entities under the common control of Thurston Group. On July 15, 1999
the Company forgave $2,100,000 of indebtedness owed to the Company by NetDox in
partial consideration of NetDox's sale of certain assets to the Company. See
description of the purchase transaction in note 10 below.
4. INVESTMENT
The Company has an investment in Tornado Development, Inc. amounting to
$1,000,000. The investment relates to a note receivable which converted to
shares based on condition (A) of the Note which states, "that the outstanding
principal and any unpaid accrued interest shall automatically convert on the
earlier of (A) the closing of a financing transaction or series of related
transactions in which Tornado Development, Inc. receives gross proceeds of
$1,000,000 or more, or such lesser amount equal to the amount advanced under
this note." During the six months ended June 30, 1999 the note was converted to
127,344 shares of Tornado's series B preferred stock.
5. SHAREHOLDERS' EQUITY
The Company is authorized to issue up to 50,000,000 shares of common
stock, $.001 par value, and 5,000,000 shares of preferred stock, $.01 par value,
to be divided into such classes or series as the board of directors may
determine.
During the year ended December 31, 1998 certain warrants were exercised
at $.25 per share for 113,100 pre-split shares of the Company's common stock.
During the year ended December 31, 1997, the Company's founding directors
contributed $19,326 to the Company for working capital.
1999 STOCK OPTION PLAN
The Company's board of directors adopted the 1999 Stock Option Plan
(the "Plan") whereby directors, officers, employees and consultants may receive
option grants as additional incentive to contribute to the success of the
Company. Under the Plan, an aggregate of 2,000,000 shares of common stock has
been reserved for issuance pursuant to options ("Plan Options"). The Plan is
administered by the Company's board of directors or a committee of the board of
directors who's responsibilities include, without limitation, the selection of
persons who will be granted Plan Options under the Plan, the type of Plan
Options to be granted, the number of shares subject to each Plan Option and the
Plan Option price.
Plan Options granted under the Plan may either be options qualifying as
incentive stock options ("Incentive Options") under Section 422 of the Internal
Revenue Code of 1986, as amended, or options that do not qualify (Non-qualified
Options"). Any Incentive Option granted under the Plan
F-23
<PAGE> 59
must provide for an exercise price of not less than 100% of the fair market
value of the underlying shares on the date of such grant, but the exercise price
of any Incentive Option granted to an eligible employee owning more than 10% of
the Company's common stock must be at least 110% of the fair market value as
determined on the date of grant. The term of each Plan Option and the manner in
which it may be exercised is determined by the Company's board of directors or
the Committee, provided that no Plan Option may be exercisable more than 10
years after the date of its grant and, in the case of an Incentive Option
granted to an eligible employee owning more than 10% of the Company's common
stock, no more than five years after the date of grant. The exercise price of
Non-qualified Options shall be determined by the Company's board of directors or
the Committee. The per share purchase price of shares subject to Plan Options
granted under the Plan may be adjusted in the event of certain changes in the
Company's capitalization, but any such adjustment shall not change the total
purchase price payable upon the exercise in full of Plan Options granted under
the Plan. The Plan provides that officers, director, key employees and
consultants of the Company or any of its subsidiary companies will be eligible
to receive Non-qualified Options under the Plan. Only employees are eligible to
receive Incentive Options. Recipients of Plan Options may not assign or transfer
such Plan Options except by will or by the laws of decent and distribution.
During the lifetime of the optionee, an option may be exercised only by such
optionee. If an optionee's employment is terminated for any reason, other than
death or disability or termination for cause, or if an optionee is not an
employee but is a member of the Company's board of directors and his service as
a director is terminated for any reason, other than death or disability, the
Plan Option granted to him shall lapse to the extent unexercised on the earlier
of the expiration date or from 30 days to 5 years following the date of
termination. If the optionee dies during the term of his employment, the Plan
Option granted to him shall lapse to the extent unexercised on the earlier of
the expiration date of the Plan Option or the date from 30 days to one year
following the date of the optionee's death. If the optionee is disabled, the
Plan Option granted to him lapses to the extent unexercised on the earlier of
the expiration date of the Plan Option or the date from 30 days to one year
following the date of the disability.
At June 30, 1999, 1,425,000 Plan Options exercisable at $1.00 per share
have been granted, 800,000 of which are immediately exercisable and 625,000 of
which vest over a three year period from date of grant (1/6 of the total amount
each six months).
6. NOTE PAYABLE TO RELATED PARTY
The Company had a note payable at June 30, 1999 due to Thurston Bridge
Fund II, a related party, which accrues interest at 10% per annum and is due on
demand. The Company had a note payable at December 31, 1997 due to a shareholder
which accrues interest at 8.5% per annum and is due on demand. All interest
accrued on the note to the stockholder through December 31, 1997 was waived.
7. RELATED-PARTY TRANSACTIONS
The Company has a note receivable from a related party. See note 3
above for a more detailed description.
During the six months ended June 30, 1999 the Company has compensated
the Thurston Group, a related party, for professional services in the amount of
$156,376 which related to the acquisition of funding and certain other
investment activity.
F-24
<PAGE> 60
The Company has a note payable in the amount of $500,000 due to
Thurston Bridge Fund II, a related party, which accrues interest at 10% per
annum and is due on demand.
8. COMMITMENTS AND CONTINGENCIES
The Company leases its office facilities in two locations in
California. Lease terms are from one to three years and expire through June 15,
2002. Rent expense from operating leases totaled $973 for the six months ended
June 30, 1999. Future minimum payments under operating leases are as follows:
<TABLE>
<S> <C>
1999 $28,124
2000 49,437
2001 44,572
2002 24,143
Total $146,276
</TABLE>
9. INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes", which requires an asset and liability approach to
financial accounting and reporting for income taxes. Deferred income tax assets
and liabilities are computed annually for temporary differences between the
financial statement basis and the income tax basis of assets and liabilities
that will result in taxable or deductible amounts in the future. Such deferred
income tax computations are based on enacted tax laws and rates applicable to
the years in which the differences are expected to affect taxable income. A
valuation allowance is established when necessary to reduce deferred income tax
assets to the amounts expected to be realized.
10. SUBSEQUENT EVENTS
On July 15, 1999 the Company acquired certain assets from NetDox, Inc.
totaling $5,042,200. As consideration for the assets acquired, the Company
forgave a portion of a promissory note due from NetDox (see note receivable due
from related party) and assumed a note payable to a bank in the amount of
$2,942,200. The note accrues interest at 10% per annum and is due August 31,
2000. A summary of the assets acquired from NetDox follows:
<TABLE>
<S> <C>
Machinery and equipment $1,500,000
Brand Name 300,000
Customer lists 1,000,000
Goodwill 2,242,200
Total $5,042,200
</TABLE>
F-25
<PAGE> 61
PART III
ITEM 1. INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description of Exhibit
- -------------- ----------------------
<S> <C>
2.1 Articles of Incorporation*
2.2 Bylaws*
3.1 Form of Common Stock Certificate of Qorus.com, Inc.*
6.1 1999 Stock Option Plan of Qorus.com, Inc.*
6.2 Acquisition Agreement between Golf Ball World, Inc., a
Florida corporation, and the stockholders of Qorus.com,
Inc., a Delaware corporation*
6.3 Employment Agreement dated May 24, 1999, between Qorus.com,
Inc., a Delaware corporation and Michael Sohn*
6.4 Amendment No.1 to Acquisition Agreement between Golf Ball
World, Inc., a Florida corporation, and the stockholders of
Qorus.com, Inc., a Delaware corporation
6.5 Software License Agreement between Tornado Development,
Inc., a California corporation, and Qorus.com, Inc., a
Delaware corporation
6.6 Tornado Development, Inc. Class A Common Stock Purchase
Warrant
6.7 Registration Rights Agreement by and between Qorus.com,
Inc., a Delaware corporation, and Tornado Development, Inc.,
a Delaware corporation, dated April 15, 1999
6.8 Authorized Reseller Agreement by and between Qorus.com,
Inc., a Delaware corporation, and Alpha Telecom (UK) Ltd., a
Limited Company, dated June 10, 1999
</TABLE>
<PAGE> 62
<TABLE>
<S> <C>
6.9 Authorized Reseller Agreement by and between Qorus.com,
Inc., a Delaware corporation, and C2C Telecom, Inc., a
Delaware corporation, dated September 21, 1999
6.10 Authorized Reseller Agreement by and between Qorus.com,
Inc., a Delaware corporation, and CyberGate, Inc. dated
August 31, 1999
6.11 Master Agreement by and between Qorus.com, Inc., a Delaware
corporation, and Moore Business Communication Services, a
division of Moore North America, Inc., dated September 10,
1999
6.12 Statement of Work #NWA-1 issued under Master Agreement by
and between Qorus.com, Inc., a Delaware corporation, and
Moore Business Communication Services, a division of Moore
North America, Inc.
6.13 Bill of Sale, Assignment and Assumption Agreement by and
between Qorus.com, Inc., a Delaware corporation, and NetDox,
Inc., a Delaware corporation, dated July 15, 1999
6.14 Rescission Agreement by and between Qorus.com, Inc., a
Delaware corporation, and NetDox, Inc., a Delaware
corporation, dated December 31, 1999
</TABLE>
III-2
<PAGE> 63
<TABLE>
<S> <C>
6.15 Commission Agreement by and between Qorus.com, Inc., a
Delaware corporation, and NetDox, Inc., a Delaware
corporation, dated December 31, 1999
6.16 Consulting Agreement by and between Qorus.com, Inc., a
Delaware corporation, and Thurston Group, Inc., a Delaware
corporation, dated March 1, 1999
6.17 Lease and Service Agreement by and between Southern European
Communications Corp., a Delaware corporation, and
VANTAS/Fair Oaks dated December 23, 1999
6.18 Internet Data Center Services Agreement by and between
Qorus.com, Inc., a Delaware corporation, and Exodus
Communications, Inc.
6.19 Amendment No. 2 to Acquisition Agreement between Golf Ball
World, Inc., a Florida corporation, and the stockholders of
Qorus.com, Inc., a Delaware corporation
6.20 Settlement Agreement and Release by and between Qorus.com,
Inc. and Tornado Development, Inc. dated October 28, 1999
6.21 Amendment No. 1 to Software License Agreement dated October
28, 1999 by and between Qorus.com, Inc. and Tornado
Development, Inc.
8.1 Acquisition Agreement between Golf Ball World, Inc., a
Florida corporation, and the stockholders of Qorus.com.
Inc., a Delaware corporation (filed as Exhibit 6.2 hereto)*
8.2 Amendment No. 1 to Acquisition Agreement between Golf Ball
World, Inc., a Florida corporation, and the stockholders of
Qorus.com, Inc., a Delaware corporation (filed as Exhibit
6.4 hereto)
8.3 Amendment No. 2 to Acquisition Agreement between Golf Ball
World, Inc., a Florida corporation, and the stockholders of
Qorus.com, Inc., a Delaware corporation (filed as Exhibit
6.19 hereto)
27 Financial Data Schedule
</TABLE>
* Previously filed
ITEM 2. DESCRIPTION OF EXHIBITS
See Item 1, above.
III-3
<PAGE> 64
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: January 21, 2000 QORUS.COM, INC.
By: /s/ Michael Sohn
-----------------------
Michael Sohn
Chief Executive Officer
<PAGE> 65
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description of Exhibit
- -------------- ----------------------
<S> <C>
2.1 Articles of Incorporation*
2.2 Bylaws*
3.1 Form of Common Stock Certificate of Qorus.com, Inc.*
6.1 1999 Stock Option Plan of Qorus.com, Inc.*
6.2 Acquisition Agreement between Golf Ball World, Inc., a
Florida corporation, and the stockholders of Qorus.com,
Inc., a Delaware corporation*
6.3 Employment Agreement dated May 24, 1999, between Qorus.com,
Inc., a Delaware corporation and Michael Sohn*
6.4 Amendment No.1 to Acquisition Agreement between Golf Ball
World, Inc., a Florida corporation, and the stockholders of
Qorus.com, Inc., a Delaware corporation
6.5 Software License Agreement between Tornado Development,
Inc., a California corporation, and Qorus.com, Inc., a
Delaware corporation
6.6 Tornado Development, Inc. Class A Common Stock Purchase
Warrant
6.7 Registration Rights Agreement by and between Qorus.com,
Inc., a Delaware corporation, and Tornado Development, Inc.,
a Delaware corporation, dated April 15, 1999
6.8 Authorized Reseller Agreement by and between Qorus.com,
Inc., a Delaware corporation, and Alpha Telecom (UK) Ltd., a
Limited Company, dated June 10, 1999
6.9 Authorized Reseller Agreement by and between Qorus.com,
Inc., a Delaware corporation, and C2C Telecom, Inc., a
Delaware corporation, dated September 21, 1999
6.10 Authorized Reseller Agreement by and between Qorus.com,
Inc., a Delaware corporation, and CyberGate, Inc. dated
August 31, 1999
</TABLE>
<PAGE> 66
<TABLE>
<S> <C>
6.11 Master Agreement by and between Qorus.com, Inc., a Delaware
corporation, and Moore Business Communication Services, a
division of Moore North America, Inc., dated September 10,
1999
6.12 Statement of Work #NWA-1 issued under Master Agreement by
and between Qorus.com, Inc., a Delaware corporation, and
Moore Business Communication Services, a division of Moore
North America, Inc.
6.13 Bill of Sale, Assignment and Assumption Agreement by and
between Qorus.com, Inc., a Delaware corporation, and NetDox,
Inc., a Delaware corporation, dated July 15, 1999
6.14 Rescission Agreement by and between Qorus.com, Inc., a
Delaware corporation, and NetDox, Inc., a Delaware
corporation, dated December 31, 1999
6.15 Commission Agreement by and between Qorus.com, Inc., a
Delaware corporation, and NetDox, Inc., a Delaware
corporation, dated December 31, 1999
6.16 Consulting Agreement by and between Qorus.com, Inc., a
Delaware corporation, and Thurston Group, Inc., a Delaware
corporation, dated March 1, 1999
</TABLE>
<PAGE> 67
<TABLE>
<S> <C>
6.17 Lease and Service Agreement by and between Southern European
Communications Corp., a Delaware corporation, and
VANTAS/Fair Oaks dated December 23, 1999
6.18 Internet Data Center Services Agreement by and between
Qorus.com, Inc., a Delaware corporation, and Exodus
Communications, Inc.
6.19 Amendment No. 2 to Acquisition Agreement between Golf Ball
World, Inc., a Florida corporation, and the stockholders of
Qorus.com, Inc., a Delaware corporation
6.20 Settlement Agreement and Release by and between Qorus.com,
Inc. and Tornado Development, Inc. dated October 28, 1999
6.21 Amendment No. 1 to Software License Agreement dated October
28, 1999 by and between Qorus.com, Inc. and Tornado
Development, Inc.
8.1 Acquisition Agreement between Golf Ball World, Inc., a
Florida corporation, and the stockholders of Qorus.com.
Inc., a Delaware corporation (filed as Exhibit 6.2 hereto)*
8.2 Amendment No. 1 to Acquisition Agreement between Golf Ball
World, Inc., a Florida corporation, and the stockholders of
Qorus.com, Inc., a Delaware corporation (filed as Exhibit
6.4 hereto)
8.3 Amendment No. 2 to Acquisition Agreement between Golf Ball
World, Inc., a Florida corporation, and the stockholders of
Qorus.com, Inc., a Delaware corporation (filed as Exhibit
6.19 hereto)
27 Financial Data Schedule
</TABLE>
* Previously filed
<PAGE> 1
EXHIBIT 6.4
AMENDMENT NO. 1
TO
ACQUISITION AGREEMENT
This is Amendment No. 1 (this "Amendment") to that certain Acquisition
Agreement (the "Agreement") dated May ___, 1999, by, between and among GOLF BALL
WORLD, INC., a company incorporated under the laws of the State of Florida;
QORUS.COM, INC., a company incorporated under the laws of the State of Delaware;
and the persons listed on Exhibit "A" attached thereto and made a part thereof,
being all of QORUS's stockholders now and as of the closing date of the
Agreement. All terms not defined herein are used with the same meanings as
defined in the Agreement.
1. The first sentence of Section 2 of the Agreement is hereby
amended to read in its entirety as follows:
2. Purchase Price. The aggregate purchase price to be paid by
GOLF for the QORUS Common Shares shall be 5,332,334
(post-reverse split) shares of GOLF $.001 par value voting
common stock (the "GOLF Common Shares").
2. Each and every reference in the Agreement to "8,400,000" is
hereby amended to read "5,332,334," and any mathematical calculation set forth
in the Agreement, including, without limitation, the calculation of any
percentages, which included the number "8,400,000" is hereby amended accordingly
to reflect the use of "5,332,334" in lieu thereof.
3. Except as expressly modified hereby, each of the other terms
and provisions of the Agreement are hereby ratified and confirmed in all
respects and shall remain in full force and effect in accordance with their
respective terms.
4. This Amendment may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this Amendment and all of
which, when taken together, will be deemed to constitute one and the same
agreement.
IN WITNESS WHEREOF, the Parties have executed and delivered this
Amendment as of the date first written above.
GOLF BALL WORLD, INC.
By: /s/ Robert Hensberry
-----------------------------
Title: President and Chief
Executive Officer
QORUS.COM, INC.
By: /s/ Patrick J. Haynes III
-----------------------------
Title: Chairman
STOCKHOLDERS
(See Attached Schedule)
<PAGE> 1
EXHIBIT 6.5
SOFTWARE LICENSE AGREEMENT
THIS SOFTWARE LICENSE AGREEMENT dated as of April 15, 1999 (the
"EFFECTIVE DATE"), by and between TORNADO DEVELOPMENT, INC., a California
corporation, with offices at 1201 Morningside Drive, Suite 100, Manhattan Beach,
California 90266 ("TORNADO"), and QORUS.COM, INC., a Delaware corporation, with
offices at 3875 Telegraph Road, A239, Ventura, California 93003 (the
"LICENSEE").
WHEREAS Tornado desires to grant to Licensee and Licensee desires to
accept from Tornado, a license to use Tornado's proprietary Software (as defined
herein) upon the terms and conditions hereinafter set forth;
NOW THEREFORE, Tornado and Licensee agree as follows:
1. DEFINITIONS
1.1. "AFFILIATE" means a corporation or other entity in which (i) Licensee
owns at least fifty-one percent (51%) of the outstanding voting securities or
(ii) Licensee possesses, directly or indirectly, a substantial minority equity
ownership and the power to direct or cause the direction of the management or
policies of the entity, whether through the ownership of voting securities or by
contract. Any such entity shall be considered an Affiliate for only such time as
Licensee continues to satisfy the conditions of (i) or (ii) above.
1.2. "CLASS 1 ERROR" means an Error which results in an Outage, renders
continued use of the Software commercially unfeasible, or a Critical Agent fails
which Licensee is unable to immediately cure.
1.3. "CLASS 2 ERROR" means an Error (other than a Class 1 Error) which
makes continued use of the Software seriously inconvenient and substantially
reduces its value to Licensee or convenience to Subscribers.
1.4. "CLASS 3 ERROR" means all Errors (other than Class 1 Errors and Class
2 Errors), and, in particular, all Documentation shortcomings and deviations and
cosmetic Errors that do not have the economic consequences defined for Class 1
and Class 2 Errors shall be deemed Class 3 Errors.
TROOP STEUBER PASICH REDDICK
& TOBEY, LLP 1
<PAGE> 2
1.5. "CONFIDENTIAL INFORMATION" means (i) with respect to Tornado, the
Software and Documentation and any complete or partial copies thereof, the
Tornado Intellectual Property, and any other information identified or
reasonably identifiable as confidential of Tornado ("TORNADO CONFIDENTIAL
INFORMATION"); and (ii) with respect to Licensee, Licensee Intellectual
Property, Transaction Data (as defined in Section 4.3 below) and information
identified or reasonably identifiable as the confidential information of
Licensee ("LICENSEE CONFIDENTIAL INFORMATION"), provided that, any part of the
Tornado or Licensee Confidential Information which: (a) is or becomes publicly
available through no act or failure of the other party; or (b) was or is
rightfully acquired by the other party from a source other than the disclosing
party prior to receipt from the disclosing party; or (c) becomes independently
available to the other party as a matter of right and without any obligation of
confidentiality, shall be excluded.
1.6. "CONTRACT YEAR" shall mean the consecutive twelve (12) month period
beginning on the date of this Agreement and then each consecutive twelve (12)
month period thereafter beginning on each successive anniversary of the date of
this Agreement.
1.7. "CORRECTIONS" means changes made in the Software and/or Documentation
by Tornado to correct Errors in the Software and/or Documentation.
1.8. "CRITICAL AGENT" means those aspects or functions of the Software set
forth on Attachment 1.8 to this Agreement.
1.9. "DEFECT" has the meaning set forth in Section 8.2, below.
1.10. "DESIGNATED SERVER" means each individual computer located at a
Designated Site in which the Software is installed. Each Designated Server must
be compatible with the Software and must be identified as specified in
Attachment 1.10 to this Agreement, or be identified by Licensee from time to
time to Tornado pursuant to Section 2.3, below.
1.11. "DESIGNATED SITE" means those facilities of Licensee located in the
Territory in which one or more Designated Servers are located and which are
identified in Attachment 1.10 to this Agreement or which are identified by
Licensee from time to time in writing to Tornado prior to locating a Designated
Server at such Designated Site.
1.12. "DOCUMENTATION" means those human readable materials, in English,
developed by or for Tornado for use in connection with the Software.
Documentation includes operating instructions, input information and format
specifications.
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1.13. "ERROR" means any error, problem, or Defect resulting from an
incorrect functioning of the Software, if such error, problem or Defect renders
the Software inoperable, which causes the Software to fail to conform to the
Software Specifications in any significant respect or which causes the
Documentation to be inaccurate or incomplete in any significant respect.
1.14. "EXTENSION" means an addition to the Software which does not require
a Modification.
1.15. "HARDWARE ENVIRONMENT" means the computer hardware and communications
environment specified for operation of the Software as set forth on Attachment
1.15.
1.16. "LICENSEE'S BUSINESS PURPOSES" means to offer TEMS Services to
Subscribers, including to market the TEMS Services through data, voice and
messaging resellers, internet service providers, web hosting companies, telecom
companies, and the like, in the Territory for monetary compensation.
1.17. "LICENSEE INTELLECTUAL PROPERTY" shall mean any idea, design,
concept, plan, technique, invention, discovery, improvement, know-how, work
(including source and object code), documentation or other intellectual
property, regardless of patentability or copyrightability thereof, that is
conceived, authored or originated by Licensee (other than any Tornado
Intellectual Property or any idea, design, concept, plan, technique, invention,
discovery, improvement, know-how, work (including source and object code),
documentation or other intellectual property expressly described in this
Agreement as being owned by Tornado.
1.18. "MODIFICATION" means a change to the Software requested or made by
Licensee which changes the source code and is not generally supplied by Tornado
to its licensees of the Software as part of a Release.
1.19. "OUTAGE" means any interruption, discontinuance, or technical failure
(taken individually or together), other than as set forth immediately below,
that results in the non-delivery of the Critical Agents of the TEMS Service. An
Outage does not include a temporary planned shut down of the TEMS Service for
the purpose of allowing Tornado to make any necessary Corrections, Modifications
or Extensions to the TEMS Service; provided, in the case of non-emergency
maintenance, such Corrections, Modifications or Extensions are performed at
mutually agreeable times.
1.20. "RELEASES" mean new versions of the Software or additions to the
Software issued by Tornado from time to time to other resellers of the TEMS
Service
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who are licensed by Tornado, either without charge or pursuant to standard
maintenance provisions, including enhancements and/or corrections of Errors.
1.21. "SOFTWARE" means the current version of the software system developed
by Tornado known as Tornado Electronic Messaging System Software described in
Attachment 1.21, including without limitation, all interfaces, navigational
devices, menus, menu structures or arrangements, icons, help and other
operational instructions and the literal expressions of ideas that operate,
cause, create, direct, manipulate, access or otherwise affect the operation of
the TEMS Service, and all Releases delivered to Licensee under this Agreement.
1.22. "SOFTWARE SPECIFICATIONS" means the specifications for the Software
set forth in Attachment 1.22 attached hereto and incorporated herein by
reference.
1.23. "SOURCE CODE" means the complete instruction set for the Software,
including all comments and procedural code, such as compilation switches, job
control language statements and a description of the system/program generation
procedure, in a form intelligible to skilled human programmers (assuming
programmers familiar with programs which perform functions comparable to the
Software) and capable of being readily translated by such programmers into
object code for execution on computer equipment through assembly or compiling,
together with all documentation to facilitate such translation, assembly and
compiling; including, without limitation, programmers' notes, technical and
functional specifications, flow charts, schematics, test programs, statements of
principles of operations, architectural and design standards, and descriptions
of data flows, data structures and control logic.
1.24. "SUBSCRIBER" any end-user of the TEMS Service who is provided access
to any TEMS Service or any portion of the TEMS Service.
1.25. "TEMS SERVICE" means the Tornado Electronic Messaging System
described in Attachment 1.25 hereto, that enables a universal messaging solution
permitting integration of e-mail, fax, pager and voice mediums, via the Internet
via personal computer and via telephony systems.
1.26. "TERRITORY" means the United States, the countries specified as part
of the Territory in Attachment 1.10 hereto, and any additional countries or
jurisdictions identified by Licensee from time to time in writing to Tornado
prior to locating a Designated Server in such Territory.
1.27. "THIRD PARTY SOFTWARE" means any proprietary software not owned by
Tornado but delivered by Tornado as an integral part of the Software.
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1.28. "TORNADO INTELLECTUAL PROPERTY" shall mean (except as otherwise
expressly provided in this Agreement) any idea, design, concept, plan,
technique, invention, discovery, improvement, know-how, work (including source
and object code), documentation or other intellectual property, regardless of
patentability or copyrightability thereof, that is conceived, authored or
originated in furtherance and within the scope of this Agreement by Tornado, or
on behalf of Tornado and which is embodied in the Software or is required to be
used in or employed to provide TEMS Service, including without limiting any such
idea, design, concept, technique, invention, discovery, improvement, know-how,
work, documentation or other intellectual property that is embodied within the
Software, or within documentation, plans, or designs for the Software, whether
or not prepared on or off the premises of Tornado and whether or not in progress
or complete.
1.29. "USE" means to load, execute, employ, utilize, store or display the
Software. Use is deemed to occur on the Designated Server(s) where any such
processes occur and at any computer terminal or workstation that initiates or is
activated by these processes.
2. GRANT OF LICENSE
2.1. LICENSE. In accordance with the terms herein, Tornado grants to
Licensee, and Licensee accepts from Tornado, a non-transferable, nonassignable
(by operation of law or otherwise, except as otherwise provided in Section 13,
below), non-exclusive, license to Use the Software on Designated Servers located
within the Territory and the nodes (or the Remote Access Servers) connected to
such Designated Servers wherever located, solely for Licensee's Business
Purposes, and to create Modifications and Extensions to the Software solely as
permitted by Section 7 below (the "LICENSE"). Licensee may make one (1) copy of
the Software for backup purposes. Licensee shall not Use the Software for any
reason other than Licensee's Business Purposes and shall under no circumstances
assign or sub-license the Software to any other person, except as provided in
Section 13, below. Licensee shall not directly target the marketing of the
Software at any college or university located within the United States of
America or at any organization of students of such colleges or universities. It
is understood and agreed that solicitations of a general nature (e.g.,
establishment of a web page or placing advertisements aimed at customers in mass
circulation publications) will not be deemed to be a breach of the restrictions
set forth in the immediately preceding sentence. Licensee may not Use, copy,
modify, or distribute the Software (electronically or otherwise), or any copy,
adaptation, transcription or merged portion thereof, or otherwise make available
to others any Source Code, object code, Documentation or other material relating
to the Software, except as expressly authorized by this Section 2.1 and Section
7 below. Except as otherwise provided in
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this Section 2.1, in Section 6 and elsewhere in this Agreement, Licensee shall
have the sole discretion to market the TEMS Services as it deems appropriate.
Licensee may not sublicense the Software except as permitted by Section 2.2.
2.2. LICENSING AFFILIATES. The parties expressly acknowledge that Licensee
may sublicense to its Affiliates its rights under Section 2.1, provided that all
payments to Tornado under this Agreement shall be based upon the aggregate
number of Subscribers of Licensee and all Affiliates of Licensee, such that
Tornado is not adversely impacted by such sublicense. Licensee shall ensure that
its Affiliates agree in writing for the benefit of Tornado to abide by all of
the terms and provisions of this Agreement and Licensee shall not be relieved of
any of its obligations to Tornado hereunder with respect to such licensed
Affiliate, including, without limitation, financial and reporting obligations.
2.3. SOURCE CODE. The parties agree that concurrent with the execution of
this Agreement or promptly thereafter, the parties shall enter into an Escrow
Agreement pursuant to which Tornado shall deposit (and maintain current with
distribution of each Release) the Source Code in an escrow account, which shall
be created pursuant to an Escrow Agreement in substantially the same form as
Attachment 2.3 attached hereto. The Escrow Agreement shall provide, among other
things, that Licensee may exercise its rights under this License with respect
to, and the escrow agent shall release from escrow and deliver to Licensee one
complete copy of, the Source Code upon and after the occurrence of any of the
following events (each referred to as an "ACCESS EVENT") but not prior to the
occurrence of such Access Event:
2.3.1. Tornado is adjudged insolvent or makes a general assignment for
benefit of creditors;
2.3.2. The filing of a petition by or against Tornado for relief under
Title 11 of the United States Code which petition is not dismissed within a
period of 90 days;
2.3.3. The appointment of a receiver or other custodian for the
business or assets of Tornado;
2.3.4. A duly authorized officer of Tornado admits in writing
Tornado's inability to pay its debts generally as they become due;
2.3.5. Licensee shall receive a finding made in an arbitration
proceeding conducted pursuant to Section 11, below, that Tornado failed to
provide the software development kit contemplated by Section 7.5.2 below or the
source code if required to be delivered under Section 7.3; or
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2.3.6. Licensee shall receive a finding made in an arbitration
proceeding conducted pursuant to Section 11, below, that Tornado has failed to
provide Support as provided in Section 7, below.
2.4. DESIGNATED SERVER(S). Licensee shall be responsible for maintenance of
the Designated Servers in accordance with applicable manufacturers'
instructions. Notwithstanding anything to the contrary contained herein, the
parties agree that Licensee may install the Software on any server located in
the Territory that is compatible with the Software and the Hardware Environment,
provided that Licensee has given Tornado prior notice that it intends to install
the Software on such server. Upon such notice to Tornado, Tornado shall have ten
(10) days to object to Licensee's installation of the Software on such server by
providing Licensee with a compelling business reason why such installation has
materially and adversely affected Tornado. Licensee need not delay installation
of the Software on a substitute server while awaiting a response from Tornado.
In the event that Licensee does not agree, the parties shall settle such
disagreement through arbitration as provided in Section 11 below. If Tornado
does not provide an objection to Licensee's proposed installation of the
Software within ten (10) days, such server shall be deemed a Designated Server.
Tornado will not interpose unreasonable objections. Notwithstanding the
foregoing, the Software may be temporarily transferred to another computer
(during the period of time during which the Designated Server is inoperable) if
the Designated Server is inoperable due to malfunction, initiation of a disaster
recovery program or for routine maintenance. Licensee hereby authorizes Tornado
to enter Licensee's premises during Licensee's regular business hours in order
to inspect the Software and to verify Licensee's compliance with the terms
hereof.
3. DELIVERY AND INSTALLATION
3.1 DELIVERY. Within 42 days following written notice delivered to Tornado
by Licensee of the delivery and installation of a Designated Server at a
Designated Site, Tornado will deliver and install the Software on such
Designated Server. Upon notification by Tornado that it has completed delivery
and installation of the Software on a Designated Server ("DELIVERY NOTICE"), the
parties will jointly conduct the Acceptance Test procedures set forth on
Attachment 3.1. When the Software has successfully completed the Acceptance Test
procedures, Licensee will execute and deliver to Tornado written notice of such
fact and the Software will be deemed accepted. The date on which such notice is
executed and delivered is hereinafter referred to as the "Acceptance Date." If
the Software does not successfully complete the Acceptance Test procedures
within 14 days following delivery and installation of the Software on the
Designated Server, Licensee shall notify Tornado in reasonable detail of the
basis for Licensee's determination that the Software has failed to successfully
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complete the Acceptance Test procedures (the "FAILURE NOTICE"). The failure of
Licensee to deliver to Tornado a Failure Notice within 14 days following
delivery to Licensee of the Delivery Notice shall constitute acceptance of the
Software by Licensee. If Tornado does not cause the Software to successfully
complete the Acceptance Test procedures within 14 days following delivery of the
Failure Notice, Licensee may reject the Software and terminate this Agreement;
in which case all Software and Tornado Intellectual Property shall be returned
by Licensee to Tornado and Tornado shall, as its only obligation to Licensee and
without further liability to Licensee hereunder, refund/pay to licensee all fees
and charges paid by Licensee to Tornado under this agreement and use reasonable
commercial efforts to re-market (for the benefit of Licensee) for fair market
value any hardware and/or software products purchased by Licensee in
contemplation of this Agreement.
3.2 SUPPORT. At Licensee's request and under the terms as set forth in
Section 7, Tornado shall provide training, Support and consulting services for
the Software.
4. PRICE AND PAYMENT
4.1. LICENSE FEES. In consideration of the license granted hereunder,
Licensee will pay to Tornado license fees for each Subscriber under the terms
set forth in Attachment 4.1 hereto ("LICENSE FEES"). These License Fees will be
considered as 'favored nations' pricing. Notwithstanding anything to the
contrary contained herein, the 'favored nations' pricing shall be the lowest
license fees or royalty fees charged by Tornado to its other similarly situated
licensees and/or customers; provided that strategic partners or equity investors
shall not be considered "similarly situated" for this purpose. For purposes of
this Section 4.1, a "strategic partner" is a person or entity to whom the
Software is licensed and whose relationship with Tornado includes materially
more than the provision of such license by Tornado in exchange for product
revenue from such party.
4.2. ROYALTY FEES. Licensee shall also pay to Tornado royalty fees under
the terms as set forth in the Attachment 4.1 hereto ("ROYALTY FEES") based on
the number of Subscribers and Channels. The amount of the Subscriber based
Royalty Fees shall be calculated based upon the Monthly Average number of
Subscribers as of the end of the immediately preceding month. The Monthly
Average number of Subscribers for any applicable month shall be the product of
(a) the sum of the total number of Subscribers at 11:59 pm of each day during
such month, divided by (b) the number of days in such month. The amount of the
Channel based Royalty Fees shall be calculated based upon the highest number of
Channels in use at any time during the immediately preceding month. All amounts
payable to Tornado but not paid by Licensee within thirty
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days of invoice date may, following written notice by Tornado to Licensee, be
assessed a finance charge at the rate of one and one-half percent (1.5%) per
month.
4.3. MONTHLY REPORTS. If requested by Tornado, Licensee shall provide to
Tornado a true and complete report at the end of each month, signed by an
authorized representative of Licensee, specifying the following ("TRANSACTION
DATA"):
4.3.1. number of Subscribers at the end of such month,
4.3.2. number of transactions completed by Subscribers,
4.3.3. types of transactions undertaken by Subscribers,
4.3.4. transaction fees and subscription fees charged and received by
Licensee from Subscribers, and
4.3.5. other matters reasonably required by Tornado under this
Agreement.
For purposes of this Agreement a "TRANSACTION" occurs with every use
by a Subscriber of a service or function which is performed by the Software.
Licensee agrees to keep accurate and complete records regarding billing accounts
for Subscribers, including number of Subscribers, number of transactions and
types of transaction and all other matters reasonably required by Tornado under
this Agreement. So long as Licensee does not utilize a third party billing
system or modify the billing system incorporated into TEMS, Tornado represents
and warrants that the Software will (when operating in the Hardware Environment,
in conjunction with the Third Party Software) generate all information to be
provided by Licensee to Tornado as contemplated by this Section 4.3. Tornado
shall have the right, subject to ten (10) days prior written notice to Licensee,
to have Tornado's outside independent auditors examine, audit, and review at
Tornado's sole expense (except as noted below), all applicable records and
accounts of Licensee once each calendar year during Licensee's normal business
hours. Such audits will be performed in a reasonable manner consistent with the
manner in which royalty audits are customarily conducted in the software
industry. This right to inspect shall continue for two (2) years after the
termination of this Agreement. In the event Tornado finds, with respect to any
calendar year, a discrepancy in the calculation of amounts payable to Tornado by
Licensee of five percent (5%) or more in Tornado's favor, Licensee agrees to pay
all reasonable costs of the applicable audit. In the event Tornado finds, with
respect to any calendar year, a discrepancy in Licensee's favor, Tornado agrees
to credit the amount of such discrepancy to Licensee's subsequent royalty
obligations hereunder. Tornado agrees to disclose to Licensee the results of
each audit of Licensee's books and records performed by or on behalf of Tornado
pursuant to this Agreement.
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4.4. RATE INCREASES. Royalty Fees shall be subject to annual increase upon
written notice to Licensee by Tornado provided that such increases shall not
exceed the lesser of 10% or the United States Consumer Price Index ("CPI"), per
Contract Year, plus all fees associated with Third Party Software included in
any Release or in any Modification requested by Licensee. Notwithstanding
anything to the contrary contained herein, the Royalty Fees shall not exceed the
lowest license fees or royalty fees charged by Tornado to its other similarly
situated licensees and/or customers; provided that strategic partners or equity
investors shall not be considered "similarly situated" for this purpose. For
purposes of this Section 4.4, a "strategic partner" is a person or entity to
whom the Software is licensed and whose relationship with Tornado includes
materially more than the provision of such license by Tornado in exchange for
product revenue from such party.
4.5. REMOTE ACCESS. Licensee shall collect and maintain on the Designated
Server(s) the Transaction Data and make the Transaction Data available for
remote access by Tornado. The configuration of such facilities and the technical
requirements applicable to Licensee for purposes of receiving and transmitting
Transaction Data are set forth in Attachment 1.15 hereto.
4.6. TAXES. As between Licensee and Tornado, Licensee shall, in addition to
the other amounts payable under this Agreement, pay all sales and other taxes,
federal, state, or otherwise, however designated, which are levied or imposed by
reason of the transactions contemplated by this Agreement, other than those
taxes based on the income of Tornado derived from these transactions or
franchise taxes payable by Tornado. Licensee shall pay to Tornado an amount
equal to any such items actually paid, or required to be collected or paid by
Tornado at the time the payment for the services performed or the license
granted under this Agreement.
4.7. THIRD PARTY SOFTWARE. Tornado agrees that, subject to compliance by
Licensee of its obligations under this Section 4, Tornado shall pay such fees as
shall be necessary to keep in effect all licenses to Third Party Software
incorporated in the Software licensed to Licensee by this Agreement. Tornado
represents and warrants that the Software (when utilized in the Hardware
Environment) will interface with the Third Party Software and will (in
conjunction with the Third Party Software) provide the functionality
contemplated by the Software Specifications. Tornado covenants that it will
(promptly following execution and delivery of this Agreement) where required or
allowed by third party software vendors register licenses to the Third Party
Software (in substantially the forms attached hereto as Attachment 4.7) in the
name of Licensee and pay to the applicable licensor of the Third Party Software
all required license fees.
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5. TERM AND TERMINATION
5.1. TERM. The term of this Agreement ("TERM") shall be for a term (the
"Initial Term") commencing on the date of execution hereof, and ending thirty
six (36) months following the date hereof and shall be automatically renewed for
one thirty six (36) month period ("RENEWAL TERM"), unless terminated or canceled
as provided in this Section 5.
5.2. TERMINATION. This Agreement may be terminated for cause as follows:
5.2.1. by Tornado, if Licensee fails to make timely payment of any
fees required under Section 4 hereof or provide royalty reports
as required under Section 4 hereof, and any such failure is not
remedied within ten (10) days after receipt by Licensee of
written notice; or
5.2.2. by Tornado immediately, if Licensee slanders or libels Tornado
in a manner which has a material adverse impact on Tornado or
misappropriate or misuses Tornado's trademarks or servicemarks.
5.2.3. by Tornado, if Licensee breaches any material representation,
warranty, term or condition under this Agreement, and Licensee fails to cure
such breach within thirty (30) days after receipt by Licensee of written notice
of such breach.
5.2.4. by Licensee, if Tornado breaches any material representation,
warranty, term or condition under this Agreement, and Tornado fails to cure such
breach within thirty (30) days after receipt by Tornado of written notice of
such breach.
5.2.5. by Licensee, if Licensee determines in its sole discretion that
it is no longer in Licensee's best interests to market the TEMS Service, by
providing written notice to Tornado stating such termination.
5.3. DUTIES UPON TERMINATION.
5.3.1. Following termination of the License, Licensee shall (i)
promptly discontinue use of the Software and shall either deliver to Tornado
and/or destroy all Software and related materials furnished by Tornado, together
with all copies of the Software (including erasing the Software from memory or
data storage apparatus under the control of Licensee) and (ii) warrant in
writing to Tornado within thirty (30) days of termination that the Software,
related materials and all copies thereof (except as provided for above) have
been either returned to Tornado and/or destroyed and erased from such memory
and/or data storage apparatus.
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5.3.2. Upon any termination of this Agreement: Sections 5.4, 6, 9,10,
and 12 shall survive such termination.
5.3.3. In the event of a termination by Licensee pursuant to Section
5.2.4, above, Licensee will only be responsible for the pro-rated fees payable
to the date of such termination.
5.3.4. No termination or cancellation of this Agreement shall affect
(i) the obligation of Licensee to make all payments to Tornado, which have
become or will (prior to such termination or cancellation) become due hereunder
or (ii) any liability for breach which existed immediately prior to such
termination or cancellation.
5.4. ORDERLY TRANSITION. For a period of one (1) year from the effective
date of any termination of this Agreement, other than a termination by Tornado
pursuant to Sections 5.2.1 or 5.2.2, Licensee shall have the option to retain a
License to Use the Software in accordance with the terms and conditions of this
Agreement, provided that Licensee has satisfied its payment obligations to
Tornado pursuant to the terms of this Agreement and continues to pay all fees
through the date Licensee ceases use of the Software. Tornado shall cooperate in
a timely manner in all respects with Licensee so as to ensure an orderly
transition, including, upon Licensee's written request and at Licensee's
expense, assistance in converting files to a new operating system and/or a new
hardware/software vendor.
6. PROPRIETARY RIGHTS
6.1. TORNADO CONFIDENTIAL INFORMATION.
6.1.1. Licensee acknowledges that, as between Licensee and Tornado,
ownership of and title in and to the Tornado Confidential Information, the
Software and all other Tornado Intellectual Property are and shall remain in
Tornado. Licensee acquires only the right to use the Tornado Confidential
Information under the terms and conditions of this Agreement and does not
acquire any ownership rights or title in or to the Tornado Confidential
Information. The grant of the License by Tornado to Licensee under Section 2
hereof is Licensee's only right to the Software. Furthermore, the grant of the
License shall not restrict additional licensing by Tornado in any manner.
6.1.2. Licensee shall not (except as otherwise permitted by this
Agreement) copy, translate, disassemble, or decompile, nor create, by reverse
engineering or otherwise, the Source Code from the object code of the Software
licensed hereunder or use it to create a derivative work, unless authorized in
writing by Tornado.
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6.1.3. Licensee shall not remove any proprietary, copyright, trademark,
or service mark legend from any Tornado Confidential Information.
6.1.4. Licensee agrees to accord the Software, Documentation (other
than such Documentation as may be publicly disclosed by Tornado) and, if in the
possession of Licensee at any time, the Source Code at least the same degree and
methods of protection as such party undertakes with respect to its own similar
Software, Source Code and/or confidential Documentation, as applicable, which
degree of care and methods shall be at least in accordance with the degree of
care and standards customary in the software industry for that type of property.
Ownership of and title in and to the Tornado Confidential Information, the
Software and all other Tornado Intellectual Property are and shall remain in
Tornado, and ownership of and title in and to the Licensee Confidential
Information and all other Licensee Intellectual Property are and shall remain in
Licensee.
6.2. PROTECTION OF CONFIDENTIAL INFORMATION. In order to protect the rights
of Tornado and Licensee in their respective Confidential Information, Tornado
and Licensee agree as follows:
6.2.1. Neither party shall, without the other party's prior written
consent, use the Confidential Information of the other party (except as
contemplated by this Agreement) or disclose, provide, or make available any of
the Confidential Information of the other party in any form to any person,
except to bona fide employees, officers, directors or consultants of such party
whose access is necessary to enable such party to exercise its rights and
obligations hereunder. Each party agrees that prior to disclosing any
Confidential Information of the other party to any bona fide employees,
officers, directors or consultants, it will obtain from such bona fide
employees, officers, directors and consultants a written acknowledgment that
such bona fide employee, officer, director and consultant will be bound by the
same terms as specified in this Section 6 with respect to the Confidential
Information.
6.2.2. Licensee and Tornado acknowledge that any disclosure to third
parties of Confidential Information may cause immediate and irreparable harm to
the owner of the disclosed Confidential Information; therefore, each party
agrees to take all reasonable steps and the same protective precautions to
protect the Confidential Information of the other party from disclosure to third
parties as with its own proprietary and confidential information.
6.3. DISPLAY OF COPYRIGHT NOTICE. Licensee shall not make any
representation of ownership of the Software. If any portion of the Software
documentation is used in the documentation of the service provided by Licensee
using
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the Software, the copyright notice must also be included in that documentation.
The copyright notice must include the copyright notice of Tornado before the
insertion of the copyright notice of any derivative product. The following is an
acceptable version of the inserted copyright notice:
Copyright(C)1999 Tornado Development, Inc.
6.4. CREDIT. One initial screen and/or home page relating to the TEMS
Service shall provide a notice positioned so that it is reasonably visible when
the screen is viewed identifying the service offered to Subscribers by Licensee
using the Software as part of the "Tornado Network" or such other name as may be
designated by Tornado, and in a style, color and reasonable size to be
designated by Tornado. Licensee further agrees to promote the network within the
Territory.
7. SUPPORT
7.1. INCLUDED SUPPORT. During the Term of this Agreement (including Initial
Term and any Renewal Terms), Tornado shall, upon request of Licensee, provide
the following support to Licensee free of charge:
7.1.1. Tornado shall provide telephone support consisting of, without
limitation, answers to Licensee's questions concerning use of the Software
and/or Documentation, assistance in solving problems encountered in Licensee's
use of the Software and/or Documentation and for the reporting and correction of
suspected Errors and shall provide the services described in Sections 7.1.2,
7.1.3, 7.1.4, 7.1.5, 7.1.6 and 7.1.7 24 hours per day, seven days per week
("MAINTENANCE PERIOD"). The services and support referenced in this Section
7.1.1 are collectively referred to herein as "SUPPORT".
7.1.2. Tornado shall provide to Licensee and keep current, a list of
persons and telephone numbers ("CALLING LIST") for Licensee to contact for
Support. Such Calling List shall include: (1) the first person to contact for
the answer or assistance desired, and (2) the persons in successively more
responsible or qualified positions to provide the answer or assistance desired.
7.1.3. If Licensee desires Support, Licensee shall contact Tornado's
telephone Support service in accordance with the Calling List. Tornado shall
make its best efforts to respond to Licensee's initial telephone call with
off-site telephone consultation, assistance and advice relating to Support of
the Software within 2 hours of Licensee's first call for Support or, as to
requests for assistance not involving suspected Class 1 or 2 Errors, within
thirty (30) minutes after the start of the next day and, in any event,
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Tornado shall respond within one (1) hour of such allowed response times. If
Tornado fails to so respond; or if Licensee is unable, after three or more calls
within a fifteen (15) minute period, to reach Tornado's telephone Support
service; or if the designated person from the Calling List is not available when
Licensee makes contact with Tornado to obtain consultation and assistance, then
Licensee shall attempt to contact the next more responsible or qualified person
on the Calling List until contact is made and a designated person responds to
the call.
7.1.4. After Licensee reports a suspected Class 1 or 2 Error, Tornado
shall provide a Correction or work around as soon as reasonably possible.
Tornado shall consult with Licensee to convey the severity of the Error. If
Tornado has not diagnosed and corrected a Class 1 or Class 2 Error on the same
day as Licensee's initial telephone call, Licensee shall submit to Tornado a
listing of output and such other data as Tornado may request and is reasonably
available to Licensee in order to reproduce operating conditions similar to
those present when Licensee detected such Error.
7.1.5. For Class 1 Errors, Tornado shall respond, via telephone or
otherwise, to Licensee's initial telephone call within thirty (30) minutes of
such call, and shall provide a work around reasonable in Licensee's judgment, or
a Correction, as soon as practicable, in any event within one day after receipt
of output or other documentation of such Error. Tornado shall, upon Licensee's
request, without limitation, assign fully-qualified technicians to work with
Licensee until Tornado provides an acceptable work around in Licensee's
reasonable judgment, or a Correction.
7.1.6. For Class 2 Errors, Tornado shall provide a work around
reasonable in Licensee's judgment, or a Correction, in any event within five
days after receipt of output or other documentation of such Error. Tornado
shall, upon Licensee's request, without limitation, assign fully-qualified
technicians to work with Licensee during regular business hours until Tornado
provides an acceptable work around in Licensee's reasonable judgment, or a
Correction.
7.1.7. For Class 3 Errors, Tornado shall correct such Error by
modifying the Software and/or Documentation no later than the tenth day after
receipt of output or other documentation of such Error.
7.1.8. On or before the initial installation of the Software, Tornado
will create a graphical interface described in Attachment 7.1.8.
7.2. EXCEPTIONS TO SUPPORT AGREEMENT. The below items are expressly
excluded from the Support and, if provided by Tornado shall, as such, be
invoiced at the then current engineering fees, which fees shall not exceed the
lowest fees charged
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by Tornado to similarly situated customers and/or licensees for similar
maintenance or support (provided that strategic partners or equity investors
shall not be considered "similarly situated" for this purpose):
7.2.1. Support or maintenance of software not delivered by Tornado;
7.2.2. Support or maintenance caused by causes other than normal use
or maintenance caused by force majeure (such as, but not limited to fire, flood,
failure of electrical power or air-conditioning);
7.2.3. Support or maintenance required by use of the Software with
hardware other than the Designated Servers, or operation of the Software other
than in conformity with applicable Documentation or from the failure of Licensee
to operate and maintain the Hardware Environment in accordance with applicable
operating instructions;
7.2.4. Support or maintenance or installation of any Modification or
Extension that was not developed with Tornado's participation; and
7.2.5. Support or maintenance of the Software which is not the most
recent Release made available by Tornado to Licensee shall cease on the first
anniversary of the release of the most recent Release made available by Tornado
to Licensee;
7.3. TERMINATION OF SUPPORT. Tornado shall have the right to terminate all
Support of the Software upon one (1) year written notice to Licensee. Upon
termination of Support by Tornado, Tornado shall provide to Licensee the Source
Code solely and exclusively to the extent necessary, and for the purposes of
Licensee providing its own support and maintenance for the Software.
7.4. TRAINED PERSONNEL; SOFTWARE OPERATION. Licensee shall employ at all
times competent, trained, full-time personnel who have been trained in
operating, backing-up, and maintaining the Software in accordance with the
Documentation and providing Subscriber Support. Licensee shall operate the
Software in substantial compliance with the operating procedures and in the
hardware environment specified in the Software Specifications and Documentation.
Training can be given to Licensee by Tornado as an additional service which will
be invoiced at the applicable training rates then published by Tornado, which
rate shall not exceed the lowest rate charged by Tornado to similarly situated
customers and/or licensees.
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7.5. MODIFICATION AND EXTENSIONS.
7.5.1. Licensee may make Modifications and Extensions for Use on the
Designated Server(s) at the Designated Site(s) under the terms set forth in this
Section 7.5.
7.5.2. Licensee shall not make any Modification to the Software without
first offering Tornado the right to make such Modification at the consulting
rates set forth on Tornado's then current rate sheet for similar consulting
services, which rates shall not exceed the lowest rates charged by Tornado to
similarly situated customers and/or licensees or "fair market" rates charged by
third parties for comparable work. In the event that Licensee requests that
Tornado make a Modification to the Software and Tornado declines to make the
requested Modification, Licensee will be granted access (at no additional
charge) to Tornado's Application Programming Interfaces/Software Developer Kit,
or, at Tornado's election, in Tornado's sole discretion, the Source Code of the
Software solely and exclusively to the extent necessary, and for the purposes
of, the development of such Modification by the Licensee. Nothing under this
Agreement requires Tornado to deliver the Source Code to permit Licensee to
create a Modification. Licensee shall have the right to make or develop any
Extension to the Software; provided, however, that if Licensee intends to use a
third-party to make such Extension, Licensee shall offer Tornado the right to
make such Extension on the same terms and prices as such third party. No access
to the Source Code will be provided in connection with the development by
Licensee of an Extension, however, Tornado will make available to Licensee
and/or Licensee's agent access (at no additional charge) to Tornado's
Application Programming Interfaces/Software Developer Kit.
7.5.3. In the event Licensee with or without Tornado's participation
develops any Modification (hereinafter referred to as a "LICENSEE MODIFICATION")
to the Software, such Modification and all Intellectual Property developed in
connection therewith will be the exclusive property of Tornado, and Licensee
will not grant, either expressly or impliedly, any rights, title, interest, or
licenses to such Modifications to any third party. Licensee shall be entitled to
Use (at no additional charge) such Modifications on the Designated Server(s) at
the Designated Site(s) under the terms set forth in this Agreement for the Use
of the Software. Licensee agrees to execute (at the expense of Tornado) any and
all assignments, deeds, applications, registrations and similar documentation
reasonably requested by Tornado to vest title to such Modification in Tornado or
to perfect Tornado's rights therein. At the time such Modification is developed,
Tornado and Licensee will agree upon the representations and warranties to be
made by Tornado with respect to such Modification and whether or not and the
extent to which Tornado will indemnify Licensee against and hold Licensee
harmless from claims of intellectual property infringement, misuse and/or
misappropriation, unless Tornado in the exercise of its sole discretion notifies
Licensee that such Modification is excluded from the warranties and indemnities
of Tornado under this
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Agreement prior to delivery of the Modification to the Licensee. Nothing under
this Agreement requires Tornado to deliver the Source Code to permit Licensee to
create a Modification.
7.5.4. In the event Licensee without Tornado's participation develops
any Extension (hereinafter referred to as a "LICENSEE EXTENSION") to the
Software, Licensee shall have all rights, title, and interest in such Licensee
Extension and all Intellectual Property developed in connection therewith
subject to Tornado's rights in the Software. Notwithstanding the foregoing,
Licensee agrees to negotiate in good faith with Tornado, so that Tornado might
obtain a license to include the Licensee Extension in future Releases and
sublicense the Licensee Extension in Releases upon commercially reasonable and
mutually agreeable terms and conditions.
7.5.5. In the event Tornado independently develops (at the written
request of Licensee) any Modification to the licensed Software, such
Modification and all Intellectual Property developed in connection therewith
will be the exclusive property of Tornado, and Licensee will not grant, either
expressly or impliedly, any rights, title, interest, or licenses to such
Modification to any third party. Licensee shall be entitled to Use (without
additional charge) such Modification on the Designated Server(s) at the
Designated Site(s) under the terms set forth in this Agreement. Licensee shall
pay to Tornado, Tornado's current engineering consulting rates for any such
Modification, which rates shall not exceed the lowest rate charged by Tornado to
similarly situated customers and/or licensees or "fair market" rates charged by
third parties for comparable work (provided that strategic partners or equity
investors shall not be considered "similarly situated" for this purpose).
7.5.6. In the event Tornado develops either independently (at the
written request of Licensee), or jointly with Licensee any Extension to the
licensed Software, such Extension and all Intellectual Property developed in
connection therewith will be the exclusive property of the party who paid for
the development of such Extension. The party which paid for such development
agrees that it will negotiate in good faith with the other party to grant the
other party a license in such Extension upon commercially reasonable and
mutually agreeable terms and conditions. If Licensee is deemed to be the owner
of such Extension, Tornado agrees to execute (at the expense of Licensee) any
and all assignments, deeds, applications, registrations and similar
documentation reasonably requested by Licensee to vest title to such Extension
in Licensee or to perfect Licensee's rights therein and Licensee agrees that the
license to be granted to Tornado with respect to such Extension will include the
right to sublicense the Extension in Releases upon commercially reasonable and
mutually agreeable terms and conditions. If Tornado is deemed to be the owner of
such Extension, Licensee agrees to execute (at the expense of Tornado) any and
all
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assignments, deeds, applications, registrations and similar documentation
reasonably requested by Tornado to vest title to such Extension in Tornado or to
perfect Tornado's rights therein. If Tornado is deemed to be the owner of such
Extension, Licensee shall be entitled to Use such Extension on the Designated
Server(s) at the Designated Site(s) under the terms set forth in this Agreement.
At the time such Extension is developed, Tornado and Licensee will agree upon
the representations and warranties to be made by Tornado with respect to which
Extension and whether or not and the extent to which Tornado will indemnify
Licensee against and hold Licensee harmless from claims of intellectual property
infringement, misuse and/or misappropriation, unless Tornado in the exercise of
its sole discretion notifies Licensee that such Extension is excluded from the
warranties and indemnities of Tornado under this Agreement prior to delivery of
the Extension to the Licensee. If the development of an Extension is to be paid
for jointly, the parties will negotiate the ownership of the resulting Extension
and any rights/obligations with respect to the licensing thereof prior to
commencing the development of such Extension.
7.5.7. The parties hereto agree that the granting of any rights, title,
or interest to (i) Licensee in any Extension (including Licensee Extensions)
shall not be construed by the parties hereto, or any court of law or equity, to
mean that Tornado has granted or given up any rights, title or interest (other
than the licenses expressly granted by this Agreement) in or to the Tornado
Confidential Information or any part thereof and (ii) Tornado in any Extension
(including Licensee Extensions) owned by Licensee shall not be construed by the
parties hereto, or any court of law or equity, to mean that Licensee has granted
or given up any rights, title or interest (other than the licenses expressly
granted by this Agreement) in or to the Licensee Confidential Information or any
part thereof.
7.5.8. Licensee agrees to: (i) keep and maintain adequate and current
records of all Modifications made by Licensee (which records shall be made
reasonably available to Tornado) (ii) promptly disclose to Tornado and provide
copies to Tornado of any Modifications made by Licensee; and (iii) insert in all
copies of the Software as modified all copyright, trade secret, or other notices
thereon or therein as Tornado may from time to time direct. With respect to
Extensions owned by Licensee which were developed independently by Tornado or
jointly by Tornado and Licensee, Tornado agrees to: (i) keep and maintain
adequate and current records of all development work done by Tornado (which
records shall be made reasonably available to Licensee) (ii) promptly disclose
to Licensee and provide copies to Licensee of any development work performed by
Tornado; and (iii) insert in all copies of the software comprising the Extension
all copyright, trade secret, or other notices thereon or therein as Licensee may
from time to time direct.
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7.6. NEW RELEASES. Tornado shall deliver to Licensee, at no charge, any
Releases, along with updates or revisions to technical materials and other
Documentation to the extent that they relate to the Release. Releases shall be
delivered substantially contemporaneously with the delivery of such Release to
any licensee of Tornado in the United States.
7.7. SCOPE OF AGREEMENT. Software products developed by Tornado, other than
the Software and any Release and any Modifications or Extensions thereto, are
not subject to this Agreement.
8. WARRANTIES
8.1. WARRANTY PERIOD: WARRANTY. Tornado warrants that the Software will
conform in all material respects to the functional Software Specifications as
set forth in Attachment 1.23 hereto (the "Software Specifications") for 6 months
following installation of the Software in a Designated Server (the "WARRANTY
PERIOD") and will perform, when in Use without alteration (other than
alterations made by or authorized by Tornado) on the Designated Server(s), in
accordance with the Software Specifications. Tornado's warranty is subject to
Licensee providing Tornado necessary access, including remote access, to the
Software loaded on Designated Servers. Tornado does not warrant that the
Software will operate uninterrupted or that it will be free from minor defects
or errors which do not materially affect such performance or that the
applications contained in the Software are designed to meet all of Licensee's or
its Affiliates' business requirements.
Licensee must specifically identify to Tornado the nature of
the perceived Error and specifically describe the conditions under which the
perceived Error occurs. On Tornado's request, Licensee shall deliver such
information in written form. Licensee shall provide Tornado with remote access
test time and support on Licensee's Designated Server(s) sufficient to duplicate
the problem, to verify that the problem is with the Software, and to confirm
that the problem has been corrected.
8.2. TORNADO'S OBLIGATION TO CORRECT DEFECTS. Should any component of the
Software fail to conform in all material respects to the Software Specifications
(a "Defect") therefor during the Warranty Period, Tornado shall, at Tornado's
option, either correct the Defect by bringing the performance of the Software
into compliance with the Software Specifications or to provide a work-around
providing commercially equivalent functionality. When Use of the Software is
materially restricted by a reported Defect and Licensee expressly so states in
written form, Tornado shall use commercially reasonable efforts to commence work
on correcting the Defect no later than the first working day after its receipt
of written notice, subject in each case to the
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provisions of this Section 8. Notwithstanding anything to the contrary contained
herein, in the event that Tornado fails to deliver a correction of the Defect or
work-around providing commercially equivalent functionality within 45 days of
its receipt of written notice of such Defect, Licensee may, at its sole option,
terminate the License granted hereunder and obtain a full refund of the payments
paid hereunder.
8.3. CORRECTION OF ERRORS. Tornado will deliver a correction of the Defect
or work-around in writing and, if appropriate, in machine-readable form. Any
installation shall be the responsibility of Tornado unless otherwise agreed to
in writing by the parties. Licensee shall provide the support of its trained
employees to assist any installation by Tornado and shall be solely responsible
for building, backing up and/or restoring files, databases and communications
facilities and for providing an appropriate Hardware Environment.
8.4. OWNERSHIP OR RIGHT TO LICENSE WARRANTY. Tornado warrants that it
either owns or has the right to license all property included in the Software.
8.5. VIRUS WARRANTY. Tornado warrants that the Software does not contain
and Licensee will not receive from any Tornado data transmission via modem or
other Tornado medium any virus, worm, trap door, back door, timer or clock that
would erase data or programming or otherwise cause the Software to become
inoperable or incapable of being used in accordance with Software
Specifications.
8.6. YEAR 2000. Tornado represents and warrants that the Software
accurately processes date data (including, but not limited to, calculating,
comparing, and sequencing) from, into, and between the 20th and 21st centuries,
including leap year calculations. Without limiting the generality of the
foregoing, Tornado further represents and warrants (a) that the Software will
not abnormally end or provide invalid or incorrect results as a result of date
data, specifically including date data which represents or references different
centuries or more than one century; (b) that the Software has been designed to
ensure year 2000 compatibility, including, but not limited to, date data century
recognition, calculations which accommodate same century and multi-century
formulas and date values, and date data interface values that reflect the
century; and (c) that the Software includes "year 2000 capabilities." For the
purposes of this Agreement, "year 2000 capabilities" means the Software (i) will
manage and manipulate data involving dates, including single century formulas
and multi-century formulas, and will not cause an abnormally ending scenario
within the application or generate incorrect values or invalid results involving
such dates; and (ii) provides that all date-related user interface
functionalities and data fields include the indication of century.
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8.7. SCOPE OF WARRANTY. The warranty set forth in this Section 8 shall not
apply: (i) to any Licensee Extension or Licensee Modification, or (ii) if the
Defect is caused by a Licensee Modification or Licensee Extension; or (iii) if
the Software is not installed on a Designated Server or at a Designated Site; or
(iv) if Licensee does not provide access, including remote access, to the
Software as required under Section 8.1; or (v) if the Defect has been corrected
in a Release which has been made available to Licensee at no additional charge
and the installation will not have a material adverse affect on the operation of
Licensees Business (other than as may result from the failure of Licensee to
operate and maintain the Software and Hardware Environment in accordance with
the operating instructions contained in the Documentation) and, in the case of
the Hardware Environment, any applicable user instructions or entail any
material cost to Licensee; or (vi) if the Defect is caused by a third-party
database or Third Party Software malfunction. Tornado shall, to the extent
permitted by its licenses with third party licensors, pass through to Licensee
any warranties on Third Part Software.
8.8. EXPRESS DISCLAIMER. EXCEPT AS SET FORTH HEREIN, TORNADO DISCLAIMS ALL
OTHER WARRANTIES EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE EXCEPT TO THE
EXTENT THAT ANY WARRANTIES IMPLIED BY LAW CANNOT BE VALIDLY WAIVED.
9. LIMITATION OF LIABILITY
9.1 LIMITATION OF DAMAGES. Except as may result from willful breach of this
Agreement, in no event shall Tornado be liable for any special, incidental,
indirect or consequential damages of any kind, resulting from its performance or
failure to perform pursuant to the terms of this Agreement or any of the
attachments hereto, or resulting from the furnishing, performance, or use or
loss of use of the Software or other materials delivered to Licensee hereunder,
including, without limitation, any interruption of business, whether resulting
from breach of contract, breach of warranty, or any other cause (including
negligence), even if Tornado has been advised of the possibility of such
damages. Except as may result from willful breach of this Agreement or from
breach of the provisions of Section 6, in no event shall Licensee be liable for
any special, incidental, indirect or consequential damages of any kind,
resulting from its performance or failure to perform pursuant to the terms of
this Agreement or any of the attachments hereto even if Licensee has been
advised of the possibility of such damages.
9.2. MAXIMUM LIABILITY. Tornado's total liability to Licensee from any and
all causes and under all provisions of this Agreement shall be limited to two
times the total
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amount of License Fees and/or Royalty Fees actually paid by Licensee to Tornado
under this Agreement during the most recently ended Contract Year. Tornado's
limitation of liability is cumulative with all Licensee's payment being
aggregated to determine satisfaction of the limit. The existence of more than
one claim shall not enlarge or extend the limit.
10. INDEMNIFICATION.
10.1. INFRINGEMENT INDEMNIFICATION OF LICENSEE. Tornado shall, at its sole
option, either reimburse Licensee for the cost of defense, or defend a suit or
proceeding brought against Licensee, but only to the extent such suit or
proceeding is based on a claim that the Software, solely as furnished by Tornado
to Licensee under this Agreement, constitutes infringement of any United States
patent or registered copyright, and Tornado shall pay, or at its sole option,
reimburse Licensee for damages and costs finally awarded therein by a court
against Licensee with respect to said matter, provided that Tornado is promptly
informed and furnished with notice of the alleged infringement and is given
authority, information and assistance necessary to settle, compromise or
litigate said suit or proceeding. Following notice of a claim or of a threatened
or actual suit, Tornado may, without obligation to do so, at its sole option,
(i) procure for Licensee the right to continue to use the Software as furnished,
or (ii) replace or modify the Software to make it non-infringing, or (iii)
discontinue the license for the Software and refund the license fee paid for it,
less the reasonable value for the use of the Software; provided, however,
Tornado shall not have the right to discontinue the license for the Software
unless and until it has utilized reasonable commercial efforts to make available
the remedies set forth in clauses (i) and (ii). Tornado shall not be obligated
to defend, or be liable for costs and damages, if the infringement or claim
thereof arises out of and would not have occurred but for: (i) use or
combination of the Software with products not provided or authorized by Tornado,
(ii) use of other than the latest unmodified release of the Software made
available to Licensee by Tornado, if such infringement would have been avoided
by the use of such release of the Software and such release has been made
available to Licensee at no additional charge and the installation of such
release will not have any material affect upon the operation of Licensee's
business or entail any material cost to Licensee, (iii) modification of the
Software by Licensee; (iv) Use of the Software after receiving notice from
Tornado to discontinue Use thereof pursuant to clause (iii) of the immediately
preceding sentence, or (v) other fault or action of Licensee.
THE FOREGOING STATES THE EXCLUSIVE REMEDY OF LICENSEE IN THE
EVENT OF A CLAIM OF INFRINGEMENT.
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10.2. INDEMNIFICATION WITH RESPECT TO CONFIDENTIAL INFORMATION. Licensee
shall indemnify Tornado against all claims, liabilities, and costs, including
reasonable attorneys' fees, reasonably incurred in the defense of any claim
(other than for the infringement by the Software of intellectual property rights
of third parties) arising out of Licensee's unauthorized Use of the Software,
Documentation, and other Tornado Confidential Information, licensed under this
Agreement, provided that, Tornado promptly notifies Licensee in writing of such
claim and that Licensee is permitted to control fully the defense and any
settlement of the claim. Tornado shall indemnify Licensee against all claims,
liabilities, and costs, including reasonable attorneys' fees, reasonably
incurred in the defense of any claim arising out of Tornado's unauthorized use
of the Licensee Confidential Information and/or Licensee Intellectual Property,
provided that, Licensee promptly notifies Tornado in writing of such claim and
that Tornado is permitted to control fully the defense and any settlement of the
claim.
10.3. TORNADO'S RIGHT TO COMMENCE INFRINGEMENT ACTIONS. Tornado alone shall
be responsible for taking such actions which it determines are reasonably
necessary or desirable in its sole discretion in connection with any
infringement or alleged infringement by a third party of any portion of the
Software and Documentation. Licensee shall not undertake any action in response
to any infringement or alleged infringement of the Software and Documentation
without the prior written consent of Tornado, which consent shall not be
unreasonably withheld or delayed. Licensee agrees to cooperate with and assist
Tornado in taking whatever action (including consenting to being named as a
party to any suit or other proceeding) which Tornado determines to be reasonably
necessary or desirable. Tornado agrees to reimburse Licensee for reasonable
legal fees and other expenses incurred in connection with investigating or
defending any such claim, suit, damage, or loss.
11. ARBITRATION
Except for the right of either party to apply to a court of competent
jurisdiction for a temporary restraining order or other provisional remedy to
preserve the status quo or prevent irreparable harm pending the selection and
confirmation of a panel of arbitrators, and for the right of Tornado to bring
suit on an open account for any payments due Tornado hereunder, any controversy
dispute arising out of relating to this Agreement (including the interpretation
of any of the provisions hereof), whether arising in contract, tort or any other
legal theory, and whether based on federal, state or local statute or common law
and regardless of the identities of any other defendants (a "Dispute"), shall be
settled by arbitration in accordance with Attachment 11 hereto. No action at law
or in equity based upon any claim arising out of or related to this Agreement
shall be instituted in any court by any Member except (a) an action to compel
arbitration pursuant to this Section 11 or (b) an action to enforce an award
obtained in an arbitration proceeding in accordance with this Section 11.
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12. NONSOLICITATION
Neither Tornado nor Licensee shall hire any employee, contractor or
consultant of the other party for a period of two years from the later of the
effective date of this Agreement or the termination of support services by
Tornado.
13. ASSIGNMENT
Subject to the following sentence, this Agreement is personal to
Licensee, and Licensee may not, without Tornado's prior written consent (which
consent may not be unreasonably withheld or delayed), assign, delegate,
sublicense, pledge, or otherwise transfer this Agreement, or any of its rights
or obligations under this Agreement, or the Tornado Confidential Information, to
any party. Notwithstanding the foregoing, Licensee shall be permitted to assign
this Agreement to any Affiliate of Licensee, or to make a sublicense to an
Affiliate of Licensee, or any other third party who acquires all or
substantially all of the assets of Licensee, or otherwise acquires all or
substantially all of the equity interests in Licensee by means of sale of stock,
merger or consolidation (each, a "Permitted Assignment"). Any Permitted
Assignment of this Agreement shall provide that the provisions of this Agreement
shall continue in full force and effect and, in the case of a Permitted
Assignment to an Affiliate, that Licensee shall guarantee the performance of its
assignee and shall remain liable for all obligations hereunder.
14. GENERAL PROVISIONS
14.1. AGREEMENT BINDING. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns.
14.2. CONSENTS. Whenever this Agreement requires that the consent or
approval of a party, unless specifically stated to the contrary, such consent or
approval may be withheld or denied by such party in the exercise of such party's
sole and absolute discretion
14.3. RIGHTS TO INJUNCTIVE RELIEF. Both parties acknowledge that remedies
at law may be inadequate to provide Tornado or Licensee with full compensation
in the event of Licensee's material breach of Sections 2 or 6, or Tornado's
material breach of Section 6 with respect to Licensee Confidential Information,
and that the non-breaching party shall therefore be entitled to seek injunctive
relief in the event of any such material breach.
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14.4. ENTIRE AGREEMENT. This Agreement and each Attachment hereto and each
other agreement referenced herein constitute the complete and exclusive
statement of the agreement between Tornado and Licensee, and all provisions
representations, discussions, and writings are merged in, and superseded by,
this Agreement. This Agreement may be modified only by a writing signed by both
parties. This Agreement and each Attachment hereto shall prevail over any
additional, conflicting, or inconsistent terms and conditions which may appear
on any purchase order or other document furnished by Licensee to Tornado or by
Tornado to Licensee.
14.5. SEVERABILITY. It is the intent of the parties that in case any one or
more of the provisions contained in this Agreement shall be held to be invalid
or unenforceable in any respect, such invalidity or unenforceability shall not
affect the other provisions of this Agreement, and this Agreement shall be
construed as if such invalid or unenforceable provision had never been contained
herein.
14.6. NO WAIVER. If either party should waive any breach of any provision
of this Agreement, it shall not thereby be deemed to have waived any preceding
or succeeding breach of the same or any other provision hereof.
14.7. COUNTERPARTS. This Agreement may be signed in two counterparts, each
of which shall be deemed an original and which shall together constitute one
Agreement.
14.8. PUBLICITY. Neither party shall use the name of the other in
publicity, advertising, or similar activity, without the prior written consent
of the other, except that Licensee hereby consents to Tornado's inclusion of
Licensee's name in customer listings which may be published as part of Tornado's
marketing efforts.
14.9. GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the state of California without reference to its conflicts of
law principles. In the event of any conflicts between foreign law, rules, and
regulations, and United States of America law, rules, and regulations, United
States of America law, rules, and regulations shall prevail and govern. The
United Nations Convention on Contracts for the International Sale of Goods shall
not apply to this agreement.
14.10. NOTICES. All notices or reports which are required or may be given
pursuant to this Agreement shall be in writing and shall be deemed duly given
when delivered to the respective executive offices of Tornado and Licensee at
the addresses first set forth above.
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14.11. FORCE MAJEURE. Any delay or nonperformance of any provision of this
Agreement caused by conditions beyond the reasonable control of the performing
party shall not constitute a breach of this Agreement, and the time for
performance of such provision, if any, shall be deemed to be extended for a
period equal to the duration of the conditions preventing performance.
14.12. EXPORT CONTROLS. Licensee understands that there have been and may,
in the future, be promulgated by the Office of Export Administration of the
United States Department of Commerce, the United States Department of State and
certain other departments and agencies of the United States of America, rules
and regulations governing the export or re-export of the Software, Licensee
agrees to comply fully with all such applicable rules and regulations and the
laws related thereto and to adopt such policies and procedures in connection
with the marketing of the Software as may be required thereby.
14.13. CUSTOMS AND DUTIES. Licensee shall be responsible for and obtain any
and all customs, import and other governmental authorizations and approvals and
visas in connection with this Agreement. Tornado's obligations hereunder shall
be subject to confirmation of the grant of all such authorizations and
approvals, Licensee shall be responsible for all customs clearance charges,
customs fees and other costs and expenses arising in connection therewith.
14.14. EXPORT. Licensee hereby agrees that Licensee will not export,
directly or indirectly, any U.S. source Software acquired from Tornado to any
country for which the U.S. Government or any agency thereof at the time of
export requires an export license or other governmental approval, without first
obtaining the written consent to do so from (a) the United States Department of
Commerce or other agency of the United States Government when required by an
applicable statute or regulation, and (b) Tornado, which consent Tornado may
withhold if such export would, in the reasonable business judgment of Tornado,
be detrimental to the interests of Tornado.
14.15. GOVERNING LANGUAGE. This Agreement is in the English language only,
and all communications between the parties relative to this Agreement shall be
conducted in the English language only.
14.16. CURRENCY AND PAYMENT. All amounts payable to Tornado hereunder shall
be calculated and payable in United States Dollars. For purposes of any
determination of amounts payable to Tornado hereunder, any amounts denominated
in any currency other than U.S. Dollars (a "LOCAL CURRENCY") shall be converted
into U.S. Dollars based upon the Local Currency/U.S. Dollar exchange rate upon
the date of invoice therefor, as reported by the United States edition of the
Wall Street Journal. This Agreement is an international transaction in which the
specification of U.S. Dollars
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and payment in California is of the essence, and U.S. Dollars shall be the
currency of account in all events. The payment obligations of the parties shall
not be discharged by an amount paid by the payee in another currency or at
another place, whether pursuant to a judgment or otherwise unless such payment
is accepted by payor in the exercise of its sole and absolute discretion.
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IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have duly
executed this Agreement to become effective as of the date first above written.
"TORNADO"
TORNADO DEVELOPMENT, INC.
By: Kevin Torf
Title: Chief Executive Officer
Date: April 15, 1999
"LICENSEE"
QORUS.COM, INC.
By: Jack Woodruff
Title: Chief Financial Officer
Date: April 15, 1999
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ATTACHMENT 11
ARBITRATION PROVISIONS
1. Rules; Jurisdiction. Any Disputed Matter shall be settled by
arbitration that must be conducted in the County of Los Angeles, California,
and, except as herein specifically stated, in accordance with the commercial
arbitration rules of the American Arbitration Association ("AAA Rules") then in
effect (but not under the auspices of the AAA), and subject to the provisions of
Title 9 of Part 3 of the California Code of Civil Procedure or any successor
statute ("Title 9"). To the extent the AAA Rules conflict with, or are
supplemented by, the provisions of Title 9, the provisions of Title 9 shall
govern and be applicable. However, in all events the arbitration provisions
provided herein shall govern over any conflicting rules that may now or
hereafter be contained in either the AAA Rules or Title 9. Any judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction of the subject matter thereof. The arbitrators shall have the
authority to grant any equitable and legal remedies that would be available in
any judicial proceeding instituted to resolve a disputed matter. The parties
hereby submit to the in personam jurisdiction of the Superior Court of the State
of California for the County of Los Angeles and the United States District Court
for the Central District of California for purposes of confirming or enforcing
an arbitral award, including without limitation an award of equitable relief,
and entering judgment thereon. The parties hereto waive any and all objections
that they may have as to jurisdiction or venue in any of the above courts.
2. Compensation of Arbitrators. Any such arbitration shall be conducted
before a panel of three arbitrators who shall be compensated for their services
at a rate to be determined by the parties, but based upon reasonable and
customary hourly or daily consulting rates for the neutral arbitrator in the
event the parties are not able to agree upon the arbitrators' rate of
compensation.
3. Selection of Arbitrators. Within fifteen (15) calendar days of
notice by a party seeking arbitration under this provision, the party requesting
arbitration shall appoint one person as an arbitrator and within fifteen (15)
calendar days thereafter the other party shall appoint the second arbitrator.
Within fifteen (15) days after the appointment of the second arbitrator, the two
arbitrators so chosen shall mutually agree upon the selection of the third
impartial and neutral arbitrator who shall be an attorney-at-law with a
background or training in computer law. In the event the chosen arbitrators
cannot agree upon the selection of the third arbitrator, the AAA Rules for the
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selection of such an arbitrator shall be followed, except that the selection
shall be from such departments or groups and certified accounting firms as are
described in the immediately preceding paragraph. If the other party shall fail
to designate the second arbitrator, the sole arbitrator appointed shall have the
power to appoint, in his or her sole discretion, both the second and third
arbitrators. If a party fails to appoint a successor to its appointed arbitrator
within fifteen (15) days of the death, resignation or other incapacity of such
arbitrator, the remaining two arbitrators shall appoint such successor. The
majority decision of the arbitrators will be final and conclusive upon the
parties hereto.
4. Payment of Costs. Each party hereby agrees to pay one half the costs
of the compensation of the arbitrators, the costs of transcripts and all other
expenses of the arbitration proceedings; provided, however, that the prevailing
party in any arbitration, which shall be determined by the arbitrators, shall be
entitled to an award of attorneys' fees and costs, and the arbitrators' fees and
costs, and all other costs of the arbitration shall be paid by the losing party.
5. Evidence. All testimony of witnesses at any arbitration proceeding
held pursuant to these provisions shall be taken under oath, and under the rules
of evidence as set forth under the Evidence Code of California and judicial
interpretations thereunder.
6. Discovery. The parties shall be entitled to conduct discovery
proceedings in accordance with the provisions of Section 1283.05 of the
California Code of Civil Procedure.
7. Burden of Proof; Basis of Decision. For any claim submitted to
arbitration, the burden of proof shall be as it would be if the claim were
litigated in a judicial proceedings except where otherwise specifically provided
in the Agreement to which this is attached, and the decision shall be based on
the application of California law (as determined from statutes, court decisions,
and other recognized authorities) to the facts found by the arbitrators.
8. Judgment. Upon the conclusion of any arbitration proceedings
hereunder, the arbitrators shall render findings of fact and conclusions of law
and a written opinion setting forth the basis and reasons for any decision
reached by them and shall deliver such documents to each party to the Agreement
along with a signed copy of the award in accordance with Section 1283.6 of Title
9.
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9. Terms of Arbitration. The arbitrators chosen in accordance with
these provisions shall not have the power to alter, amend or otherwise affect
the terms of these arbitration provisions or the provisions of the Agreement.
10. Exclusive Remedy. Except as specifically provided in this Attachment
or in the Agreement to which it is attached, arbitration shall be the sole and
exclusive remedy of the parties for any Disputed Matter.
11. Arbitration Confidential. Neither party will disclose the existence
of any arbitration proceedings hereunder, nor the outcome thereof, except: (i)
insofar as such disclosure is reasonably necessary to carry out and make
effective the terms of this Agreement, including without limitation, pleadings
or other documents filed seeking entry of judgement upon an award of the
arbitrators; (ii) insofar as a party hereto is required by law to respond to any
demand for information from any court, governmental entity, or governmental
agency, or as may be required by federal or state securities laws; (iii) insofar
as disclosure is necessary to be made to a party's independent accountants for
tax or audit purposes; (iv) insofar as disclosure is necessary to be made to a
party's attorneys for purposes of rendering advice or services relating to this
Agreement; and (v) insofar as the parties may mutually agree in writing.
12. Notice; Language. Notice of arbitration sent to the other party by
using the following means shall be deemed good and sufficient notice of service:
Notices shall be in writing, in English, shall be sent by certified or
registered air mail with postage prepaid, return receipt requested, or by hand
delivery. Such communications shall be deemed given and received upon delivery,
if hand delivered; or five (5) days of mailing, if sent by certified or
registered mail. Notices to any party shall be sent to such party's address set
forth in the first paragraph of this Agreement (or to such address as such party
may designate pursuant to the provisions of Section 14.10 of this Agreement. The
arbitration proceedings shall be in the English language.
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ATTACHMENT 1.8
Level 1 Critical Failures on TEMS
TS - The Lightweight Translation Gateway Service between the
TEMS Core system and a RACS. This service responds to
connections made by a RACS into the core TEMS system. It
is considered to be unavailable if five percent (5%) or
more of the Subscribers are not receiving the
functionality to be provided by TS.
SMTP - The SMTP compliant Lightweight Translation Gateway
Service between public SMTP based internet services and
the TEMS Core system. This service responds to the
public internet SMTP port and receives all SMTP
formatted email. It is considered to be unavailable if
five percent (5%) or more of the Subscribers are not
receiving the functionality to be provided by SMTP.
POP3 - The POP3 compliant Lightweight Translation Gateway
Service between public POP3 based email clients and the
TEMS Core system. This service responds to the public
internet POP3 port and receives and handles all POP3
formatted requests from POP3 clients. It is considered
to be unavailable if five percent (5%) or more of the
Subscribers are not receiving the functionality to be
provided by POP3.
CreateAccounts - The service responsible for account provisioning. This
service is responsible for creating/editing/deleting the
proper account provisioning information on the Operating
System level of TEMS. It is considered to be unavailable
if five percent (5%) or more of the Subscribers are not
receiving the functionality to be provided by
CreateAccounts.
PollPOP3 - The POP3 compliant Lightweight Translation Gateway
Service that pulls down other internet based POP3 email
into the TEMS system. This service is responsible for
the scheduled delivery of outside POP3 email into the
TEMS system. It is considered to be unavailable if five
percent (5%) or more of the Subscribers are not
receiving the functionality to be provided by PollPOP3.
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Netscape Web Srv- Netscape Enterprise Web Server. This server is the
main HTTP and HTTPS server for the TEMS system. It is
considered to be unavailable if five percent (5%) or
more of the Subscribers are not receiving the
functionality to be provided by Netscape Web Srv.
Oracle Enterprise - The main Oracle database that is the core of the TEMS
system. This is the core of the TEMS system and is
critical for any and all aspects of TEMS to function
properly. It is considered to be unavailable if five
percent (5%) or more of the Subscribers are not
receiving the functionality to be provided by Oracle
Enterprise.
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Oracle Web Srv - The main Oracle web server that is responsible for
allowing socket connections to the TEMS API (Application
Program Interface) layer. This service is the main API
gateway for all other TEMS based systems. It is
considered to be unavailable if five percent (5%) or
more of the Subscribers are not receiving the
functionality to be provided by Oracle Web Srv.
Oracle Report Srv - The Oracle report server that is responsible for
generating real time invoice reports. It is considered
to be unavailable if five percent (5%) or more of the
Subscribers are not receiving the functionality to be
provided by Oracle Report Srv.
Email Agent - The main component of the TEMS system that is
responsible for sending outgoing e-mail. It is
considered to be unavailable if five percent (5%) or
more of the Subscribers are not receiving the
functionality to be provided by Email Agent.
Fax Agent - The main component of the TEMS system that is
responsible for sending outgoing fax requests to the
RACS. It is considered to be unavailable if five percent
(5%) or more of the Subscribers are not receiving the
functionality to be provided by Fax Agent.
Page Agent - The main component of the TEMS system that is
responsible for sending outgoing page requests to the
RACS. It is considered to be unavailable if five percent
(5%) or more of the Subscribers are not receiving the
functionality to be provided by Page Agent.
DID Agent - The main component responsible for updating RACS with
new phone number information. It is considered to be
unavailable five percent (5%) or more of the Subscribers
are not receiving the functionality to be provided by
DID Agent.
Alert Agent - The main component responsible for generating alert
notifications (email, page, fax). It is considered to be
unavailable if five percent (5%) or more of the
Subscribers are not receiving the functionality to be
provided by Alert Agent.
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RACS Fax Srv - The main RACS service that is responsible for sending
and receiving Voice calls and Faxes. It is considered to
be unavailable if five percent (5%) or more of the
Subscribers are not receiving the functionality to be
provided by RACS Fax Srv.
RACS Pag Srv - The main RACS service that is responsible for sending
outgoing pages. It is considered to be unavailable if
five percent (5%) or more of the Subscribers are not
receiving the functionality to be provided by RACS Pag
Srv.
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ATTACHMENT 1.10
DESIGNATED SERVER
Production Server -
-----------------------------------------------
Backup Server -
---------------------------------------------------
DESIGNATED SITE
Production Server -
-----------------------------------------------
Backup Server -
---------------------------------------------------
TERRITORY
United Kingdom
United States
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ATTACHMENT 1.15
CONFIGURATION OF FACILITIES AND TECHNICAL REQUIREMENTS FOR
RECEIVING AND TRANSMITTING TRANSACTION DATA
Each facility that operates a production server requires the following:
Dual Internet access from different providers adequate to handle the appropriate
traffic (Estimate One T1 per 2000 subscribers)
Dual Telephony circuits adequate to handle the appropriate traffic (Estimate One
T1 per 4000 subscribers)
Firewall service dedicated to limit connectivity to the production server
Uninterrupted power supply with adequate battery backup to provide a controlled
shutdown of all services
Backup production server in the event of a hardware failure
Backup RACS in the event of a hardware failure
Tape backup system adequate to backup all data nightly
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HARDWARE
DISK STORAGE
Boot Drive 4GB
Basic Services 4GB
Oracle General 20GB (5*4GB)
Oracle Profiles 2MB per user
User Data 20MB per user
MEMORY
Base Memory 512MB
User Memory 500KB per processes
PROCESSOR FOR THE 3000
Box 4 Processor
1ST Processor 1 Processor per 1000 simultaneous users
Processor 1 Processor per 2000 simultaneous users
TELECOMMUNICATIONS
DISK STORAGE
Drive Space 1GB per 24 Channels
MEMORY
Base Memory 64MB
User Memory 64MB per 24 Channels
PROCESSOR FOR CUBIX
Processors 2 Processor per 168 Channels
Box 2 Processor
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EXAMPLE 100,000 USERS
Registered Users 100,000
Simultaneous users 7,000 (7% users)
Channels 700 (10% simultaneous users)
SERVER
Boot Drive 4GB Drive
Basic Services 4GB Drive
Oracle General 20GB (5*4GBB) Drive
Oracle Profiles 200GB (2MB*100,00) Drive
User Data 2TB (20MB*100,00) Drive
Base Memory 512MB Ram
User Memory 3,5GB Ram (500KB*7000)
Processor 4 Processor
TELECOM
Box 5 (700 Channels/168)
Drive Space 7GB Per Box (1GB*(168/24))
Base Memory 64MB Per Box
User Memory 448MB Per Box (64MB*(168/24))
EXAMPLE 10,000 USERS
Registered Users 10,000
Simultaneous users 700 (7% users)
Channels 70 (10% simultaneous users)
SERVER
Boot Drive 4GB Drive
Basic Services 4GB Drive
Oracle General 20GB (5*4GBB) Drive
Oracle Profiles 20GB (2MB*10,000) Drive
User Data 200GB (20MB*100,00) Drive
Base Memory 512MB Ram
User Memory 350MB Ram (500KB*700)
Processor 1 Processor
TELECOM
Box 1 Box
Drive Space 3GB Per Box (1GB*(70/24))
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Base Memory 64MB Per Box
User Memory 192MB Per Box (64MB*(70/24))
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ATTACHMENT 1.21
TEMS - SERVER SOFTWARE
The server consists of the following software:
Solaris Operating System - Sun Microsystems
Solaris Patches - Sun Microsystems
Oracle Database - Oracle
Oracle Patches - Oracle
Oracle Web Server - Oracle
Oracle Report Server - Oracle
TEMS Oracle Install Scripts - Tornado Development
TEMS Compiled Applications - Tornado Development
TEMS File System Installation - Tornado Development
Netscape Web Server - Netscape
TEMS Web Front End - Tornado Development
TEMS - RACS SOFTWARE
The RACS consists of the following software:
Microsoft NT - Microsoft
Microsoft Service Packs - Microsoft
TEMS Boot Service - Tornado Development
TEMS Fax Service - Tornado Development
TEMS Page Service - Tornado Development
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ATTACHMENT 1.22
The TEMS Technology
The Database
TEMS is, at its heart, a relational database with the ability to manage and
manipulate arbitrary objects with very little overhead. These objects, whether
they be audio, text, video, or any other complex structure, are transformed into
a neutral object (TMS Object) that is then identified and cataloged into the
database. Each of these TMS Objects are tagged with `header' information
describing their contents (e.g. owner, mime type, sub type, size, date, subject,
from, to, etc.). With this information, the database is able to quickly
determine what to do with these objects (e.g. save it, copy it to other users,
send it, schedule it for delivery at a later time, etc.).
Light Weight Translation Service (LWTS pronounced `lightweights')
The LWTS is a set of applications built on standard TEMS API's that are able to
take these TMS Objects along with instruction from the database and manipulate
them in almost any way imaginable. The TEMS smtp, pop3, pollpop3, TS, IMAP4,
LDAP, MAPI, and HTTP services are all examples of LWTS's. The power of a LWTS
comes from its rather simplistic design goal - to translate a known message
format into another known message format. Each LWTS is designed with one input
and one output path. Its job is then to take whatever it receives through it's
input, translate it into something that is compatible with it's output, and send
it to its next destination.
Summary
The true potential and flexibility of the TEMS messaging platform becomes
apparent when both the database the LWTS are brought together and the
interaction and responsibilities of each are understood.
The database is responsible for keeping track of the presence and state of
information pertaining to transactions. Each transaction has defining features
such as owner, time of transaction, destination, etc. It keeps track of where
the messages are from, where they are going, the cost of the transaction, etc.
It however, does not keep track of the contents of the message nor does it worry
about the particular format of that message. That is the job of the LWTS.
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The LWTS then only worries about what the original format of the message is,
whether it can translate it to the destination format, and then whether it can
then transmit it to the destination. Because the LWTS have been designed to be
modular, they can be placed anywhere in the world with an Internet connection
and thus, alleviating the resource overhead of the central database system. The
database is left to control the flow of information (much like a traffic sign)
while the remotely located LWTS are left to carry that information to other
destinations (much like automobiles). This allows the central database system to
handle millions of transactions with very little overhead.
With these features and the robust TEMS API set of over 150 procedures, almost
any kind of information can be transformed into neutral TMS objects, cataloged
in the database, and manipulated like any other message. All that would be
required is to engineer the LWTS to `act' on the proprietary information
objects.
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ATTACHMENT 1.25
TEMS' Features from the Computer
ACCESS TO INBOX FROM THE COMPUTER:
www.tems.com (with TEMS password and TEMS Login I.D.)
INBOX FROM THE COMPUTER:
Get messages from the TEMS server
Move messages to different folders
Delete messages from Inbox
View contents of different folders
E-MAIL MESSAGE RECEIVED FROM THE COMPUTER:
Read the e-mail
Reply to the e-mail (address book available)
Reply to all of the e-mail's recipients (address book available)
Forward the e-mail (address book available)
Delete the e-mail
Save the e-mail
Print the e-mail
Move the e-mail to another folder
VOICE MAIL MESSAGE RECEIVED FROM THE COMPUTER:
Listen to the voice mail as a .wav file
Forward the voice mail to an e-mail address (address book available)
Delete the voice mail
Save the voice mail message
Save the voice mail attachment (.wav file)
Move the voice mail to another folder
FAX MESSAGE RECEIVED FROM THE COMPUTER:
View the fax in any of these file formats: .gif, .png. or .tms
Zoom in or out on the fax image
Forward the fax to an e-mail address (address book available)
Forward the fax to a fax number (address book available)
Delete the fax message
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Save the fax message
Print the fax message
Save the fax attachment (.gif, .png or .tms file)
Move the fax to another folder
COMPOSE A MESSAGE FROM THE COMPUTER:
Send an e-mail to an e-mail address (address book available)
Send an e-mail to a fax number (address book available)
Send an e-mail to a pager number (address book available)
Send a fax to a fax number (address book available)
Send a page to a pager number (address book available)
Attach files to an e-mail
MANAGE FOLDERS FROM THE COMPUTER:
View contents of any folder
Create a folder or subfolder (except: Inbox, Outbox, Trash)
Delete a folder or subfolder (except: Inbox, Outbox, Trash)
Move a folder or subfolder (except: Inbox, Outbox, Trash)
ADDRESS BOOK FROM THE COMPUTER:
Add an e-mail address(es) to a message
Add a fax number(s) to a message
Add a pager number(s) to a message
Create new address book entries
View and Edit address book entries
SCHEDULER FROM THE COMPUTER:
Create, edit or delete a schedule for special delivery instructions for new
e-mail, voice mail, fax or page.
Create, edit or delete events that make up a schedule
Activate or deactivate a schedule
MESSAGE STORAGE SETTINGS FROM THE COMPUTER:
View message storage space available
View message storage used
Designate how to handle message storage when it becomes full
Specify when to delete Trash folder messages
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MESSAGE NOTIFICATION SETTINGS FROM THE COMPUTER:
Designate to send a page when an new e-mail, fax, voice mail arrives
Specify to send a page when message storage becomes full
E-MAIL CONSOLIDATION FROM THE COMPUTER:
Pull in any number of non-TEMS e-mail accounts into the TEMS Inbox
View or change non-TEMS e-mail consolidation settings
Designate whether to leave non-TEMS e-mail message on original server after
forwarding to the TEMS Inbox
Activate or deactivate any previously consolidated non-TEMS account
Select the color to label non-TEMS messages in the TEMS Inbox
Test the non-TEMS account for verification
Delete the non-TEMS account settings from E-mail Consolidation
FAX SETTINGS FROM THE COMPUTER:
Designate what type of file format to view fax messages with: .gif, .png, .tms
TEMS FAX VIEWER PLUG-IN FROM THE COMPUTER:
Download and install fax viewer
Rotate the image
Zoom the image
Scroll through multi-page faxes
View white on black or black on white
Save the fax image (.bmp, .png, .tms)
Open saved faxed images (.tms file)
TEMS FAX DRIVER PLUG-IN FROM THE COMPUTER:
Download and install the fax driver
Send faxes directly from most computer programs (i.e. MS Office)
Utilize the address book
ADD TEMS TO E-MAIL CLIENTS PLUG-INS FROM THE COMPUTER:
Download and install the e-mail client plug-ins
Use TEMS features with Eudora or MS Outlook/Exchange
TEMS ACCOUNT INFORMATION FROM THE COMPUTER:
View or change TEMS Password
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View or change TEMS Login I.D.
View or change Personal information
View or change credit card information
TEMS TELCO CHARGE INFORMATION FROM THE COMPUTER:
View current Telco Charge balance
Designate the amount of the next Telco Charge Deposit
Specify whether to automatically charge credit card or to send an e-mail when
Telco Charge Deposit reaches five dollars
View a summary report of Telco Charges
View a detailed report of Telco Charges
View past invoices
TEMS SUPPORT FROM THE COMPUTER:
Help screens on every page
TEMS User Guide downloadable in these formats: Word 97, Word 6.0, Word 4.0,
Adobe Acrobat Reader
The shortened version of the TEMS User Guide, the TEMS Jump Start! is viewable
online
Report a system bug to TEMS Customer Support
Contact TEMS Customer Support and TEMS Business Services
TEMS FEATURES FROM THE TELEPHONE
ACCESS TO INBOX FROM THE TELEPHONE:
TEMS General Number (with TEMS Extension Number)
[Optional] TEMS Personal Number (310 area code)
[Optional] TEMS Personal Number (800 number)
E-MAIL MESSAGE RECEIVED FROM THE TELEPHONE:
Hear an e-mail message
Reply to an e-mail message
Forward an e-mail message to an e-mail address (address book available)
Forward an e-mail message to a fax number (address book available)
Forward an e-mail message to a pager number (address book available)
Delete e-mail message
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VOICE MAIL MESSAGE RECEIVED FROM THE TELEPHONE:
Listen to voice mail message
Forward voice mail message to e-mail (address book available)
Delete voice mail message
FAX MESSAGE RECEIVED FROM THE TELEPHONE:
Access fax message
Forward fax message to a fax machine (address book available)
Forward fax message to an e-mail address (address book available)
Send a fax to a TEMS Member (if calling from a fax machine)
PAGE MESSAGE RECEIVED FROM THE TELEPHONE:
Send a page to a TEMS Member
COMPOSE A MESSAGE FROM THE TELEPHONE:
Send an e-mail message to an e-mail address (address book available)
Send a fax to a fax number (address book available)
Send page to a pager number (address book available)
MANAGE TEMS ACCOUNT FROM THE TELEPHONE:
[Optional] Record TEMS voice mail greeting for TEMS General Number
[Optional] Record TEMS voice mail greeting for TEMS Personal Number (310)
[Optional] Record TEMS voice mail greeting for TEMS Personal Number (800)
Activate TEMS Card (TEMS Card Users only)
Check TEMS Card Balance (TEMS Card Users only)
Recharge TEMS Card (TEMS Card Users only)
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<PAGE> 50
ATTACHMENT 2.3
SOFTWARE ESCROW AGREEMENT
This Software Escrow Agreement ("Agreement") is made as of this 15 day of
April, 1999, by and between Tornado Development, Inc. ("Producer"), [Name of
Escrow Service] ("Escrow Agent") and Qorus.com, Inc. ("Licensee").
RECITALS
A. Producer and Licensee are parties to that certain Software License
Agreement (together with all exhibits, schedules and attachments thereto, the
"License Agreement") being entered into concurrently with this Agreement,
pursuant to which Licensee is licensing from Producer certain proprietary
technology of Producer, which includes certain software referred to in the
License Agreement as the "software".
B. Producer intends to deliver to Escrow Agent source code for the Software
in the form of a sealed package containing, among other things, source code (on
magnetic tapes, disks, disk packs, or other forms of media) in machine and human
readable form, and the written documentation prepared in connection therewith,
and any subsequent updates or changes thereto (the "Deposit Materials").
Producer desires Escrow Agent to hold the Deposit Materials, and, upon certain
events, deliver the Deposit Materials (or a copy thereof) to Licensee, in
accordance with the terms hereof.
AGREEMENT
Now, therefore, in consideration of the foregoing, of the mutual promises
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Delivery by Producer. Producer shall be solely responsible for
delivering to Escrow Agent the Deposit Materials as soon as practicable. Escrow
Agent shall hold the Deposit Materials in accordance with the terms hereof.
Escrow Agent shall have no obligation to verify the completeness or accuracy of
the Deposit Materials.
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<PAGE> 51
2. Duplication; Updates.
(a) Licensee shall be entitled to one (1) complete copy of the
Deposit Materials without charge for copying.
(b) Producer shall deposit with Escrow Agent any modifications,
updates, new releases or documentation related to the Deposit Materials by
delivering to Escrow Agent an updated version of the Deposit Materials
("Additional Deposit") as soon as practicable after the modifications, updates,
new releases and documentation have been developed by Producer (but in no event
later than thirty (30) days following development). Escrow Agent shall have no
obligation to verify the accuracy or completeness of any Additional Deposit or
to verify that any Additional Deposit is in fact a copy of the Deposit Materials
or any modification, update, or new release thereof.
3. Notification of Deposits; Verification of Deposits. Simultaneous
with the delivery to Escrow Agent of the Deposit Materials or any Additional
Deposit, as the case may be, Producer shall deliver to Escrow Agent and to
Licensee a written statement specifically identifying all items deposited and
stating that the Deposit Materials or any Additional Deposit, as the case may
be, so deposited have been inspected by Producer and are complete and accurate.
Licensee shall have the right, at Licensee's expense, to cause a
verification of any Deposit Materials. A verification determines, in different
levels of detail, the accuracy, completeness, sufficiency and quality of the
Deposit Materials. If a verification is elected after the Deposit Materials have
been delivered to Escrow Agent, then only Escrow Agent, or at Licensee's
election an independent person or company selected and supervised by Escrow
Agent, may perform the verification.
4. Delivery by Escrow Agent. Escrow Agent shall deliver the Deposit
Materials, or a copy thereof, to Licensee only in the event that:
(a) Producer notifies Escrow Agent to effect such delivery to
Licensee at a specific address; or
(b) Escrow Agent receives from Licensee:
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<PAGE> 52
(i) written notification of or that (a) Tornado is adjudged
insolvent or makes a general assignment for benefit of creditors; (b) the
filing of a petition by or against Tornado for relief under Title 11 of the
United States Code which petition is not dismissed within a period of 90
days; (c) the appointment of a receiver or other custodian for the business
or assets of Tornado; (d) a duly authorized officer of Tornado admits in
writing Tornado's inability to pay its debts generally as they become due;
(e) Tornado fails to provide Maintenance or Support as required pursuant to
the License Agreement or (f)Tornado fails to provide the software
modification tools/modules or access to the Source Code contemplated by
Section 7 of the License Agreement. is not dismissed within a period of 90
days; (c) the appointment of a receiver or other custodian for the business
or assets of Tornado; (d) a duly authorized officer of Tornado admits in
writing Tornado's inability to pay its debts generally as they become due;
(e) Tornado fails to provide Maintenance or Support as required pursuant to
the License Agreement or (f)Tornado fails to provide the software
modification tools/modules or access to the Source Code contemplated by
Section 7 of the License Agreement. See Section 8 below.]
(ii) a written demand that the Deposit Materials be released and
delivered to Licensee;
(iii) a written undertaking from the Licensee that the Deposit
Materials being supplied to the Licensee will be used only as permitted
under the terms of the License Agreement; and
(iv) specific instructions from the Licensee for this delivery.
(c) If the provisions of paragraph 4(a) are satisfied, Escrow Agent
shall, within five (5) business days after receipt of the notification specified
in paragraph 4(a), deliver the Deposit Materials in accordance with the
applicable instructions.
(d) If the provisions of paragraph 4(b) are met, Escrow Agent shall,
within five (5) business days after receipt of all the documents specified in
paragraph 4(b), send by certified mail to Producer a photostatic copy of all
such documents. Producer shall have fifteen (15) days from the date on which
Producer receives such documents ("Objection Period") to notify Escrow Agent of
its objection ("Objection Notice") to the release of the Deposit Materials to
Licensee and to request that the issue of Licensee's entitlement to a copy of
the Deposit Materials be submitted to arbitration in accordance with the
following provisions:
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<PAGE> 53
(i) If Producer shall send an Objection Notice to Escrow Agent
during the Objection Period, the matter shall be submitted to, and settled
by arbitration pursuant to the arbitration procedures of Section 11 of the
License Agreement and its Attachments, which provisions are incorporated
herein by this reference. All costs of the arbitration incurred by Escrow
Agent, including reasonable attorneys' fees and costs, shall be paid by the
party which does not prevail in the arbitration; provided, however, if the
arbitration is settled prior to a decision by the arbitrators, Producer and
Licensee shall each pay 50% of all such costs.
(ii) Producer may, at any time prior to the commencement of
arbitration proceedings, notify Escrow Agent that Producer has withdrawn
the Objection Notice. Upon receipt of any such notice from Producer, Escrow
Agent shall reasonably promptly deliver the Deposit Materials to Licensee
in accordance with the instructions specified in paragraph 4(b).
(e) If, at the end of the Objection Period, Escrow Agent has not
received an Objection Notice from Producer, then Escrow Agent shall reasonably
promptly (but in no event later than ten (10) days) deliver the Deposit
Materials to Licensee in accordance with the instructions specified in paragraph
4(b). Both Producer and Licensee agree that Escrow Agent shall not be required
to deliver such Deposit Materials until all such fees then due Escrow Agent have
been paid.
(f) Escrow Agent shall release and deliver the Deposit Materials to
Producer upon termination of this Agreement in accordance with paragraph 7(a)
hereof.
(g) Unless otherwise provided in the License Agreement, upon release
of the Deposit Materials in accordance with this Article 4, Licensee shall have
a non-exclusive, non-transferrable, irrevocable, royalty free, right to use the
Deposit Materials for the sole purpose of continuing the benefits afforded to
Licensee by the License Agreement. Licensee shall be obligated to maintain the
confidentiality of the released Deposit Materials in accordance with the terms
of the License Agreement.
5. Indemnity. Producer and Licensee shall, jointly and severally,
indemnify and hold harmless Escrow Agent and each of its directors, officers,
agents, employees and stockholders ("Escrow Agent Indemnities") absolutely and
forever, from
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<PAGE> 54
and against any and all claims, actions, damages, suits, liabilities,
obligations, costs, fees, charges, and any other expenses whatsoever, including
reasonable attorneys' fees and costs, that may be asserted against any Escrow
Agent Indemnitee in connection with this Agreement or the performance of Escrow
Agent or any Escrow Agent Indemnitee hereunder; provided, however, in no event
will Producer or Licensee be required to indemnify or hold Escrow Agent harmless
with respect to acts or omissions which constitute bad faith, willful misconduct
or gross negligence.
6. Disputes and Interpleader.
(a) In the event of any dispute between any of Escrow Agent,
Producer and/or Licensee relating to delivery of the Deposit Materials by Escrow
Agent or to any other matter arising out of this Agreement, Escrow Agent may
submit the matter to any court of competent jurisdiction in an interpleader or
similar action. Any and all costs incurred by Escrow Agent in connection
therewith, including reasonable attorneys' fees and costs, shall be borne 50% by
each of Producer and Licensee.
(b) Escrow Agent shall perform any acts ordered by any court of
competent jurisdiction, without any liability or obligation to any party
hereunder by reason of such act.
7. Term. The term of this Agreement shall be concurrent with the term
of that certain License Agreement, including all renewal terms, and this
Agreement shall automatically terminate upon termination of such License
Agreement. In the event of termination of this Agreement, Licensee and Producer
shall pay all fees due Escrow Agent (borne 50% by each of Producer and Licensee)
and either or both of Producer and Licensee shall promptly notify Escrow Agent
that this Agreement has been terminated and that Escrow Agent shall return to
Producer all copies of the Deposit Materials then in its possession.
8. Fees. Licensee and Producer shall pay to Escrow Agent all
applicable fees (borne 50% by each of Producer and Licensee) in accordance with
Exhibit A as compensation for Escrow Agent's services under this Agreement. In
the event of non-payment of any fees or charges invoiced by Escrow Agent, Escrow
Agent shall give notice of non-payment of any fee due and payable hereunder to
the Licensee and to Producer, and if such fees are not thereafter paid by
Licensee and/or Producer within ten (10) [Licensee needs enough time to get
through the demand process.] days
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<PAGE> 55
after receipt of notice from Escrow Agent, this Agreement shall terminate.
[Annual fees should be paid sufficiently in advance of the due date that
Licensee will be able to institute notice procedures to obtain access to Deposit
Materials without having to cure Producer's default.]
9. Ownership of Deposit Materials. The parties recognize and
acknowledge that ownership of the Deposit Materials shall remain with Producer
at all times.
10. Bankruptcy. Producer and Licensee acknowledge that this Agreement
is an "agreement supplementary to" the License Agreement as provided in Section
365 (n) of Title 11, United States Code (the "Bankruptcy Code"). Producer
acknowledges that if Producer as a debtor in possession or a trustee in
Bankruptcy in a case under the Bankruptcy Code rejects the License Agreement or
this Agreement, Licensee may elect to retain its rights under the License
Agreement and this Agreement as provided in Section 365 (n) of the Bankruptcy
Code. Upon written request of Licensee to Producer or the Bankruptcy Trustee,
Producer or such Bankruptcy Trustee shall not interfere with the rights of
Licensee as provided in the License Agreement and this Agreement, including the
right to obtain the Deposit Material from Escrow Agent.
11. Miscellaneous.
(a) Remedies. Except for actual fraud, gross negligence or
intentional misconduct, Escrow Agent shall not be liable to Producer or to
Licensee for any act, or failure to act, by Escrow Agent in connection with this
Agreement. Any liability of Escrow Agent regardless of the cause shall be
limited to the fees exchanged under this Agreement. Escrow Agent will not be
liable for special, indirect, incidental or consequential damages hereunder.
(b) Natural Degeneration; Updated Version. In addition, the
parties acknowledge that as a result of the passage of time alone, the Deposit
Materials are susceptible to loss of quality ("Natural Degeneration"). It is
further acknowledged that Escrow Agent shall have no liability or responsibility
to any person or entity for any Natural Degeneration. For the purpose of
reducing the risk of Natural Degeneration, Producer shall deliver to Escrow
Agent a new copy of the Deposit Materials at least once every three years.
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<PAGE> 56
(c) Permitted Reliance and Abstention. Escrow Agent may rely and
shall be fully protected in acting or refraining from acting upon any notice or
other document believed by Escrow Agent in good faith to be genuine and to have
been signed or presented by the proper person or entity. Escrow Agent shall have
no duties or responsibilities except those expressly set forth herein.
(d) Independent Contractor. Escrow Agent is an independent
contractor, and is not an employee or agent of either the Producer or Licensee.
(e) Amendments. This Agreement shall not be modified or amended
except by another agreement in writing executed by the parties hereto.
(f) Entire Agreement. This Agreement, including all exhibits
hereto, supersedes all prior discussions, understandings and agreements between
the parties with respect to the matters contained herein, and constitutes the
entire agreement between the parties with respect to the matters contemplated
herein. All exhibits attached hereto are by this reference made a part of this
Agreement and are incorporated herein.
(g) Counterparts; Governing Law. This Agreement may be executed
in counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
Agreement. This Agreement shall be construed and enforced in accordance with the
laws of the State of California, without regard to conflicts of laws principles.
(h) Confidentiality. Escrow Agent will hold and release the
Deposit Materials only in accordance with the terms and conditions hereof, and
will maintain the confidentiality of the Deposit Materials, in accordance with
the terms and conditions of this Agreement.
(i) Notices. All notices, requests, demands or other
communications required or permitted to be given or made under this Agreement
shall be in writing and shall be delivered by hand or by commercial overnight
delivery service which provides for evidence of receipt, or mailed by certified
mail, return receipt requested, postage prepaid, at the address set forth below
such party's signature to this Agreement. If delivered personally or by
commercial overnight delivery service, the
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<PAGE> 57
date on which the notice, request, instruction or document is delivered shall be
the date on which delivery is deemed to be made, and if delivered by mail, the
date on which such notice, request, instruction or document is received shall be
the date on which delivery is deemed to be made. Any party may change its
address for the purpose of this Agreement by notice in writing to the other
parties as provided herein.
(j) Survival. Paragraphs 5, 6, 9 and 10 shall survive any
termination of this Agreement.
(k) No Waiver. No failure on the part of any party hereto to
exercise, and no delay in exercising any right, power or single or partial
exercise of any right, power or remedy by any party will preclude any other or
further exercise thereof or the exercise of any other right, power or remedy. No
express waiver or assent by any party hereto to any breach of or default in any
term or condition of this Agreement shall constitute a waiver of or an assent to
any succeeding breach of or default in the same or any other term or condition
hereof.
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<PAGE> 58
IN WITNESS WHEREOF each of the parties has caused its duly
authorized officer to execute this Agreement as of the date and year first above
written.
DSI ESCROW
By: Kathleen Cummings
Title: Sales Representative
Address: 9555 Chesapeake Drive, Suite 200
San Diego, California 92123
Fax No. (619) 694-1900
TORNADO DEVELOPMENT, INC.
By: Kevin Torf
Title: Chief Executive Officer
Address: 1201 Morningside Drive, Suite 100
Manhattan Beach, California 90266
Fax No. (310) 546-6817
QORUS.COM, INC.
By: Jack Woodruff
Title: Chief Financial Officer
Address: 3875 Telegraph Road, A239
Ventura, California 93003
Fax No. (805) 652-0994
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<PAGE> 59
EXHIBIT A
FEE SCHEDULE
Fees to be paid by Licensee and Producer (borne 50% by each of Licensee and
Producer) shall be as follows:
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<PAGE> 60
ATTACHMENT 4.1
The initial License Fees will be computed based upon a guaranteed minimum number
of Subscribers (for a period of twelve (12) months) equal to 10,000 and will be
payable in one lump sum (i.e., $150,000.00) upon the execution and delivery by
Licensee of this Agreement. After such payment, License Fees will be computed,
adjusted and paid as follows:
(1) Following the Acceptance Date, the License Fees will be computed monthly
based upon the Monthly Average number of Subscribers as of the end of the
immediately preceding calendar month; provided, however, during the first twelve
months calendar months following the Acceptance Date there will be no upward
adjustment to the License Fees unless the Monthly Average number of Subscribers
exceeds 10,000 and during the initial year there will be no downward adjustment
below 10,000 and during each year there will be no downward adjustment of the
initial payment for that year. All adjustment to the Licensee Fees will be
prorated based upon the number of months remaining to the next anniversary of
the Acceptance Date. For example, if the Acceptance Date occurred on January 1
and on June 30, the Monthly Average number of Subscribers exceeded 10,000 for
the first time and was computed to be 15,000, Licensee would pay to Tornado
additional License Fees equal to $37,500 (5,000 Subscribers (in addition to the
initial 10,000 guaranteed and prepaid Subscribers) multiplied by $15.00 per
Subscriber divided by the quotient resulting from dividing the six months
remaining to the next anniversary of the Acceptance Date by 12 months). Note:
following the first anniversary of the Acceptance Date, the License Fee per
Subscriber will be reduced as set forth in the table at the foot of this
attachment.
(2) Beginning with the first calendar month following the anniversary of the
Acceptance Date, the Monthly Average number of Subscribers will be computed
monthly and the License Fees will be computed and paid based upon the number of
Subscribers at the end of the immediately preceding calendar month; provided,
however, in no event will Licensee be entitled to a refund of previously paid
License Fees.
(3) Notwithstanding the foregoing, Licensee will be deemed to have
guaranteed a minimum of 10,000 Subscribers on the first server deployed by
Licensee and 5,000 Subscribers on each additional server deployed by Licensee.
For example, if when Licensee deploys a second server there are a total of
11,000 Monthly Average number of Subscribers being served, Licensee will
nevertheless be obligated to pay License Fees with respect to 15,000 Monthly
Average number of Subscribers.
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<PAGE> 61
The initial Royalty Fees will be computed based upon the number of Channels
deployed and will be payable in one lump sum upon the execution and delivery by
Licensee of this Agreement. After such payment, Royalty Fees will be computed,
adjusted and paid as follows:
(1) Following the Acceptance Date, the Royalty Fees will be computed monthly
based upon the highest number of Channels deployed at any time during the
immediately preceding calendar month. Any upward adjustment to the Royalty Fees
will be prorated based upon the number of months remaining to the next
anniversary of the Acceptance Date. For example, if the Acceptance Date occurred
on January 1, on the Acceptance Date Licensee deployed 200 Channels and on June
30 the number of Channels exceeded the initially deployed Channels for the first
time and was computed to be 300, Licensee would pay to Tornado additional
Royalty Fees equal to $19,000 (100 Channels (in addition to the initially
deployed Channels) multiplied by $380.00 per Channel divided by the quotient
resulting from dividing the six months remaining to the next anniversary of the
Acceptance Date by 12 months).
(2)
The number of Channels will be computed monthly and the Royalty Fees will be
computed and paid based upon the highest number of Channels deployed at any time
during the immediately preceding calendar month; provided, however, in no event
will Licensee be entitled to a refund of previously paid Royalty Fees.
(3) Notwithstanding the foregoing, Licensee will be deemed to have guaranteed a
minimum of 24 Channels per RACS. For example, if when Licensee deploys a second
RACS there are a total of thirty-six (36) Channels being utilized, Licensee will
nevertheless be obligated to pay Royalty Fees with respect to forty-eight
Channels.
Tornado has the right to review log files created by the server to
determine Subscriber usage and Channel usage, and in the absence of manifest
error, such log files shall be conclusive.
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<PAGE> 62
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
NUMBER OF SUBSCRIBERS DISCOUNT LICENSE FEE PER LICENSE FEE PER
SUBSCRIBER (FIRST SUBSCRIBER
YEAR) (ALL OTHER YEARS)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 100,000 0% $ 15.00 $10.00
- -------------------------------------------------------------------------------------------------------------
100,000 250,000 10% $ 13.50 $9.00
- -------------------------------------------------------------------------------------------------------------
250,000 500,000 20% $ 12.00 $8.00
- -------------------------------------------------------------------------------------------------------------
500,000 1,000,000 30% $ 10.50 $7.00
- -------------------------------------------------------------------------------------------------------------
1,000,000 2,500,000 40% $ 9.00 $6.00
- -------------------------------------------------------------------------------------------------------------
2,500,000 50% $ 7.50 $5.00
OR MORE
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
CHANNELS DISCOUNT ROYALTY FEE PER ROYALTY FEE
CHANNEL (FIRST YEAR) per CHANNEL
(ALL OTHER YEARS)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
24 200 0% 400.00 80.00
- -----------------------------------------------------------------------------------------------------------------
200 500 5% 380.00 76.00
- -----------------------------------------------------------------------------------------------------------------
500 1,000 10% 360.00 72.00
- -----------------------------------------------------------------------------------------------------------------
1,000 15% 340.00 68.00
or more
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
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ATTACHMENT 4.7
FORM OF THIRD PARTY SOFTWARE LICENSES
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<PAGE> 1
EXHIBIT 6.6
THIS WARRANT AND THE SHARES OF CAPITAL STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY
HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF IN VIOLATION OF ANY APPLICABLE
SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED
OR OTHERWISE DISTRIBUTED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FILED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL, SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED.
TORNADO DEVELOPMENT, INC.
Class A Common Stock Purchase Warrant
Date of Issuance: April 15, 1999 Certificate No. W-3
For Value Received, Tornado Development, Inc., a California corporation
(the "Corporation"), promises to issue to Qorus.com, Inc., a Delaware
corporation or its permitted registered assigns (the "Warrantholder") 25,000
nonassessable shares (the "Shares") of the voting Class A Common Stock, no par
value per share, of the Corporation at any time on or prior to April 15, 2002
(the "Expiration Date"), upon the payment by the Warrantholder to the
Corporation of the Purchase Price and to deliver to the Warrantholder a
certificate or certificates representing the Shares purchased. The Warrantholder
shall have the right to exercise this Warrant in whole or in part at any time or
times on or prior to the Expiration Date. Subject to the conditions hereinafter
set forth, the Warrantholder may sell, assign and transfer this Warrant, in
whole or in part, and, in the event of any such sale, assignment and transfer,
the Corporation agrees to reissue a Warrant or Warrants of like tenor for the
unexercised portion hereof. The number of Shares purchasable upon exercise of
this Warrant and the Purchase Price per share shall be subject to adjustment
from time to time as set forth herein.
1. COVENANTS OF THE CORPORATION. The Corporation will at all times
reserve and keep available out of its authorized shares of Common Stock or its
treasury shares, solely for the purpose of issue upon the exercise of this
Warrant as herein provided, such number of shares of Common Stock as shall then
be issuable upon the exercise of this Warrant. The Corporation covenants that
all shares of Common Stock which shall be so issued shall be duly and validly
issued and fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof. The Corporation will take all such
action as may be necessary to assure that all such shares of Common Stock may be
so issued without violation of any applicable requirements of any federal or
state
<PAGE> 2
securities laws or of national stock exchange upon which the shares of Common
Stock of the Corporation may be listed. The Corporation will not take any action
which results in any adjustment of the Adjustment Price if the total number of
shares of Common Stock issuable after such action upon exercise of this Warrant
would exceed the total number of shares of Common Stock then authorized by the
Corporation's Certificate of Incorporation.
2. EXERCISE OF WARRANT.
2A. DIVIDENDS. No payment or adjustment shall be made upon any exercise
of this Warrant on account of any previous cash dividends.
2B. PURCHASE PRICE. The Purchase Price shall be $3.00 per share or, in
case an adjustment of such price has taken place pursuant to the further
provisions of this paragraph 2, then the Purchase Price shall be the price as
last adjusted and in effect at the date this Warrant (or any part hereof) is
surrendered for exercise (such price or such price as last adjusted, if such
price shall have been adjusted, being referred to herein as the "Purchase
Price").
2C. ADJUSTMENT OF PURCHASE PRICE. Except as provided in paragraph 2D,
if and whenever, the Corporation shall issue or sell any shares of its Common
Stock for a consideration per share less than the Adjustment Price (as
hereinafter defined) in effect immediately prior to the time of such issue or
sale, then, forthwith upon such issue or sale, the Adjustment Price shall be
reduced to the price (calculated to the nearest cent) determined by dividing (i)
an amount equal to the sum of (a) the number of shares of all classes of Common
Stock outstanding immediately prior to such issue or sale multiplied by the then
existing Adjustment Price, and (b) the consideration, if any, received by the
Corporation upon such issue or sale, by (ii) the total number of shares of
Common Stock outstanding immediately after such issue or sale. The Adjustment
Price shall be the Purchase Price or, in the case an adjustment of such price
has taken place pursuant to the provisions of this paragraph 2, then the
Adjustment Price shall be the price as last adjusted and in effect at the date
this Warrant (or any part thereof) is surrendered for exercise (such price or
such price as last adjusted, if such price shall have been adjusted, being
referred to herein as the "Adjustment Price").
If and whenever the Adjustment Price shall have been adjusted, the
Purchase Price shall be forthwith adjusted to the price (calculated to the
nearest cent) determined by multiplying the Purchase Price as then in effect by
a fraction, the numerator of which shall be the Adjustment Price as so adjusted
and the denominator of which shall be the Adjustment Price as in effect
immediately prior to such adjustment. Upon each adjustment to the Purchase
Price, the Warrantholder shall thereafter be entitled to purchase, at the
Purchase Price resulting from such adjustment, the number of shares of Common
Stock obtained by multiplying the Purchase Price in effect immediately prior to
such adjustment by the number of shares of Common Stock purchasable pursuant
hereto immediately prior to such adjustment and dividing the product thereof by
the Purchase Price resulting from such adjustment.
-2-
<PAGE> 3
No adjustment of the Adjustment Price, however, shall be made in an
amount less than $.01 per share, but any such lesser adjustment shall be carried
forward and shall be made at the time and together with the next subsequent
adjustment which together with any adjustments so carried forward shall amount
to $.01 per share or more.
For the purposes of this paragraph 2C, the following paragraphs 2C(1)
to 2C(7), inclusive, shall also be applicable: except that this warrant shall be
deemed exercised and outstanding for all purposes and computations under this
paragraph 2 and the then current Adjustment Price shall be deemed the Purchase
Price per share.
2C(1). ISSUANCE OF RIGHTS OR OPTIONS. In case at any time the
Corporation shall in any manner grant (whether directly or by assumption in a
merger or otherwise) any rights to subscribe for or to purchase, or any options
for the purchase of, Common Stock or any stock or securities convertible into or
exchangeable for Common Stock (such convertible or exchangeable stock or
securities being herein called "Convertible Securities"), whether or not such
rights or options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such rights or options or upon conversion
or exchange of such Convertible Securities (determined by dividing (i) the total
amount, if any, received or receivable by the Corporation as consideration for
the granting of such rights or options, plus the minimum aggregate amount of
additional consideration payable to the Corporation upon the exercise of all
such rights or options, plus, in the case of such rights or options which relate
to Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the exercise of such
rights or options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such rights or options) shall be less
than the Adjustment Price in effect immediately prior to the time of the
granting of such rights or options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such rights or options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such rights or options shall be (as of
the date of granting of such rights or options) deemed to be outstanding and to
have been issued for such price per share. Except as otherwise provided in
paragraph 2C(3), no adjustment of the Adjustment Price shall be made upon the
actual issue of such Common Stock or of such Convertible Securities upon
exercise of such rights or options or upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities.
2C(2). ISSUANCE OF CONVERTIBLE SECURITIES. In case the Corporation
shall in any manner issue (whether directly or by assumption in a merger or
otherwise) or sell any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the price per
share for which Common Stock is issuable upon such conversion or exchange
(determined by dividing (i) the total amount received or receivable by the
Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion or exchange thereof, by (ii)
the
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<PAGE> 4
total maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) shall be less than the Adjustment
Price in effect immediately prior to the time of such issue or sale, determined
as of the date of such issue or sale of such Convertible Securities, as the case
may be, then the total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall (as of the date
of the issue or sale of such Convertible Securities) be deemed to be outstanding
and to have been issued for such price per share, provided that (a) except as
otherwise provided in paragraph 2C(3) below, no adjustment of the Adjustment
Price shall be made upon the actual issue of such Common Stock upon conversion
or exchange of such Convertible Securities, and (b) if any such issue or sale of
such Convertible Securities is made upon exercise of any rights to subscribe for
or to purchase or any option to purchase any such Convertible Securities for
which adjustments of the Adjustment Price have been or are to be made pursuant
to other provisions of this paragraph 2C, no further adjustment of the
Adjustment Price shall be made by reason of such issue or sale.
2C(3). CHANGE IN OPTION PRICE OR CONVERSION RATE. Upon the happening of
any of the following events, namely, if the purchase price provided for in any
right or option referred to in paragraph 2C(l), the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities
referred to in paragraph 2C(l) or 2C(2), or the rate at which any Convertible
Securities referred to in paragraph 2C(l) or 2C(2) are convertible into or
exchangeable for Common Stock shall change at any time (other than under or by
reason of provisions designed to protect against dilution), the Adjustment Price
in effect at the time of such event shall forthwith be readjusted to the
Adjustment Price which would have been in effect at such time had such rights,
options or Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or conversion rate, as the case may be,
at the time initially granted, issued or sold; and on the expiration of any such
option or right or the termination of any such right to convert or exchange such
Convertible Securities, the Adjustment Price then in effect hereunder shall
forthwith be increased to the Adjustment Price which would have been in effect
at the time of such expiration or termination had such right, option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued, and the Common Stock issuable
thereunder shall no longer be deemed outstanding. If the purchase price provided
for in any such right or option referred to in paragraph 2C(l), or the rate at
which any Convertible Securities referred to in paragraph 2C(l) or 2C(2) are
convertible into or exchangeable for Common Stock, shall be reduced at any time
under or by reason of provisions with respect thereto designed to protect
against dilution, then in case of the delivery of Common Stock upon the exercise
of any such right or option or upon conversion or exchange of any such right or
option or upon conversion or exchange of any such Convertible Securities, the
Adjustment Price then in effect hereunder shall forthwith be adjusted to such
respective amount as would have obtained had such right, option or Convertible
Security never been issued as to such Common Stock and had adjustment been made
upon the issuance of the shares of Common Stock delivered as aforesaid, but only
if as a result of such adjustment the Adjustment Price then in effect hereunder
is thereby reduced.
2C(4). STOCK DIVIDENDS. In case the Corporation shall declare a
dividend or make any other distribution upon any stock of the Corporation
payable in Common Stock or Convertible Securities,
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<PAGE> 5
any Common Stock or Convertible Securities, as the case may be, issuable in
payment of such dividend or distribution shall be deemed to have been issued or
sold without consideration.
2C(5). CONSIDERATION FOR STOCK. In case any shares of Common Stock or
Convertible Securities or any rights or options to purchase any such Common
Stock or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received by the
Corporation therefor, after deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Corporation in
connection therewith. In case any shares of Common Stock or Convertible
Securities or any rights or options to purchase any such Common Stock or
Convertible Securities shall be issued or sold for consideration other than
cash, the amount of the consideration other than cash received by the
Corporation shall be deemed to be the fair value of such consideration as
determined in good faith by the Board of Directors of the Corporation, after
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith. In case
any shares of Common Stock or Convertible Securities or any rights or options to
purchase such Common Stock or Convertible Securities shall be issued in
connection with any merger in which the Corporation is the surviving
corporation, the amount of consideration therefor shall be deemed to be the fair
value as determined in good faith by the Board of Directors of the Corporation
of such portion of the assets and business of the nonsurviving corporation as
such Board shall determine to be attributable to such Common Stock, Convertible
Securities, rights or options, as the case may be. In case any rights or options
to purchase any shares of Common Stock or Convertible Securities shall be issued
in connection with the issue and sale of other securities of the Corporation,
together comprising one integral transaction in which no specific consideration
is allocated to such rights or options by the parties thereto, such rights or
options shall be deemed to have been issued without consideration. In the event
of any consolidation or merger of the Corporation in which the Corporation is
not the surviving corporation or in the event of any sale of all or
substantially all of the assets of the Corporation for stock or other securities
of any corporations, the Corporation shall be deemed to have issued a number of
shares of its Common Stock for stock or securities of the other corporation
computed on the basis of the actual exchange ratio on which the transaction was
predicated and for a consideration equal to the fair market value on the date of
such transaction of such stock or securities of the other corporation, and if
any such calculation results in adjustment of the Adjustment Price, the
determination of the number of shares of Common Stock receivable upon exercise
of this Warrant immediately prior to such merger, consolidation or sale, for
purposes of paragraph 2E, shall be made after giving effect to such adjustment
of the Adjustment Price.
2C(6). RECORD DATE. In case the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock or in Convertible
Securities, or (ii) to subscribe for or purchase Common Stock or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
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<PAGE> 6
2C(7). TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Corporation, and the disposition of any such shares be
considered an issue or sale of Common Stock for the purposes of this paragraph
2C.
2D. SUBDIVISION OR COMBINATION OF STOCK. In case the Corporation shall
at any time subdivide its outstanding shares of Common Stock into a greater
number of shares, the Adjustment Price and the Purchase Price in effect
immediately prior to such subdivision shall be proportionately reduced, and
conversely, in case the outstanding shares of Common Stock of the Corporation
shall be combined into a smaller number of shares, the Adjustment Price and the
Purchase Price in effect immediately prior to such combination shall be
proportionately increased.
2E. NO ADJUSTMENTS FOR CERTAIN EVENTS. The Corporation shall not be
required to make any adjustment of the Current Conversion Price in the case of
(1) the granting by the Corporation from and after the date
hereof of stock options to its employees, consultants and directors to
purchase up to a maximum 1,000,000 shares of Class B Non-Voting Common
Stock of the Corporation pursuant to the 1997 Tornado, Inc. Amended and
Restated Stock Plan (effective July 2, 1997) (the "1997 Plan"), or
(2) the issuance of shares of Class B Non-Voting Common Stock
pursuant to the exercise of stock options granted pursuant to the 1997
Plan, whether granted prior to or subsequent to the date of this Note,
or
(3) the issuance of shares of Common Stock pursuant to the
conversion of (i) the Series A Preferred Stock of the Corporation or
(ii) that certain Convertible Promissory Note (the "Note") of even date
herewith in the original principal amount of $1,000,000.00 payable by
the Corporation to Qorus.com, Inc. a Delaware corporation, or (iii)
upon exercise of that certain warrant or those certain warrants (the
"Service Warrants") for the purchase of up to 63,333 shares of the
Common Stock of the Corporation to be granted by the Corporation to
Bohle & Company or its principals for services rendered to the
Corporation, or
(4) the issuance of such additional shares of Class B
Non-Voting Common Stock as may be issuable upon the exercise of stock
options granted pursuant to the 1997 Plan, or the issuance of such
additional shares of Common Stock as may be issuable upon the
conversion of the Series A Preferred Stock of the Corporation, or the
issuance of such additional shares of Common Stock as may be issuable
upon the conversion of the Note, in each case, as a result of
adjustment in the number of shares covered thereby for stock dividends,
stock splits or other changes in the capitalization of the Corporation.
2F. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
If any capital reorganization or reclassification of the capital stock of the
Corporation, or any consolidation or merger of the Corporation with another
corporation, or the sale of all or substantially all of its assets
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<PAGE> 7
to another corporation shall be effected in such a way that holders of Common
Stock shall be entitled to receive stock, securities or assets with respect to
or in exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, exercise, merger or sale, lawful and adequate
provisions shall be made whereby the holder of this Warrant shall thereafter
have the right to receive, upon the basis and upon the terms and conditions
specified herein, and in lieu of the shares of Common Stock of the Corporation
immediately theretofore receivable upon the exercise of this Warrant, such
shares of stock, securities or assets as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such stock immediately theretofore receivable upon
the exercise of this Warrant had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case appropriate
provision shall be made with respect to the rights and interests of such holder
to the end that the provisions hereof (including without limitation provisions
for adjustments of the Adjustment Price) shall thereafter be applicable, as
nearly as may be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise of such conversion rights (including an
immediate adjustment, by reason of such consolidation or merger, of the
Adjustment Price to the value for the Common Stock reflected by the terms of
such consolidation or merger if the value so reflected is less than the
Adjustment Price in effect immediately prior to such consolidation or merger).
In the event of a merger or consolidation of the Corporation with or into
another corporation as a result of which a greater or lesser number of shares of
common stock of the surviving corporation are issuable to holders of Common
Stock of the Corporation outstanding immediately prior to such merger or
consolidation, then the Adjustment Price and Purchase Price in effect
immediately prior to such merger or consolidation shall be adjusted in the same
manner as though there were a subdivision or combination of the outstanding
shares of Common Stock of the Corporation. The Corporation will not effect any
such consolidation, merger or sale, unless prior to the consummation thereof the
successor corporation (if other than the Corporation) resulting from such
consolidation or merger or the corporation purchasing such assets shall assume
by written instrument executed and mailed or delivered to the registered holder
hereof at the last address of such holder appearing on the books of the
Corporation, the obligation to deliver to such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to receive. If a purchase, tender or exchange offer is
made to and accepted by the holders of more than 50% of the outstanding shares
of Common Stock of the Corporation, the Corporation shall not effect any
consolidation, merger or sale with the Person having made such offer or with any
Affiliate of such Person, unless prior to the consummation of such
consolidation, merger or sale the holder hereof shall have been given a
reasonable opportunity to then elect to receive, upon exercise of this Warrant,
either the stock, securities or assets then issuable with respect to the Common
Stock of the Corporation or the stock, securities or assets, or the equivalent,
issued to previous holders of the Common Stock in accordance with such offer.
2G. NOTICE OF ADJUSTMENT. Upon any adjustment of the Adjustment Price
and the Purchase Price, then and in each such case the Corporation shall give
written notice thereof, which notice shall state the Adjustment Price and the
Purchase Price resulting from such adjustment, setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based.
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<PAGE> 8
2H. OTHER NOTICES. In case at any time:
(1) the Corporation shall declare any dividend upon its Common
Stock payable in stock;
(2) the Corporation shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock of any
class or other rights;
(3) there shall be any capital reorganization, or
reclassification of the capital stock of the Corporation, or
consolidation or merger of the Corporation with, or sale of all or
substantially all of its assets to, another Corporation; or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation; then, in any one or more
of said cases, the Corporation shall give, (a) at least 20 days' prior
written notice of the date on which the books of the Corporation shall
close or a record shall be taken for such dividend, distribution or
subscription rights or for determining rights to vote in respect of any
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, and (b) in the case of any such
reorganization, reclassification, consolidation, merger sale,
dissolution, liquidation or winding up, at least 20 days' prior written
notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause (a) shall also specify, in the
case of any such dividend, distribution or subscription rights, the
date on which the holders of Common Stock shall be entitled thereto,
and such notice in accordance with the foregoing clause (b) shall also
specify the date on which the holders of Common Stock shall be entitled
to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may
be.
2I. DEFINITION OF COMMON STOCK. As used in this paragraph 2, the term
"Common Stock" shall mean and include all of Corporation's authorized common
stock, no par value per share, of any class as constituted on the effective date
hereof, and shall also include any capital stock of any class of the Corporation
thereafter authorized which shall not be limited to a fixed sum or percentage of
par value in respect of the rights of the holders thereof to participate in
dividends or in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation.
2J. LISTING. If any shares of Common Stock required to be reserved for
purposes of exercise of this Warrant require listing on any national securities
exchange, before such shares may be issued upon exercise, the Corporation will
at its expense and as expeditiously as possible, use its best efforts to cause
such shares to be duly approved for listing or listed on such national
securities exchange.
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<PAGE> 9
2K. ISSUE TAX. The issuance of certificates for shares of Common Stock
upon exercise of this Warrant shall be made without charge to the holder hereof
for any issuance tax in respect thereof, provided that the Corporation shall not
be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name other than
that of the holder of this Warrant.
2L. CLOSING OF BOOKS. The Corporation will not close its books against
the transfer of any shares of Common Stock issued or issuable upon the exercise
of this Warrant.
3. TRANSFERABILITY AND STANDOFF PROVISIONS. The Warrantholder agrees
not to make any disposition of all or any portion of this Warrant or the Shares
unless and until: (i) there is then in effect a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), covering such
proposed disposition (and such disposition is registered or qualified under all
applicable state securities laws) and such disposition is made in accordance
with such registration statement and all requirements of applicable federal and
state securities laws; or (ii) (A) the Warrantholder shall have notified the
Corporation of the proposed disposition and shall have furnished the Corporation
with a detailed statement of the circumstances surrounding the proposed
disposition, and (B) if requested by the Corporation, the Warrantholder shall
have furnished the Corporation with an opinion of counsel, satisfactory in form
and substance to the Corporation, that such disposition will not require
registration or qualification under the Securities Act or any state securities
laws.
In the discretion of the Corporation, the Corporation may
condition any transfer of all or any portion of this Warrant or the Shares
(other than a disposition satisfying the conditions set forth in clause (i)
above) upon the transferee's delivery to the Corporation of a written agreement,
in form and substance satisfactory to the Corporation, whereby the transferee
(i) makes such representations and warranties to and for the benefit of the
Corporation as are comparable to the representations and warranties of the
Purchaser of this Warrant as set forth in investor letter delivered to the
Corporation by the Purchaser on the Issue Date, as and to the extent applicable
to the proposed disposition, and (ii) agrees to be bound by the transfer
restrictions set forth in this paragraph. Subject to the foregoing, this Warrant
and all rights hereunder are transferable, in whole or in part, to any Person.
The Warrantholder upon transfer of the Warrant must deliver to the Corporation a
duly executed Warrant Assignment in the form of Exhibit II hereto, with funds
sufficient to pay any transfer tax imposed in connection with such assignment
(if any) and upon surrender of this Warrant to the Corporation. The Corporation
shall execute and deliver a new Warrant in the form of this Warrant with
appropriate changes to reflect such Assignment, in the name or names of the
assignee or assignees specified in the fully executed Warrant Assignment or
other instrument of assignment and, if the Warrantholder's entire interest is
not being transferred or assigned, in the name of the Warrantholder, and this
Warrant shall promptly be canceled. Any transfer or exchange of this Warrant
Certificate shall be without charge to the Warrantholder (except as provided
above with respect to income and transfer taxes, if any) and any new Warrant
issued shall be dated the date hereof. The terms "Warrant" and "Warrantholder"
as used herein include all Warrants into which this Warrant (or any successor
Warrant) may be exchanged or issued in connection with the transfer or
assignment of this Warrant any successor Warrant) and the holders of those
Warrants, respectively.
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Each certificate for Shares issued upon exercise of this
Warrant, unless at the time of exercise the Shares are registered under the
Securities Act, shall bear the following legend (in addition to any legend
required by any state securities laws):
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR ANY STATE SECURITIES LAWS. THIS SECURITY AND MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR
OTHERWISE DISTRIBUTED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FILED UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL, SATISFACTORY
IN FORM AND SUBSTANCE TO THE COMPANY, THAT SUCH REGISTRATION
IS NOT REQUIRED. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS UNDER A
CERTAIN STOCK PURCHASE WARRANT ISSUED BY THE COMPANY ON APRIL
15, 1999.
Any certificate for Shares issued at any time in exchange or
substitution for any certificate bearing such legend (unless at that time such
Shares is registered under the Securities Act) shall also bear such legend
unless, in the written opinion of counsel selected by the holder of such
certificate, which counsel and opinion (in form and substance) shall be
reasonably acceptable to the Corporation, the Shares represented thereby need no
longer be subject to restrictions on resale under the Securities Act. The
Corporation is authorized to notify its transfer agent of the status of any
securities bearing the foregoing legend(s) and to take such other action as
shall be reasonable and proper to prevent any violation of the Securities Act or
any state securities laws.
Each Warrantholder hereby agrees that, if requested, it will
not, without the prior written consent of the managing underwriter, during the
period commencing on the date of the final prospectus relating to the
Corporation's initial underwritten public offering of Common Stock (the "Initial
Offering") and ending on the date specified by the Corporation and the managing
underwriter (such period not to exceed 90 days) (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock (whether such shares or any such securities are then owned by the
Warrantholder or are thereafter acquired, excluding however, shares of Common
Stock issued by the Corporation to the underwriters in the Initial Offering), or
(ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (i) or (ii) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise. The foregoing provisions of this Section paragraph shall only be
applicable to the Initial Offering. The underwriters in connection with the
Corporation's Initial
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<PAGE> 11
Offering are intended third party beneficiaries of this paragraph and shall have
the right, power and authority to enforce the provisions hereof as though they
were a party hereto.
4. NOTICE. Any notice or other document required or permitted to be
given or delivered to the Warrantholder(s) and holder(s) of shares issued upon
exercise of this Warrant shall be sent by certified or registered mail, return
receipt requested, to the Warrantholder at the address as it appears in the
records of the Corporation, or at such other address as the holder(s) shall
furnish to the Corporation in writing. Any notice or other document required or
permitted to be given or delivered to the Corporation at its address stated
above or such other address as shall have been furnished to the Warrantholder(s)
and holder(s) of Shares by the Corporation.
5. EXERCISE OF WARRANT. In order to exercise this Warrant, the
Warrantholder shall deliver to the Corporation (i) a written notice specifying
the number of shares of Common Stock to be purchased, of such holder's election
to exercise this Warrant, and (ii) payment in cash or by a certified or
cashier's check or by credit of an amount equal to the aggregate purchase price
of the Shares being purchased (as if the amount had been prepaid) against the
principal balance of any obligation due from the Corporation held by the
Warrantholder(s). The Corporation may require the Warrantholder to furnish a
written statement that the Shares are being purchased for its own account and
not with a view to the distribution thereof. Upon receipt of written notice, the
Corporation shall as promptly as practicable execute or cause to be executed and
deliver to such holder a certificate or certificates representing the aggregate
number of Shares purchased. If this Warrant shall have been exercised only in
part, the Corporation shall also deliver a new Warrant of like tenor evidencing
the rights of such holder to purchase the remaining Shares called for by this
Warrant.
6. LIMITATION OF LIABILITY. No provisions hereof, in the absence of
affirmative action by the Warrantholder to purchase shares hereunder, and no
mere enumeration herein of the rights or privileges of the Warrantholder shall
give rise to any liability of such holder for the Purchase Price or as a
shareholder of the Corporation (whether such liability is asserted by the
Corporation or creditors of the Corporation).
7. CONDITIONAL CANCELLATION OF WARRANT. Notwithstanding any other
provision hereof to the contrary, if Qorus.com, Inc., a Delaware corporation
("Qorus.com"), does not, subject to the terms and conditions of that certain
Convertible Promissory Note (the "Note") of even date herewith in the original
principal amount of $1,000,000.00 payable by the Corporation to the order of
Qorus.com, and provided that no Event of Default (as defined in the Note) has
occurred and is continuing, make, or cause to be made, the second advance of
$500,000.00 pursuant to the Note, then, in such event, this Warrant shall be
automatically cancelled and shall thereafter be of no further force or effect.
If such second advance is not made because an Event of Default has occurred and
is continuing, then this Warrant shall remain in full force and effect in
accordance with its terms.
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IN WITNESS WHEREOF, the Corporation has caused this Warrant to be
executed by its President or a Vice President, thereunto duly authorized, on and
effective for all purposes as of the date of issuance set forth above.
TORNADO DEVELOPMENT, INC.
ATTEST:
By: By:
-------------------------------- --------------------------------
Secretary President
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<PAGE> 1
EXHIBIT 6.7
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is dated as of
April 15, 1999, and is being made and entered into by and among TORNADO
DEVELOPMENT, INC., a Delaware corporation ("TDI"), and QORUS.COM, INC., a
Delaware corporation (the "Holder"), with reference to the following RECITALS:
R E C I T A L S:
A. For the convenience of the parties, certain capitalized words and
phrases used herein are defined or referred to in Section 3.1.
B. To provide the Holder with greater liquidity in the future with
respect to the Registrable Stock, the Holder wishes to have certain registration
rights and TDI wishes to grant such rights to the Holder.
NOW, THEREFORE, in consideration of the recitals and of the respective
covenants, representations, warranties and agreements herein contained, and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
ARTICLE 1
REGISTRATION RIGHTS
1.1 DEMAND REGISTRATION.
1.1.1 REQUEST FOR REGISTRATION. If, at any time after April
15, 2001, TDI shall have a market capitalization of
$100 million or more, Holder may, from that date
through the Expiration Date, make a written request
(the "Demand Notice") for registration under the
Securities Act (a "Demand Registration") of 20% or
more of Holder's Registrable Stock, subject to the
conditions of this Agreement. The Demand Notice will
specify the number of shares of Registrable Stock
proposed to be sold and will also specify the
intended method of disposition thereof. Subject to
Section 1.1.4 hereof, TDI will include in the Demand
Registration all Registrable Stock specified in the
Demand Notice. The Demand Registration shall be on
such appropriate registration form of the Commission
as TDI shall determine.
1.1.2 LIMITATIONS ON DEMAND REGISTRATION. TDI shall not be
obligated to effect more than one Demand Registration
under this Section 1.1.2.
Notwithstanding any provision of this Agreement to the
contrary, TDI shall not be obligated to honor any Demand Notice
requesting a Demand Registration, or otherwise cause a Demand
Registration to become effective, hereunder if the Demand Notice is
delivered to TDI during the period commencing 90 days before the
estimated effective date
<PAGE> 2
of a registration statement pursuant to which TDI proposes to offer
shares of any class of equity securities of TDI in an underwritten
offering and ending 180 days after the closing date of any such
offering. If TDI determines not to proceed with such proposed offering,
TDI shall promptly notify the Holder who made the Demand Notice that
(i) TDI's proposed offering has been cancelled and (ii) TDI will file
the Demand Registration as soon as practicable as requested by the
Holder who delivered the Demand Notice.
1.1.3 EFFECTIVE REGISTRATION AND EXPENSES. Upon receipt of
a Demand Notice, TDI will (i) take appropriate
action, on a reasonable, timely basis, to prepare and
file a registration statement covering the
Registrable Stock requested to be included in the
Demand Registration (subject to Section 1.1.4 below)
and (ii) use its commercially reasonable efforts to
cause the Demand Registration to become effective
under the Securities Act. A registration will not
count as a Demand Registration unless a registration
statement with respect thereto has become effective
(unless the Holders whose Registrable Stock are
included in such Demand Registration withdraw their
shares of Registrable Stock, in which case such
demand shall count as the Demand Registration). TDI
will pay all Registration Expenses in connection with
the Demand Registration.
1.1.4 PRIORITY ON DEMAND REGISTRATION. In the event the
offering of shares pursuant to a Demand Registration
shall be in the form of an underwritten offering by
or through one or more underwriters, and the managing
underwriter or underwriters of such underwritten
offering advise TDI in writing that, in their
opinion, the number of shares of Registrable Stock
and any other securities requested to be included in
such offering is sufficiently large to affect
materially and adversely the success of such offering
(a "Material Adverse Effect"), TDI shall include in
such registration the aggregate number of shares of
Registrable Stock which in the opinion of such
managing underwriter or underwriters can be sold
without any such Material Adverse Effect. In such
event, other securities requested to be included in
such offering by others with piggyback registration
rights shall only be included if (i) all shares of
Registrable Stock requested to be included in the
Demand Registration are included and (ii) the
inclusion of such other securities will not result in
a Material Adverse Effect.
1.2 INCIDENTAL REGISTRATION.
1.2.1 PIGGYBACK RIGHTS OF HOLDER. If at any time or times
from and after the date hereof, TDI intends to file
prior to the Expiration Date a Registration Statement
on Form S-1, S-2 or S-3 (or other appropriate form)
for the registration of Common Stock with the
Commission (other than a (i) Registration Statement
on Form S-4 (or any
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successor form) relating to a corporate
reorganization or other transaction under Rule 145,
(ii) Registration Statement relating to securities
issued pursuant to, or interests in, an employee
benefit plan for the employees of TDI or its
affiliates or (iii) Registration Statement on a form
which does not permit the inclusion of securities
sold in a secondary offering), then TDI shall notify
the Holder at least 30 days prior to each such filing
of TDI's intention to file such a Registration
Statement. Such notice shall state the amount and
type of securities proposed to be registered thereby.
Upon the written request of the Holder (a "Holder
Request") given within 20 days after receipt of any
such notice stating the number of shares of
Registrable Stock to be disposed of by the Holder and
the intended method of disposition, TDI will use
reasonable efforts to cause the aggregate of the
Registrable Stock designated in the Holder Requests
to be included in such registration so as to permit
the disposition (in accordance with the methods
specified in the Holder Request(s)) by the Holder of
the Registrable Stock so registered, subject to the
reductions specified in Sections 1.2.2 and 1.2.4, as
applicable. The Holder shall be entitled, subject to
such reductions, to participate in an unlimited
number of such registrations.
1.2.2 REDUCTIONS OF REGISTRABLE STOCK TO BE INCLUDED. If
the registration proposed by TDI involves an
underwritten offering of the Common Stock, whether or
not for sale for the account of TDI, to be
distributed (on a best efforts or firm commitment
basis) by or through one or more underwriters, and
the managing underwriter of such underwritten
offering shall advise TDI in writing that, in its
opinion, the registration of all or a specified
portion of Registrable Stock concurrently with the
Common Stock will adversely affect the distribution
of such Common Stock by such underwriters, then TDI
may require, by written notice to the Holder, that
the distribution of all or a specified portion of the
Registrable Stock be excluded from such registration
in accordance with Section 1.2.3.
1.2.3 ALLOCATION OF REGISTRATION OPPORTUNITIES. In any
circumstance in which the Registrable Stock and other
shares of TDI Common Stock (including shares of
Common Stock issued or issuable upon conversion of
shares of any currently unissued series of preferred
stock of TDI) with registration rights (the "Other
Shares") requested to be included in a registration
under this Section 1.2 on behalf of the Holder or
other selling stockholders ("Other Stockholders")
cannot be so included as a result of limitations of
the aggregate number of shares of Registrable Stock
and Other Shares that may be so included, the number
of shares of Registrable Stock and Other Shares that
may be so included shall be allocated among the
Holder and Other
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Stockholders requesting inclusion of shares pro rata
on the basis of the number of shares of Registrable
Stock and Other Shares that would be held by the
Holder and Other Stockholders, assuming conversion;
provided, however, that such allocation shall not
operate to reduce the aggregate number of shares of
Registrable Stock and Other Shares to be included in
such registration. If the Holder or any Other
Stockholder does not request inclusion of the maximum
number of shares of Registrable Stock and Other
Shares allocated to such Person pursuant to the
above-described procedure, the remaining portion of
any such Person's allocation shall be reallocated
among those requesting Holder and Other Stockholders
whose allocations did not satisfy their requests pro
rata on the basis of the number of shares of
Registrable Stock and Other Shares which would be
held by the Holder and Other Stockholders, assuming
conversion, and this procedure shall be repeated
until all of the shares of Registrable Stock and
Other Shares which may be included in the
registration on behalf of the Holder and Other
Stockholders have been so allocated.
1.2.4 WITHDRAWALS. TDI may in its discretion withdraw any
Registration Statement filed pursuant to this Section
1.2 subsequent to its filing and prior to its
effective date without liability to the Holder, other
than to pay expenses pursuant to Section 1.4.
1.3 INDEMNITY.
TDI will, and hereby does, indemnify and hold harmless, to the
extent permitted by law, each Holder, its partners, representatives,
shareholders, officers and directors, if any, and each Person, if any,
who controls the Holder within the meaning of Section 15 of the
Securities Act, against all losses, claims, damages, liabilities (or
proceedings in respect thereof) and expenses (under the Securities Act
or common law or otherwise), joint or several, resulting from any
untrue or misleading statement or alleged untrue or misleading
statement of a material fact contained in any Registration Statement
(as declared effective) or prospectus filed under Rule 424(b) under the
Securities Act (and as amended or supplemented if TDI shall have
furnished any amendments or supplements thereto) or any preliminary
prospectus or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as:
(i) such losses, claims, damages, liabilities (or
proceedings in respect thereof) or expenses are caused by any
untrue statement or alleged untrue statement made in reliance
on or in conformity with any information furnished in writing
to TDI by the Holder expressly for use therein; or
(ii) in the case of any registration that is not an
underwritten offering, such losses, claims, damages,
liabilities (or proceedings in respect thereof) or expenses
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result from the Holder selling Registrable Stock to a Person
asserting the existence of an untrue or misleading statement
or alleged untrue statement or omission or alleged omission in
a preliminary prospectus and to whom there was not given or
sent, at or prior to the written confirmation of the sale of
the Registrable Stock, a copy of the final prospectus or the
final prospectus as then amended or supplemented but only if
such statement or omission was corrected in such final
prospectus or amended or supplemented final prospectus prior
to such written confirmation and the Holder was given notice,
prior to such written confirmation, of the availability of, or
that TDI was preparing, such final prospectus or amended or
supplemented final prospectus.
If the offering pursuant to any Registration Statement
provided for under this Agreement is made through underwriters, no
action or failure to act on the part of such underwriters (whether or
not such underwriter is an Affiliate of any Holder) shall affect TDI's
obligations to indemnify the Holder or any other Person pursuant to the
preceding sentence. It is agreed that the indemnity agreement contained
in this Section 1.3(a) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability, or action if such settlement
is effected without the consent of TDI (which consent has not been
unreasonably withheld).
In connection with any Registration Statement in which the
Holder is participating, the Holder will indemnify and hold harmless,
to the extent permitted by law, TDI, its officers, directors, partners,
legal counsel, and accountants, and each underwriter, if any, of TDI
Securities covered by such Registration Statement, and each Person, if
any, who controls TDI or any such underwriter within the meaning of
Section 15 of the Securities Act, and each of the Other Stockholders,
and each of their respective officers, directors, and partners, and
each Person controlling any of the Other Stockholders against any
losses, claims, damages, liabilities (or proceedings in respect
thereof) and expenses (under the Securities Act or common law or
otherwise) resulting from any untrue statement or alleged untrue
statement of a material fact or any omission or alleged omission of a
material fact required to be stated in the Registration Statement (as
declared effective) or prospectus filed under Rule 424(b) under the
Securities Act or preliminary prospectus or any amendment thereof or
supplement thereto, or necessary to make the statements therein not
misleading, but only to the extent that:
(i) such untrue statement is made in reliance on or
in conformity with any information furnished in writing by the
Holder expressly for use therein; or
(ii) in the case of any registration that is not an
underwritten offering, such losses, claims, damages,
liabilities (or proceedings in respect thereof) or expenses
resulting from the Holder selling Registrable Stock to a
Person asserting the existence of an untrue statement or
alleged untrue statement or omission or alleged omission in a
preliminary prospectus and to whom there was not given or
sent, at or prior to the written confirmation of the sale of
the Registrable Stock, a copy of the final prospectus or of
the final prospectus as then amended or supplemented but only
if such statement or omission was corrected in such final
prospectus or amended or
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supplemented final prospectus prior to such written
confirmation and the Holder was given notice, prior to such
written confirmation, of the availability of, or that TDI was
preparing, such final prospectus or amended or supplemented
final prospectus;
provided, however, that the obligations of the Holder hereunder shall
not apply to amounts paid in settlement of any such claims, losses,
damages, or liabilities (or actions in respect thereof) if such
settlement is effected without the consent of the Holder (which consent
has not been unreasonably withheld); and, provided further, that the
Holder's obligations under this Section 1.3.(b) shall be limited to an
amount equal to the net proceeds to the Holder of the Registrable Stock
sold pursuant to such Registration Statement.
Any Person entitled to indemnification under the provisions of
Section 1.3.(a) or (b) shall (i) give prompt notice to the indemnifying
party of any claim with respect to which it seeks indemnification, and
(ii) unless in the opinion of counsel reasonably satisfactory to the
indemnifying party a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, permit such
indemnifying party to assume the defense of such claim, with counsel
reasonably satisfactory to the indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the
indemnifying party); and if such defense is so assumed, such
indemnifying party shall not enter into any settlement without the
consent of the indemnified party if such settlement attributes
liability to the indemnified party and such indemnifying party shall
not be subject to any liability for any settlement made without its
consent (which shall not be unreasonably withheld). In the event an
indemnifying party shall not be entitled, or elects not, to assume the
defense of a claim, such indemnifying party shall not be obligated to
pay the fees and expenses of more than one counsel or firm of counsel
for all parties indemnified by such indemnifying party in respect of
such claim. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of a participating
Holder, its officers, directors or any Person, if any, who controls the
Holder as aforesaid, and shall survive the transfer of such securities
by the Holder.
If for any reason the foregoing indemnity is unavailable, then
the indemnifying party shall contribute to the amount paid or payable
by the indemnified party as a result of such losses, claims, damages,
liabilities or expenses (i) in such proportion as is appropriate to
reflect the relative benefits received by the indemnifying party on the
one hand and the indemnified party on the other or (ii) if the
allocation provided by clause (i) above is not permitted by applicable
law or provides a lesser sum to the indemnified party than the amount
hereinafter calculated, in such proportion as is appropriate to reflect
not only the relative benefits received by the indemnifying party on
the one hand and the indemnified party on the other but also the
relative fault of the indemnifying party and the indemnified party as
well as any other relevant equitable considerations. Notwithstanding
the foregoing, no Holder shall be required to contribute any amount in
excess of the amount the Holder would have been required to pay to an
indemnified party if the indemnity under Section 1.3.(a) or (b), as
applicable, was available. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who
was not guilty of such fraudulent misrepresentation. The relative fault
of the
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indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access
to information, and opportunity to correct or prevent such statement or
omission.
An indemnifying party shall make payments of all amounts
required to be made pursuant to the foregoing provisions of this
Section 1.3 to or for the account of the indemnified party from time to
time promptly upon receipt of bills or invoices relating thereto or
when otherwise due and payable.
Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with the underwritten
public offering are in conflict with the foregoing provisions, the
provisions in the underwriting agreement shall control.
1.4 REGISTRATION PROCEDURES.
Whenever the Holder has properly requested that any
Registrable Stock be registered pursuant to Sections 1.1 or 1.2, TDI
will use reasonable efforts to effect the registration in furtherance
of the sale of the Registrable Stock in accordance with the intended
method of disposition thereof, and in connection with any such request
TDI will:
(i) 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
such period (not to exceed 90 days) as will terminate when all
Registrable Stock covered by such Registration Statement have
been sold and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by
such Registration Statement during such period in accordance
with the intended methods of disposition by the sellers
thereof set forth in such Registration Statement;
(ii) furnish to each seller of Registrable Stock such
number of copies of such Registration Statement, each
amendment and supplement thereto (in each case including all
exhibits thereto), the prospectus included in such
Registration Statement (including each preliminary
prospectus), each amendment and supplement thereto and such
other documents as such seller may reasonably request in order
to facilitate the disposition of the Registrable Stock owned
by such seller;
(iii) use reasonable efforts to register or qualify
the Registrable Stock under such other applicable securities
or blue sky laws of such jurisdictions as any seller
reasonably requests and do any and all other acts and things
which may be reasonably necessary or advisable to enable such
seller to consummate the disposition in such jurisdictions of
the Registrable Stock owned by such seller; provided, however,
that TDI will not be required to (A) qualify generally to do
business or
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subject itself to taxation in any jurisdiction where it would
not otherwise be required to qualify or be subject but for
this subparagraph (iii), or (B) consent to general service of
process in any such jurisdiction;
(iv) use reasonable efforts to cause the Registrable
Stock covered by such Registration Statement to be registered
with or approved by such other Governmental Authorities as may
be reasonably necessary by virtue of the business and
operations of TDI to enable the seller or sellers thereof to
consummate the disposition of the Registrable Stock;
(v)(A) notify each seller of the Registrable Stock,
at any time when a prospectus relating thereto is required to
be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in such
Registration Statement contains an untrue statement of a
material fact or omits to state any material fact required to
be stated therein or necessary to make the statements therein
not misleading, and (B) prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the
purchasers of the Registrable Stock, such prospectus will not
contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading;
(vi)(B) use reasonable efforts to cause all
Registrable Stock to be listed on each securities exchange or
stock market on which the Common Stock is then listed or
quoted, and (B) unless the same already exists, provide a
transfer agent, registrar and CUSIP number for all Registrable
Stock not later than the effective date of the Registration
Statement;
(vii) make available for inspection at the offices of
TDI during regular business hours by any seller of Registrable
Stock, any underwriter participating in any disposition
pursuant to such Registration Statement and any attorney,
accountant or other agent retained by any such seller or
underwriter, such financial and other records, pertinent
corporate documents and properties of TDI as shall be
reasonably requested by them and be necessary to enable them
to exercise its due diligence responsibility; and
(viii) use its reasonable efforts to otherwise comply
with all applicable rules and regulations of the Commission.
In connection with any registration effected pursuant to
Sections 1.1 or 1.2, that the Holder has requested that its securities
be registered pursuant to such Registration Statement shall provide to
TDI such information as may be reasonably requested by TDI to be
required for inclusion in such Registration Statement pursuant to the
Securities Act and the rules and regulations thereunder.
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Holder agrees by acquisition of the Registrable Stock and the
registration rights thereunder that, upon receipt of any notice from
TDI of the happening of any event of the kind described in Section
1.4(a)(v), the Holder will forthwith discontinue disposition of
Registrable Stock pursuant to the Registration Statement covering the
Registrable Stock until the Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by such Section
1.4(a)(v), and, if so directed by TDI, the Holder will deliver to TDI
(at TDI's expense) all copies, other than permanent file copies then in
the Holder's possession, of the prospectus covering the Registrable
Stock current at the time of receipt of such notice. In the event TDI
shall give any such notice, the period mentioned in Section 1.4(a)(i)
shall be extended by the number of days during the period from and
including the date of the giving of such notice pursuant to Section
1.4(a)(v) to and including the date when each seller of Registrable
Stock covered by such Registration Statement shall have received the
copies of the supplemented or amended prospectus contemplated by such
Section 1.4(a)(v).
1.5 EXPENSES. All Registration Expenses incurred in effecting any
registration, qualifications or compliance pursuant to this
Agreement, shall be borne by TDI. All Selling Expenses
relating to Registrable Stock so registered shall be borne by
the Holder, according to the quantity of Registrable Stock
included in such registration along with any other expenses in
connection with the registration required to be borne by the
Holder of the Registrable Stock.
1.6 LIMITATION ON REGISTRATION. Notwithstanding the foregoing,
under no circumstances will TDI be obligated to cause any
registration effected pursuant to this Agreement to remain
effective after the Expiration Date or to include any
Registrable Stock in a Registration Statement which becomes
effective after the Expiration Date.
1.7 DELAY OF REGISTRATION. No Holder shall have any right to take
any action to restrain, enjoin, or otherwise delay any
registration as the result of any controversy that might arise
with respect to the interpretation or implementation of this
Article 1.
ARTICLE 2
UNDERWRITTEN OFFERINGS
2.1 UNDERWRITING ARRANGEMENTS. If TDI or holders of securities
initially requesting or demanding such registration have
determined to enter into an underwriting agreement in
connection therewith, all shares constituting Registrable
Stock to be included in such registration shall be subject to
such underwriting agreement and no Person may participate in
such registration unless such Person agrees to sell such
Person's securities on the basis provided in the underwriting
arrangements approved by such Persons so determining to enter
therein and completes and executes all questionnaires,
indemnities, underwriting agreements and other reasonable
documents which must be executed under the terms of such
underwriting arrangements.
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If requested by the underwriters for any underwritten offering of
Registrable Stock, TDI will enter into an underwriting agreement that shall
contain such representations and warranties by TDI and such other terms and
provisions as are customarily contained in underwriting agreements with respect
to secondary distributions.
2.2 SELECTION OF UNDERWRITERS. If TDI at any time proposes to register
any TDI Securities for sale for its own account and such securities are to be
distributed by or through one or more underwriters, the selection of the
underwriter(s), including, without limitation, the managing underwriter(s),
shall be made by TDI.
2.3 HOLDBACK AGREEMENTS. Notwithstanding any other provision of the
Agreement, if any registration pursuant to this Agreement shall be in connection
with an underwritten public offering, each Holder agrees, if so required by the
managing underwriter, not to effect any public sale or distribution of
Registrable Stock (other than as part of such underwritten public offering)
within 30 days prior to the effective date of such Registration Statement or 90
days after the effective date of such Registration Statement.
ARTICLE 3
DEFINITIONS AND CONSTRUCTION
3.1 DEFINITION OF CERTAIN TERMS.
Except as otherwise expressly provided or unless the context otherwise
requires, the terms defined in this Section 3.1, whenever used in this
Agreement, shall have the respective meanings assigned to them in this Section
for all purposes of this Agreement, and include the plural as well as the
singular.
As used herein, the following terms have the following meanings:
AGREEMENT: this instrument as originally executed, or as it may be from
time to time supplemented or amended by one or more supplements or
amendments hereto entered pursuant to the applicable provisions hereof.
COMMISSION: the United States Securities and Exchange Commission and
any successor federal agency having similar powers.
COMMON STOCK: the voting Class A Common Stock, no par value per share,
of TDI.
DEMAND NOTICE: as defined in Section 1.1.1.
DEMAND REGISTRATION: as defined in Section 1.1.1.
EXPIRATION DATE: March 31, 2007.
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GOVERNMENTAL AUTHORITY: the United States of America, any state or
other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government within any such jurisdiction.
HOLDER: as defined in the first paragraph of this Agreement, and any
Person who (i) subsequently becomes the owner of record of any
Registrable Stock and (ii) enters into an amendment or supplement to
this Agreement pursuant to which such subsequent holder of Registrable
Stock agrees to be bound by each and every provision of this Agreement
except for the provisions of Section 1.1.
HOLDER CONVERSION SHARES: all shares of Common Stock issued to Holder
upon conversion of the Preferred Stock received by Holder upon the
automatic conversion of the Note.
HOLDER REQUEST: as defined in Section 1.2.1.
HOLDER WARRANT SHARES: all shares of Common Stock received by Holder
from TDI upon exercise of the Warrant.
MATERIAL ADVERSE EFFECT: as defined in Section 1.1.4.
NOTE: the Promissory Note of even date herewith payable by TDI to
Holder in the original principal amount of $1,000,000.00
OTHER SHARES: as defined in Section 1.2.3.
OTHER STOCKHOLDERS: as defined in Section 1.2.3.
PERSON: any individual, corporation (including a business trust) joint
stock company, partnership, joint venture, trust, estate, limited
liability company, unincorporated association, unincorporated
organization, Governmental Authority or any other entity.
PREFERRED STOCK: the Series B Preferred Stock, no par value per share,
of TDI, having the powers, designations, preferences, and relative
participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, as set forth in
the Certificate of Determination for the Preferred Stock attached to
the Note as Annex A.
REGISTER, REGISTERED AND REGISTRATION: refer to a registration effected
by filing a Registration Statement in compliance with the Securities
Act, and the declaration or ordering by the Commission of the
effectiveness of such Registration Statement.
REGISTRABLE STOCK: collectively, the Holder Conversion Shares and the
Holder Warrant Shares, and all shares of Common Stock issued by TDI in
respect of such Shares.
REGISTRATION EXPENSES: all expenses incurred in effecting any
registration pursuant to this Agreement, including, without limitation,
all registration, qualification, and filing fees, printing
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expenses, escrow fees, fees and disbursements of counsel for TDI, blue
sky fees and expenses, and expenses of any regular or special audits
incident to or required by any such registration, but shall not include
Selling Expenses, fees and disbursements of counsel for the Holder.
REGISTRATION STATEMENT: a registration statement prepared on an
appropriate form promulgated under the Securities Act.
RULE 144: Rule 144 (or any successor provision) under the Securities
Act.
RULE 145: Rule 145 (or any successor provision) under the Securities
Act.
SECURITIES ACT: the Securities Act of 1933.
SELLING EXPENSES: all underwriting discounts, selling commissions and
stock transfer taxes applicable to the sale of Registrable Stock and
fees and disbursements of counsel for any Holder (other than the fees
and disbursements of counsel included in Registration Expenses).
TDI: as defined in the first paragraph of this Agreement.
TDI SECURITIES: securities issued by TDI.
WARRANT: the Warrant to purchase 50,000 shares of Common Stock at an
initial exercise price of $3.00 per share granted by TDI to the Holder
on the date hereof.
3.2 RULES OF CONSTRUCTION
(i) "This Agreement" means this instrument as originally
executed or as it may be from time to time supplemented or amended by
one or more supplements or amendments hereto entered pursuant to the
applicable provisions hereof;
(ii) "includes" and "including" are not limiting, and, in each
case, shall be construed as if followed by the words "without
limitation," "but not limited to" or words of similar import;
(iii) "may not" is prohibitive, and not permissive;
(iv) "shall" is mandatory, and not permissive;
(v) "or" is not exclusive [i.e., if a party "may do (a), (b)
or (c)," then the party may do all of, any one of, or any combination
of, (a), (b) or (c)] unless the context expressly provides otherwise;
(vi) all references in this instrument to designated Articles,
Sections, Exhibits, and Schedules are to the designated Articles,
Sections, Exhibits, and Schedules of this instrument as originally
executed;
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(vii) all references herein to constitutions, treaties,
statutes, laws, rules, regulations, ordinances, codes or orders include
any successor thereto or replacement thereof, include any amendment,
modification or supplements thereof or thereto from time to time, and,
include all rules and regulations promulgated thereunder or pursuant
thereto;
(viii) the words "herein," "hereof," "hereto" and "hereunder"
and other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision; and
(ix) all terms used herein which are defined in the Securities
Act, the Exchange Act or the rules and regulations promulgated
thereunder have the meanings assigned to them therein unless otherwise
defined herein.
ARTICLE 4
GENERAL PROVISIONS
4.1 SEVERABILITY. If any provision of this Agreement, including
any phrase, sentence, clause, Section or subsection is
inoperative or unenforceable for any reason, such
circumstances shall not have the effect of rendering the
provision in question inoperative or unenforceable in any
other case or circumstance, or of rendering any other
provision or provisions herein contained invalid, inoperative,
or unenforceable to any extent whatsoever.
4.2 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been
duly given if (a) delivered personally, (b) mailed by
first-class, registered or certified mail, return receipt
requested, postage prepaid, or (c) sent by next-day or
overnight mail or delivery or (d) sent by telecopy or
telegram.
if to TDI, to
Tornado Development, Inc.
1201 Morningside Drive, Suite 100
Manhattan Beach, CA 90266
Attention: Kevin Torf, President
if to the Holder, to
Qorus.com, Inc.
190 South LaSalle Street, Suite 1710
Chicago, IL 60603
Attention: Patrick J. Haynes, III, Chairman
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or, in each case, at such other address as may be specified in writing to the
other parties hereto.
All such notices, requests, demands, waivers and other communications
shall be deemed to have been received (w) if by personal delivery on the day
after such delivery, (x) if by certified or registered mail, on the seventh
business day after the mailing thereof, (y) if by next-day or overnight mail or
delivery, on the day delivered, (z) if by telecopy or telegram, on the next day
following the day on which such telecopy or telegram was sent, provided that a
copy is also sent by certified or registered mail.
4.3 HEADINGS. The headings contained in this Agreement
are for purposes of convenience only and shall not
affect the meaning or interpretation of this
Agreement.
4.4 ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement and supersede all prior agreements
and understandings, both written and oral, between
the parties with respect to the subject matter
hereof.
4.5 COUNTERPARTS. This Agreement may be executed in
several counterparts, each of which shall be deemed
an original and all of which shall together
constitute one and the same instrument.
4.6 GOVERNING LAW. This Agreement shall be governed in
all respects, including as to validity,
interpretation and effect, by the internal laws of
the State of Texas, without giving effect to the
conflict of laws rules thereof.
4.7 BINDING EFFECT. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and
their respective heirs, successors and permitted
assigns.
4.8 ASSIGNMENT. This Agreement shall not be assignable or
otherwise transferable by any party hereto without
the prior written consent of the other parties
hereto.
4.9 NO THIRD PARTY BENEFICIARIES. Nothing in this
Agreement shall confer any rights upon any person or
entity other than the parties hereto and their
respective heirs, successors and permitted assigns.
4.10 AMENDMENT; WAIVERS, ETC. No amendment, modification
or discharge of this Agreement, and no waiver
hereunder, shall be valid or binding unless set forth
in writing and duly executed by the party against
whom enforcement of the amendment, modification,
discharge or waiver is sought. Any such waiver shall
constitute a waiver only with respect to the specific
matter described in such writing and shall in no way
impair the rights of the party granting such waiver
in any other respect or at any other time. Neither
the waiver by any of the parties hereto of a breach
of or a default under any of the provisions of
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<PAGE> 15
this Agreement, nor the failure by any of the
parties, on one or more occasions, to enforce any of
the provisions of this Agreement or to exercise any
right or privilege hereunder, shall be construed as a
waiver of any other breach or default of a similar
nature, or as a waiver of any of such provisions,
rights or privileges hereunder. The rights and
remedies herein provided are cumulative and are not
exclusive of any rights or remedies that any party
may otherwise have at law or in equity. The rights
and remedies of any party based upon, arising out of
or otherwise in respect of any inaccuracy or breach
of any representation, warranty, covenant or
agreement or failure to fulfill any condition shall
in no way be limited by the fact that the act,
omission, occurrence or other state of facts upon
which any claim of any such inaccuracy or breach is
based may also be the subject matter of any other
representation, warranty, covenant or agreement as to
which there is no inaccuracy or breach.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
15
<PAGE> 16
REGISTRATION RIGHTS AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
TORNADO DEVELOPMENT, INC.
By:
----------------------------------------
Kevin Torf, President
HOLDER
QORUS.COM, INC.
By:
----------------------------------------
Jack Woodruff, Chief Financial Officer
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<PAGE> 1
EXHIBIT 6.8
AUTHORIZED RESELLER AGREEMENT
This Agreement (the "Agreement") is made and entered into this 10th day
of June, 1999 ("Effective Date"), by and between Qorus.com, a Delaware
corporation with its principal place of business at 9800 Sepulveda
Boulevard, Los Angeles, California, 90045, ("QORUS") and Alpha Telecom
(UK) Ltd., a Limited Company, incorporated in the United Kingdom with
offices at Molasses House, Plantation Wharf London SW113TN ("ALPHA").
QORUS and ALPHA may be referred to hereafter individually as a "Party"
or collectively as the "Parties."
RECITALS
A. QORUS is in the business of providing certain electronic
messaging services;
B. ALPHA desires to market and resell those services specified in
the attached Exhibit A (the "Services") to ALPHA's Customers
(as defined below); and
C. QORUS is willing to provide Services to ALPHA's Customers in
accordance with the terms of this Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, the Parties hereby agree as follows:
1. Definitions.
1.1. "Affiliate" of a Party shall mean a corporation, partnership,
joint venture or other entity directly or indirectly, through
one or more intermediaries, controlling, controlled by or
under common control with such Party.
1.2. "ALPHA Authorized Reseller" shall mean any current or future
entities that are agreed to in writing by both QORUS and
ALPHA; such agreement shall not be unreasonably withheld by
QORUS.
1.3. "ALPHA Customers" shall mean any person, entity, or ALPHA
Authorized Reseller that is a customer of ALPHA, or a customer
of an ALPHA Authorized Reseller.
1.4. "Documentation" shall mean any user guides, manuals, operator
guides, installation guides, technical reference guides and
other similar reference materials generally made available by
QORUS to its customers to facilitate use of the Services,
which QORUS shall offer to ALPHA.
1.5. "Services" shall be defined as used in Exhibit A.
1.6. "Operating Plan" shall be defined in Exhibit B.
<PAGE> 2
2. Agreement to Provide Services/Grant of Rights
2.1. QORUS shall provide the Services to ALPHA Customers in
accordance with the pricing set forth in the attached Exhibit
A and the Operating Plan.
2.2. QORUS hereby grants to ALPHA a non-exclusive, non-transferable
right to market, promote and resell the Services to current
and prospective ALPHA Customers in the United Kingdom,
Germany, and Switzerland (in addition to other European Union
countries which shall be added upon presentation to QORUS of
satisfactory marketing plans for each such additional country)
(the "Territory"); provided, however, that ALPHA may market,
promote and resell the Services through ALPHA Authorized
Resellers, provided that ALPHA shall be responsible for such
third parties' observance of the terms and conditions of this
Agreement.
2.3. QORUS hereby grants to ALPHA and ALPHA accepts the right to
re-brand the Services and Documentation for use in accordance
with the rights granted herein, the Documentation, and
branding guidelines as mutually agreed upon by the Parties;
provided, however, that (a): any such re-branding shall comply
with QORUS' published guidelines, and shall carry a notice
identifying the Service as "Powered by QORUS" or such other
name and/or copyright notices as may be designated by QORUS,
and in a style, color and reasonable size S, and (b): any
branding with trademarks other than ALPHA's trademarks is
subject to compliance with QORUS' published guidelines.
2.4. QORUS hereby grants to ALPHA the right to utilize QORUS's
trade name and any trademarks and service marks (the
"Trademarks") in connection with ALPHA's advertising and
promotional materials used for the sale of the Services
provided that such advertising and promotional materials
comply with QORUS' published guidelines. ALPHA has paid no
consideration for the use of the Trademarks, and nothing
contained in this Agreement shall give ALPHA any right, title
or interest in the Trademarks. ALPHA agrees that it will not
at any time during or after this Agreement assert or claim any
interest in or do anything which may adversely affect the
validity or enforceability of any Trademark. In order to
comply with QORUS's quality control standards, ALPHA shall:
(i) use the Trademarks in compliance with all relevant laws
and regulations; (ii) accord QORUS the right to inspect during
normal business hours, with prior advance notice, ALPHA's
facilities used in connection with efforts to sell the
Services in order to confirm that ALPHA's use of such
Trademarks is in compliance with this Section; and (iii) not
modify any of the Trademarks in any way and not use any of the
Trademarks on or in connection with any goods or services
other than the Services.
2.5. The grants made herein by QORUS to ALPHA are non-exclusive.
QORUS reserves the right in its discretion to use other
authorized resellers of the Services covered by this Agreement
within or outside of the Territory without obligation or
liability of any kind to ALPHA. QORUS also reserves the right
to sell the Services or similar products and services to any
person or entity, using its own personnel or third parties,
without obligation or liability or any kind to ALPHA;
provided, however, QORUS shall not, during the term of this
agreement or after termination thereof, knowingly contact
current ALPHA Customers for any purpose (other than through
general advertising programs) except in the performance of its
obligations hereunder. It is expressly understood that the
client list will at all times remain the exclusive property of
Alpha.
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<PAGE> 3
2.6. ALPHA acknowledges that nothing in this Agreement grants ALPHA
any ownership interest in the Services, other than full
ownership of the customer list, including clients' email
addresses (based on ALPHA's registered domain name for the
Services), and Personal numbers for fax and voicemail access;
and that upon termination of this Agreement, ALPHA shall make
no claims of such ownership or of any further interest in the
Services other than those specified herein. If Alpha
terminates this agreement for any reason during the first six
months, except by reason of a breach by QORUS, then Alpha will
continue (for a period of six (6) months from date of that
Termination) to use the services provided by Qorus to
customers who had signed up to those services prior to the
date of Termination, unless the customer chooses to terminate
the services themselves.
2.7. No rights or licenses with respect to the Services or the
Trademarks (as defined below) are granted or deemed granted
hereunder or in connection herewith, other than those rights
expressly granted in this Agreement.
3. Additional Obligations of QORUS.
3.1. QORUS shall, at its own expense, provide and install within
ALPHA's premises a proprietary suite of equipment necessary to
provide local remote access communications (the "Equipment")
as detailed in Exhibit C. Such equipment will be the sole
property of QORUS and QORUS will be solely responsible for its
upkeep and maintenance.
3.2. QORUS shall provide ALPHA with a copy of the Documentation
within a timely period after execution of this Agreement, and
shall thereafter provide ALPHA on a timely basis any updates
or revisions thereto, for re-branding, reproduction and
distribution by ALPHA to ALPHA Customers in accordance with
this Agreement and in connection with the marketing and sale
of the Services. ALPHA shall maintain all copyright notices of
QORUS on the documentation.
3.3. QORUS shall provide ALPHA and ALPHA Authorized Resellers with
training as set forth in the Operating Plan.
3.4. QORUS shall provide the maintenance and support services for
ALPHA and ALPHA Customers, as set forth in the Operating Plan,
at no additional cost to ALPHA.
3.5. QORUS shall notify ALPHA at least 60 days in advance of new
products and services not described on Exhibit A and material
enhancements which substantially alter the functionality of
the Services and are available from QORUS after the Effective
Date (collectively, "New Services"). If QORUS and ALPHA agree
that any such New Services will be offered to ALPHA Customers,
such New Services will be added to Exhibit A.
4. Obligations of ALPHA.
4.1. ALPHA shall use diligent commercial efforts to market and sell
the Services to ALPHA Customers. ALPHA shall develop at its
own expense, all marketing, sales, and promotional materials
used in connection with ALPHA's marketing and sale of the
Services.
4.2. ALPHA shall accurately represent the Services to ALPHA
Customers or prospective ALPHA Customers and prospective ALPHA
Authorized Resellers and shall make no claims,
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<PAGE> 4
representations or warranties on behalf of QORUS in connection
with the Services other than as set forth in QORUS's
Documentation, the forms or orders provided by QORUS, or as
otherwise expressly authorized by QORUS in writing.
4.3. ALPHA shall provide adequate, secure space with appropriate
cabling and electrical wiring to house the Equipment as
outlined in Exhibit C. ALPHA shall grant, subject to normal
landlord regulations, to QORUS unrestricted and immediate
access to the Equipment during normal business hours. ALPHA
shall make available a qualified telecom technician to be
trained as provided for in the Operating Plan and to be
available for on-site repair of Equipment at QORUS' request.
ALPHA also agrees to provide to QORUS access to the equipment
during times other than normal business hours upon 6 hours'
notice during the term of this agreement and immediately after
any termination in order to permit QORUS to remove the
Equipment.
4.4. ALPHA shall provide the maintenance and support services for
ALPHA and ALPHA Customers, as set forth in the Operating Plan.
5. Customer Registration and Payment.
5.1. ALPHA Customers shall register for the Services as described
in Exhibit B.
5.2. QORUS's description of Services and Pricing to ALPHA is set
forth in Exhibit A, provided however that pricing to ALPHA
Customers shall be determined by ALPHA in its sole discretion.
QORUS may, decrease, where market conditions dictate, or
increase as market conditions allow, the pricing of Services
to ALPHA at any time upon written mutual agreement.
5.3. QORUS shall be responsible for providing a single,
standardized monthly electronic billing feed to ALPHA, on or
about the 5th of every month, which includes all service usage
and billing information, by ALPHA Customer, for the previous
month. Payment terms will be Net 30 days. Such payments will
be made by ALPHA to QORUS regardless of ALPHA's ability to
collect its charges from ALPHA Customers.
5.4. ALPHA, or its ALPHA Authorized Reseller, shall be responsible
for and pay all taxes applicable to amounts billed to ALPHA
Customers under this Agreement (excluding taxes based on
QORUS's income, net worth or capital).
5.5. All amounts due and owing to QORUS hereunder but not paid by
ALPHA on the due date thereof shall bear interest at the rate
of the lesser of: (i) one and one-half per cent (1 1/2%) per
month; and (ii) the maximum lawful interest rate permitted
under applicable law. Such interest shall accrue on the
balance of unpaid amounts from time to time outstanding from
the date on which portions of such amounts become due and
owing until payment thereof in full.
6. Term and Termination.
6.1. The initial term of this Agreement shall commence as of the
Effective Date and will continue for a period of three (3)
years (the "Initial Term"). At the conclusion of the Initial
Term and any subsequent term, this Agreement shall
automatically be extended for an additional one (1) year term
unless either Party provides the other Party with written
notice of its intention not to renew this Agreement at least
six (6) months prior to the expiration of the then current
term. The
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<PAGE> 5
Agreement shall automatically be renewed for an additional one
(1) year term on the same basis as above, on an ongoing basis
until one party elects not to renew it.
6.2. This Agreement may also be terminated as follows:
a. At any time upon the mutual written agreement of the
Parties; or
b. By either Party immediately if the other Party fails
to cure any material breach within thirty days
following receipt of written notice thereof; or
c. By either Party immediately upon giving written
notice to the other Party if the other Party has a
receiver, administrator, administrative receiver or
liquidator appointed; if the other Party passes a
resolution liquidating the Party, if any court of
competent jurisdiction issues an order to that
effect, or if the other Party enters into any
arrangement with its creditors, becomes insolvent or
ceases to carry on business;
6.3. Upon termination or expiration of this Agreement, the Parties
agree to cooperate in good faith to effect an orderly wind-up
of the relationship created under this Agreement. QORUS shall
complete all orders, which it has accepted and ALPHA shall
remain obligated to pay all amounts owing to QORUS hereunder.
Termination of this Agreement shall not limit either party
from pursuing any other remedies otherwise available to it.
6.4. In the event of a termination of this Agreement pursuant to
its terms or upon expiration of this Agreement, QORUS shall
not have any obligation to ALPHA, or to any employee of ALPHA
or ALPHA Authorized Reseller, for compensation or for damages
of any kind, whether on account of the loss by ALPHA or such
employee or ALPHA Authorized Reseller of present or
prospective sales, investments, compensation or goodwill.
ALPHA hereby indemnifies and holds QORUS harmless from and
against any and all claims, costs, damages and liabilities
whatsoever asserted by any employee, agent or representative
of ALPHA or a ALPHA Authorized Reseller under any applicable
termination, labor, social security or other similar laws or
regulations.
6.5 It is expressly agreed and understood that in the event of
Termination of the agreement, QORUS may not in any way contact
Alpha Customers, except in the course of general advertising
programs unless given written confirmation, signed by two
Alpha directors, that they may do so.
7. Confidentiality.
7.1. The Parties agree that the following provisions shall govern
the anticipated mutual disclosure and use of confidential and
proprietary information under this Agreement.
a. as used in this Agreement, the term "Proprietary
Information" shall mean information that is
transmitted or otherwise provided by or on behalf of
either Party to the other Party related to this
Agreement and the services to be performed hereunder,
and that may be reasonably understood from legends,
the circumstances of disclosure or the nature or the
information itself, to be proprietary and/or
confidential to the disclosing party. Proprietary
Information may be disclosed in written or other
tangible form
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<PAGE> 6
(including on magnetic media) or by oral, visual or
other means. Proprietary Information shall include,
without limitation, a Party's business plan, customer
names and information relating to the customers,
information regarding other material third party
relationships which a Party may obtain in the course
of performance under this Agreement, and scientific
or technical data, design or process. Notwithstanding
the foregoing, Proprietary Information shall not
include any information that:
(i) was publicly known at the time of
discloser's communication thereof to
recipient;
(ii) becomes publicly known through no fault of
recipient subsequent to the time of
discloser's communication thereof to
recipient;
(iii) was in recipient's possession free of any
obligation of confidence at the time of
discloser's communication thereof to
recipient;
(iv) is developed by recipient independently of
and without reference to any of discloser's
Proprietary Information or other information
that discloser disclosed in confidence to
any third party;
(v) is rightfully obtained by recipient from
third parties which made such disclosure
without restriction; or
(vi) is identified in writing by discloser as no
longer proprietary or confidential.
7.2. In the event recipient is required by law, regulation or court
order to disclose any of discloser's Proprietary Information,
recipient will, where reasonably possible, promptly notify
discloser in writing prior to making any such disclosure in
order to facilitate discloser seeking a protective order or
other appropriate remedy from the proper authority. Recipient
agrees to cooperate with discloser in seeking such order or
other remedy. Recipient further agrees that if discloser is
not successful in precluding the requesting legal body from
requiring the disclosure of the Proprietary Information, it
will furnish only that portion of the Proprietary Information
which is legally required and will exercise all reasonable
efforts to obtain reliable assurances that confidential
treatment will be accorded the Proprietary Information.
7.3. The Parties acknowledge that their respective Proprietary
Information, as well as their respective intellectual property
rights pursuant to this Agreement, are unique and valuable,
and that breach by either Party of the obligations of this
Agreement regarding such Proprietary Information and
intellectual property rights will result in irreparable injury
to the affected Party for which monetary damages alone would
not be an adequate remedy. Therefore, the Parties agree that
in the event of a breach or threatened breach of such
provisions, the affected Party shall be entitled to specific
performance and injunctive or other equitable relief as a
remedy for any such beach or anticipated breach without the
necessity of posting a bond. Any such relief shall be in
addition to and not in lieu of any appropriate relief in the
way of monetary damages.
7.4. Each Party receiving Proprietary Information shall, as to any
Proprietary Information that may be disclosed to it by the
other Party hereunder: (i) use the Proprietary Information
only in the performance of this Agreement and (ii) protect
such Proprietary Information from disclosure to others, using
the same degree of care used to protect its own confidential
or proprietary
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<PAGE> 7
information of like importance, but in any case using no less
than a reasonable degree of care. Recipient may disclose
Proprietary Information received hereunder to its Affiliates
and its employees and subcontractors, who have a need to know,
for the purpose of this Agreement, and who are bound to
protect the received Proprietary Information from unauthorized
use and disclosure provided that in any event recipient shall
remain liable for breaches by any such third parties of the
provisions of this Section. Proprietary Information shall not
otherwise be disclosed to any third party without the prior
written consent of the discloser.
8. Compliance with Regulations.
QORUS shall comply, in all material respects, with all applicable
statutes, laws, regulations, tariffs and orders adopted or issued by
any governmental authority governing the provisioning of the Services
by QORUS to ALPHA Customers including, but not limited to, all relevant
export and re-export controls under the U.S. Export Administration
Regulations and/or similar regulations of the U.S. or any other
country. ALPHA shall cooperate with QORUS as reasonably necessary to
permit QORUS to comply with such laws and administrative regulations.
9. Representations and Warranties.
9.1. QORUS represents and warrants to ALPHA (and no other person or
entity) that:
a. the Services will perform substantially as described
in the Documentation. ALPHA's exclusive remedy for
breach of this warranty is QORUS re-performing the
Services for no additional charge;
b. it has not incorporated in the Services, and, to
QORUS's knowledge, the Services do not contain any
"time bomb", "worms", viruses, locks, drop dead
devices or other routines or components to permit
unauthorized access, disable the software or data,
harm the system on which the software is run or
performance and other actions which would impair the
value or operation of the Services;
c. to QORUS's knowledge, the Services do not infringe
upon or violate any patent, copyright, trademark, or
other intellectual property or proprietary right of
any third party and do not constitute a
misappropriation of trade secrets of any third party.
9.2. Year 2000 Compliance. QORUS warrants that QORUS's provision of
Licensed Product to ALPHA, and any related deliverables
provided to ALPHA under this Agreement, will not be adversely
affected by the occurrence or use of dates before, on, or
after January 1, 2000 A.D., including dates and leap years
between the twentieth and twenty-first centuries ("Millennial
Dates"). Any deliverables (including any software, hardware or
firmware product(s) delivered by QORUS to ALPHA) will without
error or omission, create, receive, store, process and output
(collectively, "Compute") information related to Millennial
Dates. This warranty includes, without limitation, that the
deliverables will accurately, and without performance
degradation, compute Millennial Dates, date-dependent data,
date-related interfaces, or other date-related functions
(including, without limitation, calculating, comparing, and
sequencing such functions). At ALPHA's request, QORUS will
provide written evidence sufficient to demonstrate adequate
testing and conversion of the deliverable to meet the
foregoing requirements. In all cases, the parties agree that
Year 2000 compliance of Services will be dependent upon Year
2000
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compliance of ALPHA Customers' email systems and other
software and hardware.
10. Disclaimer on Warranties; Limitation of Liability.
10.1. EXCEPT AS SPECIFICALLY MADE IN THIS AGREEMENT, QORUS MAKES NO
OTHER WARRANTIES, EXPRESS OR IMPLIED, AND DISCLAIMS ANY
WARRANTY OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE AS TO THE PRODUCTS AND
SERVICES PROVIDED UNDER THIS AGREEMENT.
10.2. EXCEPT AS IS PROVIDED IN ARTICLE 11 BELOW, UNDER NO
CIRCUMSTANCES SHALL EITHER PARTY, OR ANY AFFILIATE THEREOF BE
LIABLE TO THE OTHER PARTY OR TO ANY THIRD PARTY FOR ANY
SPECIAL, INCIDENTAL, INDIRECT, PUNITIVE, STATUTORY OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST REVENUE OR PROFITS OR
OTHER LOST ECONOMIC ADVANTAGE) ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR BREACH HEREOF, WHETHER SUCH CLAIMS ARE BASED
ON BREACH OF CONTRACT, STRICT LIABILITY, TORT, OR ANY OTHER
LEGAL THEORY AND EVEN IF THE OTHER PARTY KNEW, SHOULD HAVE
KNOWN, OR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
THE PARTIES HAVE AGREED THAT THE LIMITATION SPECIFIED IN THIS
SECTION WILL SURVIVE AND APPLY IF ANY LIMITED REMEDY SPECIFIED
IN THIS AGREEMENT IS FOUND TO HAVE FAILED OF ITS ESSENTIAL
PURPOSE.
10.3. Limited Damages. IN NO EVENT (EXCEPT AS IS PROVIDED IN ARTICLE
11 BELOW) SHALL QORUS's LIABILITY TO ALPHA IN CONNECTION WITH
THIS AGREEMENT EXCEED AMOUNTS PAID TO QORUS BY ALPHA UNDER
THIS AGREEMENT. THIS LIMITATION APPLIES TO ALL CAUSES OF
ACTION IN THE AGGREGATE, INCLUDING WITHOUT LIMITATION ANY
ACTION FOR BREACH OF CONTRACT, BREACH OF WARRANTY, NEGLIGENCE,
STRICT LIABILITY, MISREPRESENTATION, AND OTHER TORTS.
11. Indemnification
11.1. Each Party agrees to indemnify the other and its directors,
officers, agents and employees harmless from and against any
and all losses, liabilities, judgements, damages, costs and
expense, including reasonable attorneys' fees and court costs,
resulting from or arising out of any charges, claims, suits,
actions, causes of action, of any kind and description,
brought by any third party as a result of or in connection
with a breach of or default by a Party of any provision of, or
representations or warranties set forth in this Agreement,
except to the extent any of the foregoing is caused by the
negligence or willful misconduct of the other Party.
QORUS agrees to indemnify ALPHA, its directors, officers,
agents and employees harmless from and against any and all
losses, liabilities, judgments, damages, costs and expense,
including reasonable attorneys' fees and court costs,
resulting from or arising out of any charges, claims, suits,
actions, causes of action, of any kind and description,
brought by any third party as a result of or in connection
with any claim that the use or sale of the Services by ALPHA
or any ALPHA Customer infringes on the intellectual property
rights of any third party or constitutes a misappropriation of
a trade secret of any third party; provided, however, that:
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<PAGE> 9
(a) In the event that any Service is held in a suit or
proceeding to infringe any intellectual property rights of a
third party and the use or reselling of such Service is
enjoined, or QORUS reasonably believes that it is likely to be
found to infringe or likely to be enjoined, then QORUS shall,
at its sole cost and expense, either (i) procure for ALPHA the
right to continue using and reselling such Service, or (ii)
modify such Service so that it becomes non-infringing.
(b) QORUS shall have no obligation for any claim of
infringement arising from: (i) any combination of Services
with products or services not supplied or approved in writing
by QORUS, where such infringement would not have occurred but
for such combination; (ii) the adaptation or modification of
Services not performed by QORUS, where such infringement would
not have occurred but for such adaptation or modification;
(iii) the use of Services in an application for which it was
not designed or intended, where such infringement would not
have occurred but for such use; or (iv) a claim based on
intellectual property rights claimed by ALPHA or any of its
Affiliates.
(c) This Section 11.1 states ALPHA's sole and exclusive remedy
in the event that a Service infringes on the intellectual
property right of any third party.
11.2. In the event a claim which is covered by the terms of this
Section is made by a third party against either ALPHA or
QORUS, the party receiving the claim and entitled to
indemnification hereunder (the "Indemnified Party") shall
promptly notify the other party (the "Indemnifying Party") of
the claim and the indemnification obligation arising
thereunder. The Indemnifying Party shall be accorded control
of the defense and of all negotiations for settlement or
compromise of such claim and the Indemnified Party shall
cooperate with the Indemnifying Party in the defense and
settlement of such claim. The Indemnified Party may at its own
expense, be represented in such defense. The Indemnifying
Party shall promptly adjust, settle for defend or otherwise
dispose of the claim at its sole cost and expense. The
Indemnifying Party may not agree to any settlement, which
imposes liability on the Indemnified Party without the prior
written consent of the Indemnified Party.
11.3 In the event a claim is based partially on an indemnified
claim described in Section 11.1 above and partially on a
non-indemnified claim, or is based partially on a claim
indemnified by QORUS pursuant to Section 11.1 above and
partially on a claim indemnified by ALPHA pursuant to Section
11.1 above, any payments and reasonable attorney fees incurred
in connection with such claims are to be apportioned between
the Parties in accordance with the degree of cause
attributable to each Party.
12. Arbitration Clause.
Any dispute or disagreement arising between the Parties in connection
with this Agreement, which is not settled to the mutual satisfaction of
the Parties within thirty (30) days (or such longer period as may be
mutually agreed upon in writing) from the date that either Party
informs the other in writing that such dispute or disagreement exists,
shall be settled by arbitration in London, United Kingdom, in
accordance
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with The Arbitration Act 1996. The cost of the arbitration, including
the fees and expenses of the arbitrator(s) and legal counsel, will be
shared equally by the parties unless the award otherwise provides. Each
Party will be responsible for its own legal fees; provided, however,
that the prevailing party in any arbitration proceeding shall be
entitled to reimbursement of its legal fees and costs by the
non-prevailing party.
13. Publicity.
No news, media or other informational releases public announcements,
public disclosures, advertising or marketing materials concerning or
referencing any part of the terms and conditions of this Agreement,
including exhibits hereto, either Party's performance hereunder, or any
other aspect of the Agreement shall be made or distributed without the
express prior written approval of the other Party.
14. Force Majeure.
Neither Party will be liable for any failure to perform (other than
payment obligations) due to unforeseen circumstances or causes beyond
its reasonable control, including, but not limited to, acts of God,
war, riot, embargoes, acts or civil or military authorities, fire,
flood, accident, shortages of fuel, raw materials or equipment,
provided that the delayed Party has taken reasonable measure to notify
the other in writing of the delay.
15. Miscellaneous.
15.1. Non Waiver. The failure of either Party to insist upon the
strict performance of any terms, covenants and conditions of
this Agreement at any time, or in any one or more instances,
or its failure to take advantage of any of its rights
hereunder, or any course of conduct or dealing, shall not be
construed as a waiver or relinquishment of any such rights or
conditions at any future time and shall in no way affect the
continuance in full force and effect of all the provisions of
this Agreement.
15.2. Relationship of Parties/Independent Contractors. Nothing
contained in this Agreement shall be deemed or construed as
creating a joint venture or partnership between QORUS and
ALPHA. Neither Party is by virtue of this Agreement authorized
as an agent, employee or legal representative of the other.
Neither Party shall have the power to control the activities
and operations of the other and their status is, and at all
times will continue to be, that of independent contractors.
Neither Party shall have any authority to bind or commit the
other. Except as expressly agreed in writing each Party shall
bear its own costs and expenses incurred under or in
conjunction with performance of this Agreement.
15.3. Headings. Headings used in this Agreement are for convenience
and reference only and shall not be construed as altering the
meaning of this Agreement or any of its parts.
15.4. Applicable Law. This Agreement shall be interpreted construed
and governed in accordance with the laws of England, without
regard to its conflict of law provisions.
15.5. Survival. The Parties agree that Section 6.3, 6.4, and
Articles 7, 10, 11, 12, 13, 14 and 15 shall survive the
expiration or any earlier termination of this Agreement.
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15.6. Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable, the remaining terms shall
not be affected. The Agreement shall be interpreted as if the
illegal, invalid or unenforceable provision had not been
included in it, and the invalid or unenforceable provision
shall be replaced by a mutually acceptable provision which,
being valid and enforceable, comes closes to the intention of
the Parties underlying the invalid or unenforceable provision.
15.7. Notices. All notices, request, demands, or communications
required or permitted hereunder shall be in writing, delivered
personally, by registered mail with return receipt, by
overnight delivery service, by electronic mail (with confirmed
receipt), or facsimile (with confirmed receipt), at the
respective addresses set forth below (or at such other
addresses as shall be given in writing by either Party to the
other). All notices, requests, demands or communications shall
be deemed effective upon receipt for personal delivery, on the
business day following the date of sending by electronic mail,
facsimile or overnight delivery service, or three days after
mailing.
QORUS: Chief Financial Officer
QORUS.COM
9600 Sepulveda Blvd.
Los Angeles, CA 90045
Fax (310) 258 8460
ALPHA: Managing Director
ALPHA Telecom (UK) Ltd.
Molasses House, Plantation Wharf
London, England
15.8. Assignment. This Agreement shall be binding on and inure to
the benefit of the Parties hereto and their respective
successors and assigns. Neither Party may assign this
Agreement without the prior express written consent of the
other Party, which consent shall not be unreasonably withheld
or delayed; provided, however, either Party, without the
consent of the other, assign its rights and obligations
hereunder to an Affiliate, or to a successor in interest or to
a purchaser of all or substantially all of its assets or of
the assets of that portion of its business as to which this
Agreement pertains. Any prohibited assignment shall be null
and void.
15.9. Entire Agreement. This Agreement, including Exhibit A and
Exhibit B hereto constitutes the entire understanding of the
Parties, and supersedes all prior or contemporaneous written
and oral agreements, representations or negotiations with
respect to the subject matter hereof. This Agreement may not
be modified or amended except in writing signed by both
Parties.
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15.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
ALPHA TELECOM (UK) LTD. QORUS.COM
Signature Signature
Name Name
Date Date
Title Title
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<PAGE> 13
EXHIBIT A
SERVICES AND PRICING
SERVICE DESCRIPTION
o GENERAL:
- 10MB allocated disk space for message storage
- Personal email address
- Personal phone number for voice mail access
o FAX CAPABILITIES:
- Fax to any fax number at local call charges
- Receive notice of incoming fax via QORUS telephone access
- Send or forward fax to any fax number from telephone or
browser interface
- View faxes similarly to viewing e-mail
- Broadcast fax capabilities
- Fax to e-mail addresses
o E-MAIL CAPABILITIES:
- Send to and receive from all standard e-mail systems
- Send to multiple e-mail addresses
- Attach multiple files to e-mail messages
- Send to any combination of e-mail, faxes, pagers, voice mail
- Listen to e-mail on telephone in same fashion as listening to
voice mail
- Use QORUS features with existing e-mail clients
- Send to any fax number
- Send to multiple fax numbers
- Notification of e-mail arrival via voice mail
- Send to multiple pagers
o VOICE MAIL CAPABILITIES:
- Leave voice mail in QORUS via telephone access
- Retrieve voice mail from QORUS telephone access
- Retrieve voice mail from computer with voice medium
- Notification by fax if a voice mail is received
- Send, reply, or forward voice mail to e-mail using the
telephone interface
- Notification by page if a voice mail is received
o PAGING CAPABILITIES
- Page from telephone interface with address book option
- Send pages from browser interface with address book option
- Supports multiple paging providers: numeric, alphanumeric and
page enabled cellular phones
o OTHER SERVICES
- Remote access to mailbox using the Internet or touch-tone
phone
- Platform/operating system independent
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- Full service e-mail/phone/fax/pager address book accessible
from both the Internet and the telephone interfaces
- Full scheduling features which allow user to create a unique
set of instructions for QORUS to handle, forward or hold
incoming and outgoing messages
- Message transmission events can be pre-set based on any
combination of:
- Type of message(e-mail, fax, voice, page)
- Start and end date and/or start and end time
- Day of week
- Filter an incoming message
- Address message to any type or individual
PRICING
QORUS will be paid as per Sections 5.2 and 5.3 of the Agreement an amount equal
to 50% of the prices charged by Alpha to its customers provided that Qorus shall
not receive less than 50% of the amount agreed to per user per month.
Alpha and Qorus will agree, in writing, to any price changes.
The agreed monthly charge shall be (pound)9.95/month and may only be changed by
the written consent of both parties. Upon any such change, the revenue sharing
arrangement shall continue to be 50% of the amount agreed to per user per month.
Qorus further agrees that this consent will not be unreasonably withheld and
that Qorus will support Alpha's efforts to maintain the most competitive pricing
within its market.
ADDITIONAL PRICING:
Pricing for additional features such as additional allocated disk space in 5MB
increments beyond 10MB, Teleco charges for fax and pages outside of area, and
other features tbd, will be determined by mutual agreement between the Parties
and revenues will be shared 50%/50 % between the Parties.
ALPHA TELECOM SERVICES TO QORUS
Termination services will be purchased by Qorus at the RACS installation site in
UK from Alpha Telecom and may include outbound faxes and pages for any Qorus
customer. Further discussion and finalization of this arrangement is required.
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EXHIBIT B
OPERATING PLAN
MARKETING AND SALES
Alpha will make best efforts to identify target customers, create appropriate
collateral, advertising and other specific sales efforts to secure commitments
from some portion of those customers to buy Qorus services. Such activities will
be directed toward prospective market segments which are known to have clear
need for Qorus services. Any card-based activities must be at Alpha's own
expense.
Qorus will help Alpha secure customers through any or all of the following
means:
- - Supply existing marketing materials to Alpha for distribution or
original work for incorporation into Alpha-developed materials.
- - Periodic visits to Alpha and Alpha prospective customers by Qorus
personnel to assist with presentation and explanation of Qorus
services.
- - Start-up discount on Qorus services as proposed in Exhibit A Pricing
- - Promotional programs as warranted (further discussion required)
ACCOUNT CREATION/CLOSURE
Alpha customers will sign-up directly through the Alpha-branded registration
web-page. The customer may supply a pre-assigned reference number identifying
them as an Alpha customer and the appropriate account configuration.
The customer will be assigned appropriate telephone access numbers and email id.
The account will be available for immediate usage.
Upon creation, a notice will be sent to the appropriate Alpha representative
advising of the account creation.
Customers may discontinue services at any time via web or telephone access.
Alpha will be notified by email upon account closure of such activity.
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BILLING
Qorus will bill Alpha at the end of each month the flat rate for all accounts
active at the end of the month and for associated additional charges (telco,
additional storage, etc.)
CUSTOMER SUPPORT
Alpha will supply the first and second line of support to its users on a 24 x 7
basis. This includes telephone and email based questions and problems. Training
for this support will be provided by Qorus as outlined below.
Qorus will provide third tier support.
TRAINING
A. Qorus will provide at its location in Southern California technical support
training designed to familiarize a qualified Alpha telcom technician with
the operation capabilities of the Equipment, to enable the technician to
install the Equipment in the UK and to provide ongoing rebooting services
as directed by Qorus. Estimated length of this training - 1 day.
B. Qorus will provide customer service/technical support training to an Alpha
service support technician at the Southern California location in order for
Alpha to be able to provide first and second tier support to Alpha
Customers, and to document escalation procedures.
MAINTENANCE
The costs associated with maintenance of the Equipment will be borne by Qorus.
Systems management to monitor availability of systems and applications will be
provided remotely.
SERVICE ENHANCEMENTS
Qorus will, from time to time, add features to the services. These additional
features will be made available to Alpha and its customers as well. If Qorus
adds significant functionality which results in a retail price list change,
Alpha will be given the option to revise pricing to reflect such new services.
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EXHIBIT C
EQUIPMENT:
QORUS will provide and cause to be installed a Remote Access Communications
System ("RACS") at a mutually agreeable secure location within ALPHA's premises.
QORUS will retain title to, provide risk of loss insurance, and be solely
responsible for maintenance of the equipment.
QORUS/ALPHA CO-LOCATION SPECIFICATION:
ALPHA Provisioning:
Access Requirements:
o Internet connection with a minimum bandwidth of 3 mbs. Minimum 1.5 mbs
for each RACS.
o Minimum of 8 internet addresses.
o Required circuits for RACS:
o 4 (Four) E1's
o 30 digital channels each E1
o E1 Line Type - Framing Formats - CRC-4 Multiframing
o Line Coding - HDB3
o Clock Source - MVIP bus master clock signals
o Line Impedance - 120 ohm terminations
o 1000 DID numbers both trunks.
o DID rollover from trunk A to C; B to D.
o Services: DNIS, DID, CallerID, (ANI).
Space Requirements:
o One 19 inch rack containing:
o 1 Cisco PIX Firewall
o 1 Cisco 2900 100base T Switch
o 2 RACS
Service Requirements:
o 24/7 Reboot Support
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<PAGE> 1
EXHIBIT 6.9
AUTHORIZED RESELLER AGREEMENT
This Agreement (the "Agreement") is made and entered into this 21st day
of September, 1999 ("Effective Date"), by and between Qorus.com, a Delaware
corporation with its principal place of business at 9800 Sepulveda Boulevard,
Los Angeles, California, 90045 ("QORUS"), and C2C Telecom, Inc., Delaware
corporation, with its principal place of business at 313 North Sierra Vista,
Monterey Park, California 91755. QORUS and C2C TELECOM may be referred to
hereafter individually as a "Party" or collectively as the "Parties."
RECITALS
A. QORUS is in the business of providing certain electronic
messaging services;
B. C2C TELECOM desires to market and resell those services
specified in the attached Exhibit A ("Services") to C2C
Telecom's Customers (as defined below); and
C. QORUS is willing to provide Services to C2C Telecom's
Customers in accordance with the terms of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the Parties hereby agree as follows:
1. Definitions.
1.1. "Affiliate" of a Party shall mean a corporation, partnership,
joint venture or other entity directly or indirectly, through
one or more intermediaries, controlling, controlled by or
under common control with such Party.
1.2. "C2C TELECOM Authorized Reseller" shall mean any current or
future entities that are agreed to in writing by both QORUS
and C2C Telecom; such agreement shall not be unreasonably
withheld by either party.
1.3. "C2C Telecom Customers" shall mean any person, entity, or C2C
Telecom Authorized Reseller that is a customer of C2C Telecom,
or a customer of a C2C Telecom Authorized Reseller.
1.4. "Documentation" shall mean any user guides, manuals, operator
guides, installation guides, technical reference guides and
other similar reference materials generally made available by
QORUS to its customers to facilitate use of the Services,
which QORUS shall offer to C2C TELECOM.
1.5. "Services" shall be defined as used in Exhibit A.
1.6. "Operating Plan" shall be defined in Exhibit B.
<PAGE> 2
1.7. "Contacts" shall be defined in Exhibit C.
2. Agreement to Provide Services/Grant of Rights
2.1. QORUS shall provide the Services to C2C TELECOM Customers in
accordance with the pricing set forth in the attached Exhibit
A and the Operating Plan set forth in the attached Exhibit B.
2.2. QORUS hereby grants to C2C TELECOM a non-exclusive,
non-transferable right to market, promote and resell the
Services to current and prospective C2C TELECOM Customers in
the United States (the "Territory") provided, however, that
C2C TELECOM may market, promote and resell the Services
through C2C TELECOM Authorized Resellers, provided that C2C
TELECOM shall be responsible for such third parties'
observance of the terms and conditions of this Agreement.
2.3. QORUS hereby grants to C2C TELECOM and C2C TELECOM accepts the
right to re-brand the Services and Documentation for use in
accordance with the rights granted herein, the Documentation,
and branding guidelines as mutually agreed upon by the
Parties; provided, however, that (a): any such re-branding
shall be subject to QORUS' written approval, may carry a
notice identifying the Service as "Powered by QORUS" or such
other name and/or copyright notices as may be designated by
QORUS, and in a style, color and reasonable size to be
designated by QORUS, and (b): any branding with trademarks
other than C2C TELECOM's trademarks may be subject to prior
approval of QORUS, which may be withheld in QORUS's absolute
discretion.
2.4. QORUS hereby grants to C2C TELECOM the right to utilize
QORUS's trade name and any trademarks and service marks (the
"Trademarks") in connection with C2C TELECOM's advertising and
promotional materials used for the sale of the Services
provided that if C2C TELECOM utilizes the QORUS trade name and
any trade marks it shall first submit such advertising and
promotional materials to QORUS for review and approval, not to
be unreasonably withheld. C2C TELECOM has paid no
consideration for the use of the Trademarks, and nothing
contained in this Agreement shall give C2C TELECOM any right,
title or interest in the Trademarks. C2C TELECOM agrees that
it will not at any time during or after this Agreement assert
or claim any interest in or do anything which may adversely
affect the validity or enforceability of any Trademark. In
order to comply with QORUS's quality control standards, C2C
TELECOM shall: (i) use the Trademarks in compliance with all
relevant laws and regulations; (ii) accord QORUS the right to
inspect all C2C TELECOM Products, Advertising and Promotional
material used in conjunction with this service in order to
confirm that C2C TELECOM's use of such Trademarks is in
compliance with this Section; and (iii) not modify any of the
Trademarks in any way and not use any of the Trademarks on or
in connection with any goods or services other than the
Services.
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<PAGE> 3
2.5. The grants made herein by QORUS to C2C TELECOM are
non-exclusive. QORUS reserves the right in its discretion to
use other authorized resellers of the Services covered by this
Agreement within or outside of the Territory without
obligation or liability of any kind to C2C TELECOM. QORUS also
reserves the right to sell the Services or similar products
and services to any person or entity not currently a customer
of any C2C TELECOM-provided service, using its own personnel
or third parties, without obligation or liability of any kind
to C2C TELECOM; provided, however, QORUS shall not, during the
term of this agreement, knowingly contact current C2C TELECOM
Customers for any purpose (other than through general
advertising programs) except in the performance of its
obligations hereunder.
2.6. C2C TELECOM acknowledges that nothing in this Agreement grants
C2C TELECOM any ownership interest in the Services and that
upon termination of this Agreement, C2C TELECOM shall make no
claims of such ownership or of any further interest in the
Services.
2.7. No rights or licenses with respect to the Services or the
Trademarks (as defined below) are granted or deemed granted
hereunder or in connection herewith, other than those rights
expressly granted in this Agreement.
3. Additional Obligations of QORUS.
3.1. QORUS shall, at its own expense, provide a proprietary suite
of software and equipment necessary to provide remote access
communications (the "Equipment"). Such equipment will be the
sole property of QORUS and QORUS will be solely responsible
for its upkeep and maintenance.
3.2. QORUS shall provide C2C TELECOM with a copy of the
Documentation within a timely period after execution of this
Agreement, and shall thereafter provide C2C TELECOM on a
timely basis any updates or revisions thereto, for
re-branding, reproduction and distribution by C2C TELECOM to
C2C TELECOM Customers in accordance with this Agreement and in
connection with the marketing and sale of the Services. C2C
TELECOM shall maintain all copyright notices of QORUS on the
documentation.
3.3. QORUS shall provide C2C TELECOM and C2C TELECOM Authorized
Resellers with training as set forth in the Operating Plan.
3.4. QORUS shall provide the maintenance and support services for
C2C TELECOM and C2C TELECOM Customers, as set forth in the
Operating Plan, at no additional cost to C2C TELECOM.
3.5. QORUS shall notify C2C TELECOM at least 60 days in advance of
new products and services not described on Exhibit A and
material enhancements which substantially alter the
functionality of the Services and are available from QORUS
after the Effective Date (collectively, "New
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<PAGE> 4
Services"). If QORUS and C2C TELECOM agree that any such New
Services will be offered to C2C TELECOM Customers, such New
Services will be added to Exhibit A.
4. Obligations of C2C TELECOM.
4.1. C2C TELECOM shall use diligent commercial efforts to market
and sell the Services to C2C TELECOM Customers and other
prospective customers. C2C TELECOM shall not sell or market,
to its customers, services that are in direct competition to
the Services. If C2C TELECOM C2C intends to offer
complementary services in conjunction with similar service
offerings to QORUS Services, then QORUS has the first right of
refusal to offer such services within a reasonable time frame
to be not less than 90 days. C2C TELECOM shall develop at its
own expense, all marketing, sales, and promotional materials
used in connection with C2C TELECOM's marketing and sale of
the Services.
4.2. C2C TELECOM shall accurately represent the Services to C2C
TELECOM Customers or prospective C2C TELECOM Customers and
prospective C2C TELECOM Authorized Resellers and shall make no
claims, representations or warranties in connection with the
Services other than as set forth in QORUS's Documentation, the
forms or orders provided by QORUS, or as otherwise expressly
authorized by QORUS in writing.
4.3. C2C TELECOM shall provide the first and second line
maintenance and support services for C2C TELECOM and C2C
TELECOM Customers, as set forth in the Operating Plan.
5. Customer Registration and Payment.
5.1. C2C TELECOM Customers shall register for the Services as
described in Exhibit B.
5.2. QORUS's description and pricing of Services to C2C TELECOM and
its suggested pricing for the Services to distributors and at
retail is set forth in Exhibit A, provided however that
pricing to C2C TELECOM Customers shall be determined by C2C
TELECOM in its sole discretion.
5.3. QORUS shall be responsible for providing a single,
standardized daily electronic billing feed (format to be
determined and agreed upon between the Parties within 7 days
of the date hereof) to C2C TELECOM via electronic file
transfer, which includes all service usage and billing
information, by C2C TELECOM Customer, for the previous month.
Payment terms will be Net 30 days. Such payments will be made
by C2C TELECOM to QORUS regardless of C2C TELECOM's ability to
collect its charges from C2C TELECOM Customers.
5.4. C2C TELECOM, and its C2C TELECOM Authorized Reseller, shall be
responsible for and pay all taxes applicable to amounts billed
to C2C TELECOM Customers under this Agreement (excluding taxes
based on QORUS's income, net worth or capital).
5.5. All amounts due and owing to QORUS hereunder but not paid by
C2C TELECOM on the due date thereof shall bear interest at the
rate of the lesser of: (i) one and one-half per cent
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<PAGE> 5
(1 1/2%) per month; and (ii) the maximum lawful interest rate
permitted under applicable law. Such interest shall accrue on
the balance of unpaid amounts from time to time outstanding
from the date on which portions of such amounts become due and
owing until payment thereof in full.
6. Term and Termination.
6.1. The initial term of this Agreement shall commence as of the
Effective Date and will continue for a period of one (1) year
(the "Initial Term"). At the conclusion of the Initial Term
and any subsequent term, this Agreement shall automatically be
extended for an additional one (1) year term unless either
Party provides the other Party with written notice of its
intention not to renew this Agreement at least three (3)
months prior to the expiration of the then current term.
6.2. This Agreement may also be terminated as follows:
a. At any time upon the mutual written agreement of the
Parties; or
b. By either Party immediately if the other Party fails
to cure any material breach within fifteen days
following receipt of written notice thereof; or
c. By either Party immediately upon giving written
notice to the other Party if the other Party has a
receiver, administrator, administrative receiver or
liquidator appointed; if the other Party passes a
resolution liquidating the Party, if any court of
competent jurisdiction issues an order to that
effect, or if the other Party enters into any
arrangement with its creditors, becomes insolvent or
ceases to carry on business.
6.3. Upon termination or expiration of this Agreement, the Parties
agree to cooperate in good faith to effect an orderly wind-up
of the relationship created under this Agreement. QORUS shall
complete all orders, which it has accepted and C2C TELECOM
shall remain obligated to pay all amounts owing to QORUS
hereunder. Termination of this Agreement shall not limit
either party from pursuing any other remedies otherwise
available to it. After the termination of the contract, Qorus
will provide services to any accounts still open for a period
of six months, for which C2C Telecom, Inc. will pay Qorus a
flat fee of $8.00 (no more and no less) per month per account
for maintenance and service, until the account is closed or
transferred.
6.4. In the event of a termination of this Agreement pursuant to
its terms or upon expiration of this Agreement, QORUS shall
not have any obligation to C2C TELECOM, or to any employee of
C2C TELECOM or C2C TELECOM Authorized Reseller, for
compensation or for damages of any kind, whether on account of
the loss by C2C TELECOM or such employee or C2C TELECOM
Authorized Reseller of present or prospective sales,
investments, compensation or goodwill. C2C TELECOM hereby
waives any rights, which may be granted to it under the laws
and regulations of the Territory or otherwise, which are not
granted to it by this Agreement. C2C TELECOM hereby
indemnifies and holds
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QORUS harmless from and against any and all claims, costs,
damages and liabilities whatsoever asserted by any employee,
agent or representative of C2C TELECOM or a C2C TELECOM
Authorized Reseller under any applicable termination, labor,
social security or other similar laws or regulations.
7. Confidentiality.
7.1. The Parties agree that the following provisions shall govern
the anticipated mutual disclosure and use of confidential and
proprietary information under this Agreement.
. As used in this Agreement, the term "Proprietary
Information" shall mean information that is
transmitted or otherwise provided by or on behalf of
either Party to the other Party related to this
Agreement and the services to be performed hereunder,
and that may be reasonably understood from legends,
the circumstances of disclosure or the nature or the
information itself, to be proprietary and/or
confidential to the disclosing party. Proprietary
Information may be disclosed in written or other
tangible form (including on magnetic media) or by
oral, visual or other means. Proprietary Information
shall include, without limitation, a Party's business
plan, customer names and information relating to the
customers, information regarding other material third
party relationships which a Party may obtain in the
course of performance under this Agreement, and
scientific or technical data, design or process.
Notwithstanding the foregoing, Proprietary
Information shall not include any information that:
(i) was publicly known at the time of
discloser's communication thereof to
recipient;
(ii) becomes publicly known through no fault of
recipient subsequent to the time of
discloser's communication thereof to
recipient;
(iii) was in recipient's possession free of any
obligation of confidence at the time of
discloser's communication thereof to
recipient;
(iv) is developed by recipient independently of
and without reference to any of discloser's
Proprietary Information or other information
that discloser disclosed in confidence to
any third party;
(v) is rightfully obtained by recipient from
third parties which made such disclosure
without restriction; or
(vi) is identified in writing by discloser as no
longer proprietary or confidential.
7.2. In the event recipient is required by law, regulation or court
order to disclose any of discloser's Proprietary Information,
recipient will promptly notify discloser in writing prior to
making any such disclosure in order to facilitate discloser
seeking a protective order or other appropriate
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<PAGE> 7
remedy from the proper authority. Recipient agrees to
cooperate with discloser in seeking such order or other
remedy. Recipient further agrees that if discloser is not
successful in precluding the requesting legal body from
requiring the disclosure of the Proprietary Information, it
will furnish only that portion of the Proprietary Information
which is legally required and will exercise all reasonable
efforts to obtain reliable assurances that confidential
treatment will be accorded the Proprietary Information.
7.3. The Parties acknowledge that their respective Proprietary
Information, as well as their respective intellectual property
rights pursuant to this Agreement, are unique and valuable,
and that breach by either Party of the obligations of this
Agreement regarding such Proprietary Information and
intellectual property rights will result in irreparable injury
to the affected Party for which monetary damages alone would
not be an adequate remedy. Therefore, the Parties agree that
in the event of a breach or threatened breach of such
provisions, the affected Party shall be entitled to specific
performance and injunctive or other equitable relief as a
remedy for any such breach or anticipated breach without the
necessity of posting a bond. Any such relief shall be in
addition to and not in lieu of any appropriate relief in the
way of monetary damages.
7.4. Each Party receiving Proprietary Information shall, as to any
Proprietary Information that may be disclosed to it by the
other Party hereunder: (i) use the Proprietary Information
only in the performance of this Agreement and (ii) protect
such Proprietary Information from disclosure to others, using
the same degree of care used to protect its own confidential
or proprietary information of like importance, but in any case
using no less than a reasonable degree of care. Recipient may
disclose Proprietary Information received hereunder to its
Affiliates and its employees and subcontractors, who have a
need to know, for the purpose of this Agreement, and who are
bound to protect the received Proprietary Information from
unauthorized use and disclosure provided that in any event
recipient shall remain liable for breaches by any such third
parties of the provisions of this Section. Proprietary
Information shall not otherwise be disclosed to any third
party without the prior written consent of the discloser.
8. Compliance with Regulations.
Each party shall comply, in all material respects, with all applicable
statutes, laws, regulations, tariffs and orders adopted or issued by
any governmental authority governing its performance under this
agreement including, but not limited to, all relevant export and
re-export controls under the U.S. Export Administration Regulations
and/or similar regulations of the U.S. or any other country. Each party
shall cooperate with the other as reasonably necessary to permit QORUS
to comply with such laws and administrative regulations.
9. Representations and Warranties.
9.1. QORUS represents and warrants to C2C TELECOM, its Authorized
Resellers and no other person or entity that:
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a. the Services will perform substantially as described
in the Documentation. C2C TELECOM's exclusive remedy
for breach of this warranty is QORUS re-performing
the Services for no additional charge;
b. it has not incorporated in the Services, and, to
QORUS's knowledge, the Services do not contain any
"time bomb", "worms", viruses, locks, drop dead
devices or other routines or components to permit
unauthorized access, disable the software or data,
harm the system on which the software is run or
performance and other actions which would impair the
value or operation of the Services;
c. to QORUS's knowledge, the Services do not infringe
upon or violate any patent, copyright, trademark, or
other intellectual property or proprietary right of
any third party and do not constitute a
misappropriation of trade secrets of any third party.
9.2. Year 2000 Compliance. QORUS warrants that QORUS's provision of
Licensed Product to C2C TELECOM, and any related deliverables
provided to C2C TELECOM under this Agreement, will not be
adversely affected by the occurrence or use of dates before,
on, or after January 1, 2000 A.D., including dates and leap
years between the twentieth and twenty-first centuries
("Millennial Dates"). Any deliverables (including any
software, hardware or firmware product(s) delivered by QORUS
to C2C TELECOM) will without error or omission, create,
receive, store, process and output (collectively, "Compute")
information related to Millennial Dates. This warranty
includes, without limitation, that the deliverables will
accurately, and without performance degradation, compute
Millennial Dates, date-dependent data, date-related
interfaces, or other date-related functions (including,
without limitation, calculating, comparing, and sequencing
such functions). At C2C TELECOM's request, QORUS will provide
written evidence sufficient to demonstrate adequate testing
and conversion of the deliverable to meet the foregoing
requirements. In all cases, the parties agree that Year 2000
compliance of Services will be dependent upon Year 2000
compliance of C2C TELECOM Customers' email systems and other
software and hardware. QORUS shall not be responsible for the
failure of its vendors and their services and products to be
Year 2000 compliant.
10. Disclaimer on Warranties; Limitation of Liability.
10.1. EXCEPT AS SPECIFICALLY MADE IN THIS AGREEMENT, QORUS MAKES NO
OTHER WARRANTIES, EXPRESS OR IMPLIED, AND DISCLAIMS ANY
WARRANTY OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE AS TO THE PRODUCTS AND
SERVICES PROVIDED UNDER THIS AGREEMENT.
10.2. EXCEPT AS IS PROVIDED IN ARTICLE 11 BELOW, UNDER NO
CIRCUMSTANCES SHALL EITHER PARTY, OR ANY AFFILIATE THEREOF BE
LIABLE TO THE OTHER PARTY OR TO ANY THIRD PARTY FOR ANY
SPECIAL, INCIDENTAL, INDIRECT, PUNITIVE, STATUTORY OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST
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REVENUE OR PROFITS OR OTHER LOST ECONOMIC ADVANTAGE) ARISING
OUT OF OR RELATED TO THIS AGREEMENT OR BREACH HEREOF, WHETHER
SUCH CLAIMS ARE BASED ON BREACH OF CONTRACT, STRICT LIABILITY,
TORT, OR ANY OTHER LEGAL THEORY AND EVEN IF THE OTHER PARTY
KNEW, SHOULD HAVE KNOWN, OR HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. THE PARTIES HAVE AGREED THAT THE
LIMITATION SPECIFIED IN THIS SECTION WILL SURVIVE AND APPLY IF
ANY LIMITED REMEDY SPECIFIED IN THIS AGREEMENT IS FOUND TO
HAVE FAILED OF ITS ESSENTIAL PURPOSE.
10.3. Limited Damages. IN NO EVENT (EXCEPT AS IS PROVIDED IN ARTICLE
11 BELOW) SHALL QORUS's LIABILITY TO C2C TELECOM IN CONNECTION
WITH THIS AGREEMENT EXCEED AMOUNTS PAID TO QORUS BY C2C
TELECOM UNDER THIS AGREEMENT. THIS LIMITATION APPLIES TO ALL
CAUSES OF ACTION IN THE AGGREGATE, INCLUDING WITHOUT
LIMITATION ANY ACTION FOR BREACH OF CONTRACT, BREACH OF
WARRANTY, NEGLIGENCE, STRICT LIABILITY, MISREPRESENTATION, AND
OTHER TORTS.
11. Indemnification
11.1. Each Party agrees to indemnify the other and its directors,
officers, agents and employees harmless from and against any
and all losses, liabilities, judgments, damages, costs and
expense, including reasonable attorneys' fees and court costs,
resulting from or arising out of any charges, claims, suits,
actions, causes of action, of any kind and description,
brought by any third party as a result of or in connection
with a breach of or default by a Party of any provision of, or
representations or warranties set forth in this Agreement,
except to the extent any of the foregoing is caused by the
gross negligence or willful misconduct of the other Party.
QORUS agrees to indemnify C2C TELECOM, its directors,
officers, agents and employees harmless from and against any
and all losses, liabilities, judgments, damages, costs and
expense, including reasonable attorneys' fees and court costs,
resulting from or arising out of any charges, claims, suits,
actions, causes of action, of any kind and description,
brought by any third party as a result of or in connection
with any claim that the use or sale of the Services by C2C
TELECOM or any C2C TELECOM Customer infringes on the
intellectual property rights of any third party or constitutes
a misappropriation of a trade secret of any third party;
provided, however, that:
(a) In the event that any Service is held in a suit or
proceeding to infringe any intellectual property rights of a
third party and the use or reselling of such Service is
enjoined, or QORUS reasonably believes that it is likely to be
found to infringe or likely to be enjoined, then QORUS shall,
at its sole cost and expense, either (i) procure for C2C
TELECOM the right to continue using and reselling such
Service, or (ii) modify such Service so that it becomes
non-infringing.
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(b) QORUS shall have no obligation for any claim of
infringement arising from: (i) any combination of Services
with products or services not supplied or approved in writing
by QORUS, where such infringement may not have occurred but
for such combination; (ii) the adaptation or modification of
Services not performed by QORUS, where such infringement would
not have occurred but for such adaptation or modification;
(iii) the use of Services in an application for which it was
not designed or intended, where such infringement would not
have occurred but for such use; or (iv) a claim based on
intellectual property rights claimed by C2C TELECOM or any of
its Affiliates.
(c) This Section 11.1 states C2C TELECOM's sole and exclusive
remedy in the event that a Service infringes on the
intellectual property right of any third party.
11.2. In the event a claim which is covered by the terms of this
Section is made by a third party against either C2C TELECOM or
QORUS, the party receiving the claim and entitled to
indemnification hereunder (the "Indemnified Party") shall
promptly notify the other party (the "Indemnifying Party") of
the claim and the indemnification obligation arising
thereunder. The Indemnifying Party shall be accorded control
of the defense and of all negotiations for settlement or
compromise of such claim and the Indemnified Party shall
cooperate with the Indemnifying Party in the defense and
settlement of such claim. The Indemnified Party may at its own
expense, be represented in such defense. The Indemnifying
Party shall promptly adjust, settle for defend or otherwise
dispose of the claim at its sole cost and expense. The
Indemnifying Party may not agree to any settlement, which
imposes liability on the Indemnified Party without the prior
written consent of the Indemnified Party.
11.3 In the event a claim is based partially on an indemnified
claim described in Section 11.1 above and partially on a
non-indemnified claim, or is based partially on a claim
indemnified by QORUS pursuant to Section 11.1 above and
partially on a claim indemnified by C2C TELECOM pursuant to
Section 11.1 above, any payments and reasonable attorney fees
incurred in connection with such claims are to be apportioned
between the Parties in accordance with the degree of cause
attributable to each Party.
12. Arbitration Clause.
Any dispute or disagreement arising between the Parties in connection
with this Agreement, which is not settled to the mutual satisfaction of
the Parties within thirty (30) days (or such longer period as may be
mutually agreed upon in writing) from the date that either Party
informs the other in writing that such dispute or disagreement exists,
shall be settled by arbitration in Los Angeles County, California, in
accordance with the American Arbitration Association Commercial
Arbitration Rules and Procedures. The cost of the arbitration,
including the fees and expenses of the arbitrator(s) and legal counsel,
will be shared equally by the parties unless the award otherwise
provides. Each Party will be responsible for its own legal fees;
provided, however, that the prevailing party in any arbitration
proceeding shall be entitled to reimbursement of its legal fees and
costs by the non-prevailing party.
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13. Publicity.
No news, media or other informational releases public announcements,
public disclosures, advertising or marketing materials concerning or
referencing any part of the terms and conditions of this Agreement,
including exhibits hereto, either Party's performance hereunder, or any
other aspect of the Agreement shall be made or distributed without the
express prior written approval of the other Party.
14. Force Majeure.
Neither Party will be liable for any failure to perform (other than
payment obligations) due to unforeseen circumstances or causes beyond
its reasonable control, including, but not limited to, acts of God,
war, riot, embargoes, acts or civil or military authorities, fire,
flood, accident, shortages of fuel, raw materials or equipment,
provided that the delayed Party has taken reasonable measure to notify
the other in writing of the delay.
15. Miscellaneous.
15.1. Non Waiver. The failure of either Party to insist upon the
strict performance of any terms, covenants and conditions of
this Agreement at any time, or in any one or more instances,
or its failure to take advantage of any of its rights
hereunder, or any course of conduct or dealing, shall not be
construed as a waiver or relinquishment of any such rights or
conditions at any future time and shall in no way affect the
continuance in full force and effect of all the provisions of
this Agreement.
15.2. Relationship of Parties/Independent Contractors. Nothing
contained in this Agreement shall be deemed or construed as
creating a joint venture or partnership between QORUS and C2C
TELECOM. Neither Party is by virtue of this Agreement
authorized as an agent, employee or legal representative of
the other. Neither Party shall have the power to control the
activities and operations of the other and their status is,
and at all times will continue to be, that of independent
contractors. Neither Party shall have any authority to bind or
commit the other. Except as expressly agreed in writing each
Party shall bear its own costs and expenses incurred under or
in conjunction with performance of this Agreement.
15.3. Headings. Headings used in this Agreement are for convenience
and reference only and shall not be construed as altering the
meaning of this Agreement or any of its parts.
15.4. Applicable Law. This Agreement shall be interpreted construed
and governed in accordance with the laws of the State of
California, without regard to its conflict of law provisions.
15.5. Survival. The Parties agree that Section 6.3, 6.4, and
Articles 7, 10, 11, 12, 13, 14 and 15 shall survive the
expiration or any earlier termination of this Agreement.
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15.6. Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable, the remaining terms shall
not be affected. The Agreement shall be interpreted as if the
illegal, invalid or unenforceable provision had not been
included in it, and the invalid or unenforceable provision
shall be replaced by a mutually acceptable provision which,
being valid and enforceable, comes closes to the intention of
the Parties underlying the invalid or unenforceable provision.
15.7. Notices. All notices, request, demands, or communications
required or permitted hereunder shall be in writing, delivered
personally, by registered mail with return receipt, by
overnight delivery service, by electronic mail (with confirmed
receipt), or facsimile (with confirmed receipt), at the
respective addresses set forth below (or at such other
addresses as shall be given in writing by either Party to the
other). All notices, requests, demands or communications shall
be deemed effective upon receipt for personal delivery, on the
business day following the date of sending by electronic mail,
facsimile or overnight delivery service, or three days after
mailing. E-mail notices shall be effective upon receipt
provided that a confirmation copy thereof is posted as
provided above on the date of transmission.
QORUS: Chief Financial Officer
QORUS.COM
9600 Sepulveda Blvd.
Los Angeles, CA 90045
Fax (310) 258-8460
William F. Capps, Esq.
JEFFER, MANGELS, BUTLER & MARMARO LLP
2121 Avenue Of the Stars, 10th Floor
Los Angeles, CA 90067
Fax (310) 203-0567
C2C TELECOM: Gene Chu
Chief Executive Officer
C2C Telecom
1000 Freemont Ave. Ste 4203
Alhambra, CA 91803
15.8. Assignment. This Agreement shall be binding on and inure to
the benefit of the Parties hereto and their respective
successors and assigns. Neither Party may assign this
Agreement without the prior express written consent of the
other Party, which consent shall not be unreasonably withheld
or delayed; provided, however, either Party, without the
consent of the other, assign its rights and obligations
hereunder to an Affiliate, or to a successor in interest or to
a purchaser of all or substantially all of its assets or of
the assets of that portion of its business as to which this
Agreement pertains. Any prohibited assignment shall be null
and void.
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15.9. Entire Agreement. This Agreement, including Exhibit A, Exhibit
B and Exhibit C hereto constitutes the entire understanding of
the Parties, and supersedes all prior or contemporaneous
written and oral agreements, representations or negotiations
with respect to the subject matter hereof. This Agreement may
not be modified or amended except in writing signed by both
Parties.
15.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
C2C TELECOM, INC. QORUS.COM
By: By:
--------------------------------- --------------------------------
Name: Gene Chu Name:
Title: President Title:
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EXHIBIT A
SERVICES AND PRICING
SERVICE DESCRIPTION
o GENERAL:
- 5 MB allocated disk space for message storage
- Personal email address
- Personal direct DID or 800 (or 888/877) phone number for voice and
fax deposit and retrieval
o FAX CAPABILITIES:
- Fax to any fax number from web interface, Internet email client or
phone (retrieve existing fax from inbox via phone)
- Receive notice of incoming fax via pager or cell phone
- Send or forward fax to any fax number from telephone or browser
interface
- View faxes similarly to viewing e-mail
- Broadcast fax capabilities
- Forward fax to e-mail addresses
o E-MAIL CAPABILITIES:
- Send to and receive from all standard e-mail systems
- Send to multiple e-mail addresses
- Attach files to e-mail messages
- Send to any combination of e-mail, faxes, pagers
- Listen to e-mail on telephone in same fashion as listening to voice
mail
- Use QORUS features with existing e-mail clients
- Send to any fax number
- Send to multiple fax numbers
- Notification of e-mail arrival via pager or cell phone
Consolidation of multiple email addresses into QORUS account - color
coded by address
o VOICE MAIL CAPABILITIES:
- Leave voice mail in QORUS via telephone
- Retrieve voice mail from QORUS telephone access
- Retrieve voice mail from computer with multimedia PC
- Notification by fax if a voice mail is received
- Send, reply, or forward voice mail to e-mail using the telephone
interface
- Notification by page or cell phone if a voice mail is received
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o PAGING CAPABILITIES
- Page from telephone interface with address book option
- Send pages from browser interface with address book option
- Supports multiple paging providers: numeric, alphanumeric and pager
enabled cellular phones
o OTHER SERVICES
- Remote access to mailbox using the Internet or touch-tone phone
- Platform/operating system independent
- Full service e-mail/phone/fax/pager address book accessible from both
the Internet and the telephone interfaces
- Full scheduling features which allow user to create a unique set of
instructions for QORUS to handle, forward or hold incoming and outgoing
messages
- Message transmission events can be pre-set based on any combination of:
- Type of message(e-mail, fax, voice, page)
- Start and end date and/or start and end time
- Day of week
- Filter an incoming message by email address
- Address message to any type or individual
PRICING
o Qorus normally provides services on a flat monthly fee basis, but in this
agreement, the fee paid to QORUS shall be based upon the revenues and/or
profits generated by online advertising (sponsors, etc) and any minutes
driven through the combined Qorus and C2C systems.
o C2C Telecom, Inc will provide to Qorus on a monthly basis, 20% of the
advertising revenue from its website, pincity.com.
o C2C Telecom, Inc. will provide 50% of the gross margins earned through the
unified messaging accounts. (including minutes to call mailbox, to call
international or domestic long distance for the purpose of faxing or
leaving a voice-mail and retrieving messages via the calling card). Gross
margins shall mean all revenues less operating costs, but excluding
interest, depreciation, amortization and payments or distributions to the
owners of C2C (whether or not paid as salaries or dividends).
o Qorus shall have the right to examine the books and records of C2C Telecom
from time to time to determine C2C's compliance with this Agreement. In the
event of any shortfall, in addition to the shortfall, C2C shall promptly
pay the cost of the review.
o In its sales agreements for unified messaging, C2C will require its
customers to incur at least $1 monthly usage payments within the first
three (3) months. Should its customers fail to meet the usage requirement
in that period, C2C will either terminate their services or charge them a
monthly service fee. For the accounts which pay a monthly service fee, C2C
will pay Qorus seven(7) dollars per account per month.
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ADDITIONAL PRICING:
Pricing for additional features such as additional allocated disk space in 5MB
increments beyond 5 MB will be $.75 per month per subscriber.
Telco revenues for fax and pages sent from the UM platform and any
800/888/877-toll usage by subscribers for accessing an individual 8xx number,
will be shared by Qorus at a 50/50 gross margin split. C2C Telecom will bill
subscribers at no less than $.10 USD per minute billed at 60-second increments.
Qorus agrees to change all Qorus branding to pincity.com brand, including e-mail
address accounts, fax cover sheets, etc.
Any additional consulting, programming and/or development will be billed at
normal Qorus rates of US $110.00 per hour. Any out of pocket expenses, including
on-site visits, will be paid for by C2C Telecom.
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EXHIBIT B
OPERATING PLAN
MARKETING AND SALES
C2C Telecom will make best efforts to identify target customers, create
appropriate collateral, advertising and other specific sales efforts to secure
commitments from C2C Telecom's customers to buy Qorus services. Such activities
will be directed toward prospective market segments, which are known to have
clear need for Qorus services.
Initially, C2C Telecom will target its existing customer base. There after, it
will concentrate its marketing focus on the following:
MARKETING:
1. Media
a. Radio
b. Newspapers
c. Business wires
2. Internet
a. Banner Ads - Business / Travel sites
b. Search Engine Registration
c. Link Exchange
d. Targeted marketing - direct mail
3. Promotions
a. give away
b. referral program
c. special events
DISTRIBUTION CHANNELS:
1. Individuals - sign-up right on the web, hassle free.
2. Small Businesses - Allow to setup home or small offices anywhere
3. Corporations - customized services according each company's needs
Qorus will help C2C TELECOM secure customers through any or all of the following
means:
- - Supply existing marketing materials to C2C TELECOM for distribution or
original work for incorporation into C2C Telecom -developed materials.
- - Periodic visits to C2C TELECOM by Qorus personnel to assist with
presentation and explanation of Qorus services.
- - Promotional programs as mutually agreed by the parties.
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ACCOUNT CREATION/CLOSURE
C2C TELECOM customers will sign-up directly with C2C TELECOM by calling a
toll-free number or through a C2C Telecom-branded registration web page. In
either case, the customer may supply a pre-assigned reference number identifying
them as a C2C TELECOM customer and the appropriate account configuration.
The customer will be assigned appropriate telephone access numbers and email id.
The account will be available for usage at C2C Telecom's discretion.
BILLING
C2C TELECOM at the end of each month will provide to QORUS all Call Detail
Records from C2C's platform to assure compliance with the revenue/profit share
program.
Qorus will work with C2C Telecom in capturing usage of the system by subscribers
in order for C2C Telecom to bill their customers for additional storage, minutes
of usage, long distance faxes, etc. The rate table will contain agreed upon
minimum pricing between the Parties on a per minute charge and additional
storage will be billed at agreed upon minimum pricing between the Parties on a
per month for each additional 5MB.
CUSTOMER SUPPORT
C2C TELECOM will supply the first and second line of support to its users. This
includes telephone and email-based questions and problems. Qorus will provide
third tier support, which includes system failures only.
TRAINING
A. Qorus will provide customer service/technical support training to C2C
TELECOM service support technicians in order for C2C TELECOM to be able to
provide first and second tier support to C2C TELECOM Customers, and to
document escalation procedures. Estimated length of this training - 2 days.
C2C Telecom will pay out of pocket expenses but not for training.
SERVICE ENHANCEMENTS
Qorus will, from time to time, add features to the services. These additional
features will be made available to C2C TELECOM and its customers as well. If
Qorus adds significant functionality, which results in a retail price list
change, C2C TELECOM will be given the option to offer these services at a
revised pricing schedule to reflect such new services.
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OPERATIONS
o C2C Telecom will provide and provision all Telco circuits, Internet
bandwidth, co-location facility and backup power for QORUS communication
servers required to support C2C Telecom subscribers
o Upon QORUS request, C2C Telecom will also provide rack space for a monthly
fee of $300.00 to Qorus for other QORUS communication servers
o All UM accounts will be opened with a credit card and only accessible
through the C2C platform (or direct dial individual 8xx numbers to the
Qorus system) to allow usage of minutes and drive revenues for both
parties. At no time will accounts be opened that have UM account access
without driving Telco minutes that drive shared revenue for both parties.
If accounts are determined to be used with web access only and from a phone
that does not drive minutes on C2Cs network, then those accounts will have
the option to change to direct dial 8xx numbers to the Qorus platform
and/or pay a monthly fee (at a flat rate o f $7.00 for Qorus) for use of
the account. Any UM accounts that have been established for access through
the C2C platform may have inactive periods that do not drive revenue. These
accounts will be reviewed monthly by both parties to determine if they will
be closed or temporarily disabled.
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EXHIBIT C
Contacts
Contacts for Project Management
Qorus - John Kemp
C2C Telecom - Kwong Chen
Contacts for Marketing Support
Qorus - Tami Timperio, Senior Director of Marketing
C2C Telecom - Josephine Chang
Contacts for Third Tier Support
Qorus - Alan Paige -
Authorized C2C Telecom personnel for access to Qorus support - Wei Cheng
Contacts for Development and customization
Qorus - Bill Long
C2C Telecom - Kwong Chen
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EXHIBIT 6.10
AUTHORIZED RESELLER AGREEMENT
This Agreement (the "Agreement") is made and entered into this 31st day
of August, 1999 ("Effective Date"), by and between Qorus.com, a Delaware
corporation with its principal place of business at 9800 Sepulveda Boulevard,
Los Angeles, California, 90045 ("QORUS"), and CyberGate, with its principal
place of business at 350 NW 12th Street, Suite 200, Deerfield Beach, Florida
33442 ("CYBERGATE"). QORUS and CYBERGATE may be referred to hereafter
individually as a "Party" or collectively as the "Parties."
RECITALS
A. QORUS is in the business of providing certain electronic
messaging services;
B. CYBERGATE desires to market and resell those services
specified in the attached Exhibit A ("Services") to
CYBERGATE's Customers (as defined below); and
C. QORUS is willing to provide Services to CYBERGATE's Customers
in accordance with the terms of this Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, the Parties hereby agree as follows:
1. Definitions.
1.1. "Affiliate" of a Party shall mean a corporation, partnership,
joint venture or other entity directly or indirectly, through
one or more intermediaries, controlling, controlled by or
under common control with such Party.
1.2. "CYBERGATE Authorized Reseller" shall mean any current or
future entities who are authorized by CYBERGATE to resell
QORUS services.
1.3. "CYBERGATE Customers" shall mean any person, entity, or
CYBERGATE Authorized Reseller that is a customer of CYBERGATE,
or a customer of a CYBERGATE Authorized Reseller.
1.4. "Documentation" shall mean any user guides, manuals, operator
guides, installation guides, technical reference guides and
other similar reference materials generally made available by
QORUS to its customers to facilitate use of the Services,
which QORUS shall offer to CYBERGATE.
1.5. "Services" shall be defined as used in Exhibit A.
1.6. "Operating Plan" shall be defined in Exhibit B.
1.7. "Contacts" shall be defined in Exhibit C.
<PAGE> 2
2. Agreement to Provide Services/Grant of Rights
2.1. QORUS shall provide the Services to CYBERGATE Customers in
accordance with the pricing set forth in the attached Exhibit
A and the Operating Plan set forth in the attached Exhibit B.
2.2. QORUS hereby grants to CYBERGATE a non-exclusive,
non-transferable right to market, promote and resell the
Services to current and prospective CYBERGATE Customers
provided, however, that CYBERGATE may market, promote and
resell the Services through CYBERGATE Authorized Resellers,
provided that CYBERGATE shall be responsible for such third
parties' observance of the terms and conditions of this
Agreement.
2.3. QORUS hereby grants to CYBERGATE and CYBERGATE accepts the
right to re-brand the Services and Documentation for use in
accordance with the rights granted herein, the Documentation,
and branding guidelines as mutually agreed upon by the
Parties; provided, however, that (a): any such re-branding
will be subject to QORUS' written approval, may include a
requirement that a notice be included identifying the Service
as "Powered by QORUS" or such other name and/or copyright
notices as may be designated by QORUS, and in a predetermined
style, color and size no less than 125x50 pixels, and (b): any
branding with trademarks other than CYBERGATE's trademarks
will be subject to prior approval of QORUS, which may not be
unreasonably withheld by QORUS's.
2.4. QORUS hereby grants to CYBERGATE the right to utilize QORUS's
trade name and any trademarks and service marks (the
"Trademarks") in CYBERGATES's advertising and promotional
materials used for the sale of the Services provided that if
CYBERGATE utilizes the QORUS trade name and any trade marks it
shall use QORUS's current style, color and minimum size of
125x50 pixels. After distribution, mailing or posting on the
web, CYBERGATE will then submit such advertising and
promotional materials to QORUS for review. CYBERGATE has paid
no consideration for the use of the Trademarks, and nothing
contained in this Agreement shall give CYBERGATE any right,
title or interest in the Trademarks. CYBERGATE agrees that it
will not at any time during or after this Agreement assert or
claim any interest in or do anything which may adversely
affect the validity or enforceability of any Trademark. In
order to comply with QORUS's quality control standards,
CYBERGATE shall: (i) use the Trademarks in compliance with all
relevant laws and regulations; (ii) accord QORUS the right to
inspect all CYBERGATE Products, Advertising and Promotional
material used in conjunction with this service in order to
confirm that CYBERGATE's use of such Trademarks is acceptable
to QORUS; and (iii) not modify any of the Trademarks in any
way and not use any of the Trademarks on or in connection with
any goods or services other than the Services.
2.5. The grants made herein by QORUS to CYBERGATE are
non-exclusive. QORUS reserves the right in its discretion to
use other authorized resellers of the Services covered by this
Agreement within or outside of the Territory without
obligation or liability of any kind to CYBERGATE. QORUS also
reserves the right to sell the Services or similar products
and services to any person or entity not currently obtaining
the Services through CYBERGATE, using its own personnel or
third parties, without obligation or liability of any kind to
CYBERGATE; provided, however, QORUS shall not, during the term
of this agreement, knowingly contact
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current CYBERGATE Customers for any purpose (other than
through general advertising programs) except in the
performance of its obligations hereunder.
2.6. CYBERGATE acknowledges that nothing in this Agreement grants
CYBERGATE any ownership interest in the Services and that upon
termination of this Agreement, CYBERGATE shall make no claims
of such ownership or of any further interest in the Services.
2.7. No rights or licenses with respect to the Services or the
Trademarks (as defined below) are granted or deemed granted
hereunder or in connection herewith, other than those rights
expressly granted in this Agreement.
3. Additional Obligations of QORUS.
3.1. QORUS shall, at its own expense, provide software and
equipment necessary to provide remote access communications
(the "Equipment"). Such Equipment will be the sole property of
QORUS and QORUS will be solely responsible for its upkeep and
maintenance.
3.2. QORUS grants to CYBERGATE the right to reproduce the
Documentation solely for the purpose of distributing it to
CYBERGATE's customers using the Services. QORUS shall provide
CYBERGATE with a copy of the Documentation within a timely
period after execution of this Agreement, and shall thereafter
provide CYBERGATE on a timely basis any updates or revisions
thereto, for re-branding, reproduction and distribution by
CYBERGATE to CYBERGATE Customers in accordance with this
Agreement and in connection with the marketing and sale of the
Services. CYBERGATE shall maintain all copyright notices of
QORUS on the documentation.
3.3. QORUS shall provide CYBERGATE and CYBERGATE Authorized
Resellers with training as set forth in the Operating Plan.
3.4. QORUS shall provide the maintenance and support services for
CYBERGATE , as set forth in the Operating Plan, at no
additional cost to CYBERGATE.
3.5. QORUS shall notify CYBERGATE of new products and services not
described on Exhibit A and material enhancements which
substantially alter the functionality of the Services and are
available from QORUS after the Effective Date (collectively,
"New Services"). If QORUS and CYBERGATE agree that any such
New Services will be offered to CYBERGATE Customers, such New
Services will be added to Exhibit A.
4. Obligations of CYBERGATE.
4.1. CYBERGATE shall market and sell the Services to CYBERGATE
Customers and fulfill its obligations as described on Exhibit
B. CYBERGATE shall develop at its own expense, all marketing,
sales, and promotional materials used in connection with
CYBERGATE's marketing and sale of the Services. CYBERGATE
shall provide to CYBERGATE customers, at its expense, the
Documentation.
4.2. CYBERGATE shall accurately represent the Services to CYBERGATE
Customers or prospective CYBERGATE Customers and prospective
CYBERGATE Authorized Resellers
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and shall make no claims, representations or warranties on
behalf of QORUS in connection with the Services other than as
set forth in QORUS's Documentation, the forms or orders
provided by QORUS, or as otherwise expressly authorized by
QORUS in writing. CYBERGATE shall provide the Services to
CYBERGATE customers subject to the warranty limitations and
liability limitations set forth in Sections 10 and 11 below
and shall assure that all CYBERGATE Customers receive and
accept such warranty limitations and liability limitations.
4.3. CYBERGATE shall provide the first and second line maintenance
and support services for CYBERGATE Customers, as set forth in
the Operating Plan.
5. Customer Registration and Payment.
5.1. CYBERGATE Customers shall register for the Services as
described in Exhibit B.
5.2. QORUS's description and pricing of Services to CYBERGATE is
set forth in Exhibit A. Pricing to CYBERGATE Customers shall
be determined by CYBERGATE in its sole discretion. QORUS may
not increase the pricing of Services to CYBERGATE during the
term of this Agreement without CYBERGATE's prior written
consent. In the event that telecommunications expenses
incurred by QORUS increase, QORUS shall inform CYBERGATE of
said increase. CYBERGATE shall have the option of accepting or
rejecting said increase, but in the event of a rejection,
QORUS will have the option of terminating this Agreement.
5.3. QORUS shall be responsible for providing a single,
standardized daily electronic billing feed (format to be
determined and agreed upon between the Parties) to CYBERGATE
via electronic file transfer, which includes all service usage
and billing information, by CYBERGATE Customer, for the
previous month. Payment terms will be Net 30 days. Such
payments will be made by CYBERGATE to QORUS regardless of
CYBERGATE's ability to collect its charges from CYBERGATE
Customers.
5.4. CYBERGATE shall be responsible for and pay all taxes
applicable to amounts billed to CYBERGATE Customers under this
Agreement (excluding taxes based on QORUS's income, net worth
or capital).
5.5. All amounts due and owing to QORUS hereunder but not paid
by CYBERGATE on the due date thereof shall bear interest at
the rate of the lesser of: (i) one and one-half per cent (1
1/2%) per month; and (ii) the maximum lawful interest rate
permitted under applicable law. Such interest shall accrue on
the balance of unpaid amounts from time to time outstanding
from the date on which portions of such amounts become due and
owing until payment thereof in full.
6. Term and Termination.
6.1. The initial term of this Agreement shall commence as of the
Effective Date and will continue for a period of one (1) year
(the "Initial Term"). At the conclusion of the Initial Term
and any subsequent term, this Agreement shall automatically be
extended for an additional one (1) year term unless either
Party provides the other Party with written notice of its
intention not to renew this Agreement at least ninety (90)
days prior to the expiration of the then current term.
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6.2. This Agreement may also be terminated as follows:
a. At any time upon the mutual written agreement of the
Parties; or
b. By either Party immediately if the other Party fails
to cure any material breach within thirty days
following receipt of written notice thereof; or
c. By either Party immediately upon giving written
notice to the other Party if the other Party has a
receiver, administrator, administrative receiver or
liquidator appointed; if the other Party passes a
resolution liquidating the Party, if any court of
competent jurisdiction issues an order to that
effect, or if the other Party enters into any
arrangement with its creditors, becomes insolvent or
ceases to carry on business;
6.3. Upon termination or expiration of this Agreement, the Parties
agree to cooperate in good faith to effect an orderly wind-up
of the relationship created under this Agreement. QORUS shall
complete all orders, which it has accepted and CYBERGATE shall
remain obligated to pay all amounts owing to QORUS hereunder.
Termination of this Agreement shall not limit either party
from pursuing any other remedies otherwise available to it.
6.4. In the event of a termination of this Agreement pursuant to
its terms or upon expiration of this Agreement, QORUS shall
not have any obligation to CYBERGATE, or to any employee of
CYBERGATE or - CYBERGATE Authorized Reseller, for compensation
or for damages of any kind, whether on account of the loss by
CYBERGATE or such employee or CYBERGATE Authorized Reseller of
present or prospective sales, investments, compensation or
goodwill. CYBERGATE hereby indemnifies and holds QORUS
harmless from and against (i) any and all claims, costs,
damages and liabilities whatsoever asserted by any employee or
independent contractor of CYBERGATE; (ii) any claim of any
CYBERGATE Authorized Reseller under any applicable
termination, labor, social security or other similar laws or
regulations, except to the extent such claim arises out of the
breach by QORUS of this agreement or due to the negligence of
Qorus.
7. Confidentiality.
7.1. The Parties agree that the following provisions shall govern
the anticipated mutual disclosure and use of confidential and
proprietary information under this Agreement.
As used in this Agreement, the term "Proprietary
Information" shall mean information that is
transmitted or otherwise provided by or on behalf of
either party to the other Party related to this
Agreement and the services to be performed hereunder,
and that may be reasonably understood from legends,
the circumstances of disclosure or the nature of the
information itself, to be proprietary and/or
confidential to the disclosing party. Proprietary
Information may be disclosed in written or other
tangible form (including on magnetic media) or by
oral, visual or other means. Proprietary Information
shall include, without limitation, a Party's business
plan, customer names and information relating to the
customers, information regarding other material third
party relationships which a Party may obtain in the
course of performance under this Agreement, and
scientific or technical data, design or process.
Notwithstanding the foregoing, Proprietary
Information shall not include any information that:
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<PAGE> 6
(i) was publicly known at the time of the
discloser's communication thereof to the
recipient;
(ii) becomes publicly known through no fault of
recipient subsequent to the time of the
discloser's communication thereof to the
recipient;
(iii) was in recipient's possession free of any
obligation of confidence at the time of the
discloser's communication thereof to the
recipient;
(iv) is developed by the recipient independently
of and without reference to any of the
discloser's Proprietary Information or other
information that discloser disclosed in
confidence to any third party;
(v) is rightfully obtained by recipient from
third parties which made such disclosure
without restriction; or
(vi) is identified in writing by the discloser as
no longer proprietary or confidential.
7.2. In the event the recipient is required by law, regulation or
court order to disclose any of the discloser's Proprietary
Information, the recipient shall promptly notify the discloser
in writing prior to making any such disclosure in order to
enable the discloser to seek a protective order or other
appropriate remedy from the proper authority. The recipient
agrees to cooperate with the discloser in seeking such order
or other remedy. The recipient further agrees that if the
discloser is not successful in precluding the requesting legal
body from requiring the disclosure of the Proprietary
Information, it will furnish only that portion of the
Proprietary Information which is legally required and will
exercise all reasonable efforts to obtain reliable assurances
that confidential treatment will be accorded the Proprietary
Information.
7.3. The Parties acknowledge that their respective Proprietary
Information, as well as their respective intellectual property
rights pursuant to this Agreement, are unique and valuable,
and that breach by either Party of the obligations of this
Agreement regarding such Proprietary Information and
intellectual property rights will result in irreparable injury
to the affected Party for which monetary damages alone would
not be an adequate remedy. Therefore, the Parties agree that
in the event of a breach or threatened breach of such
provisions, the affected Party shall be entitled to specific
performance and injunctive or other equitable relief as a
remedy for any such beach or anticipated breach without the
necessity of posting a bond. Any such relief shall be in
addition to and not in lieu of any appropriate relief in the
way of monetary damages.
7.4. Each Party receiving Proprietary Information shall, as to any
Proprietary Information that may be disclosed to it by the
other Party hereunder: (i) use the Proprietary Information
only in the performance of this Agreement and (ii) protect
such Proprietary Information from disclosure to others, using
the same degree of care used to protect its own confidential
or proprietary information of like importance, but in any case
using no less than a reasonable degree of care. The recipient
may disclose Proprietary Information received hereunder to its
Affiliates and its employees and subcontractors, who have a
need to know, for the purpose of this Agreement, and who are
bound to protect the received Proprietary Information from
unauthorized use and disclosure provided that in any event the
recipient shall remain liable for breaches by any such
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third parties of the provisions of this Section. Proprietary
Information shall not otherwise be disclosed to any third
party without the prior written consent of the discloser.
8. Compliance with Regulations.
QORUS shall comply, in all material respects, with all applicable
statutes, laws, regulations, tariffs and orders adopted or issued by
any governmental authority governing the provisioning of the Services
by QORUS to CYBERGATE Customers including, but not limited to, all
relevant export and re-export controls under the U.S. Export
Administration Regulations and/or similar regulations of the U.S. or
any other country. CYBERGATE shall cooperate with QORUS as reasonably
necessary to permit QORUS to comply with such laws and administrative
regulations.
9. Representations and Warranties.
9.1. QORUS represents and warrants to CYBERGATE, its Authorized
Resellers (and no other person or entity) that:
a. the Services will perform substantially as described
in the Documentation. CYBERGATE's exclusive remedy
for breach of this warranty is QORUS re-performing
the Services for no additional charge;
b. it has not incorporated in the Services, and, to
QORUS's knowledge, the Services do not contain any
"time bomb", "worms", viruses, locks, drop dead
devices or other routines or components to permit
unauthorized access, disable the software or data,
harm the system on which the software is run or
performance and other actions which would impair the
value or operation of the Services;
c. to QORUS's knowledge, the Services do not infringe
upon or violate any patent, copyright, trademark, or
other intellectual property or proprietary right of
any third party and do not constitute a
misappropriation of trade secrets of any third party.
9.2. Year 2000 Compliance. QORUS represents and warrants to
CYBERGATE, its Authorized Resellers (and no other person or
entity) that the software which it has created or owns and
uses to deliver the Services CYBERGATE, will not be adversely
affected by the occurrence or use of dates before, on, or
after January 1, 2000 A.D., including dates and leap years
between the twentieth and twenty-first centuries ("Millennial
Dates"). QORUS additionally represents and warrants that it
has or will make commercially reasonable efforts to obtain
from third party vendors providing hardware or software used
by it in the delivery of the Services or otherwise satisfy
itself that such hardware or software will not be adversely
affected by the occurrence or use of the Millennial Dates. In
all cases, the parties agree that Year 2000 compliance of
Services will be dependent upon Year 2000 compliance of
CYBERGATE Customers' email systems and other software and
hardware.
10. Disclaimer on Warranties; Limitation of Liability.
10.1. EXCEPT AS SPECIFICALLY MADE IN THIS AGREEMENT, QORUS MAKES NO
OTHER WARRANTIES, EXPRESS OR IMPLIED, AND DISCLAIMS ANY
WARRANTY OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY OR
FITNESS FOR A
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PARTICULAR PURPOSE AS TO THE PRODUCTS AND SERVICES PROVIDED
UNDER THIS AGREEMENT.
10.2. EXCEPT AS IS PROVIDED IN ARTICLE 11 BELOW, UNDER NO
CIRCUMSTANCES SHALL EITHER PARTY, OR ANY AFFILIATE THEREOF BE
LIABLE TO THE OTHER PARTY OR TO ANY THIRD PARTY FOR ANY
SPECIAL, INCIDENTAL, INDIRECT, PUNITIVE, STATUTORY OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST REVENUE OR PROFITS OR
OTHER LOST ECONOMIC ADVANTAGE) ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR BREACH HEREOF, WHETHER SUCH CLAIMS ARE BASED
ON BREACH OF CONTRACT, STRICT LIABILITY, TORT, OR ANY OTHER
LEGAL THEORY AND EVEN IF THE OTHER PARTY KNEW, SHOULD HAVE
KNOWN, OR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
THE PARTIES HAVE AGREED THAT THE LIMITATION SPECIFIED IN THIS
SECTION WILL SURVIVE AND APPLY IF ANY LIMITED REMEDY SPECIFIED
IN THIS AGREEMENT IS FOUND TO HAVE FAILED OF ITS ESSENTIAL
PURPOSE.
10.3. Limited Damages. IN NO EVENT (EXCEPT AS IS PROVIDED IN ARTICLE
11.2 BELOW) SHALL QORUS's LIABILITY TO CYBERGATE AND
CYBERGATE's CUSTOMERS IN CONNECTION WITH THIS AGREEMENT EXCEED
IN THE AGGREGATE THE AMOUNTS PAID TO QORUS BY CYBERGATE UNDER
THIS AGREEMENT DURING THE PRIOR (12) TWELVE MONTHS. IN NO
EVENT (EXCEPT AS IS PROVIDED IN ARTICLE 11.2 BELOW) SHALL
QORUS's LIABILITY TO ANY CYBERGATE CUSTOMER IN CONNECTION WITH
THIS AGREEMENT EXCEED AMOUNTS PAID BY SUCH CUSTOMER FOR
SERVICERS PROVIDED UNDER THIS AGREEMENT DURING THE PRIOR
TWELVE (12) MONTHS. THIS LIMITATION APPLIES TO ALL CAUSES OF
ACTION IN THE AGGREGATE, INCLUDING WITHOUT LIMITATION ANY
ACTION FOR BREACH OF CONTRACT, BREACH OF WARRANTY, NEGLIGENCE,
STRICT LIABILITY, MISREPRESENTATION, AND OTHER TORTS. IN NO
EVENT SHALL QORUS's LIABILITY TO EITHER CYBERGATE OR ANY
CYBERGATE CUSTOMER FOR ANY FAILURE OF THE SYSTEM/SERVICES TO
BE AVAILABLE DURING ANY MONTH EXCEED THE AMOUNT PAID BY SUCH
CUSTOMER FOR THE SERVICES FOR SUCH MONTH
11. Indemnification
11.1. Each Party agrees to indemnify the other and its directors,
officers, agents and employees harmless from and against any
and all losses, liabilities, judgments, damages, costs and
expense, including reasonable attorneys' fees and court costs,
resulting from or arising out of any charges, claims, suits,
actions, causes of action, of any kind and description,
brought by any third party as a result of or in connection
with a breach of or default by a Party of any provision of, or
representations or warranties set forth in this Agreement,
except to the extent any of the foregoing is caused by the
negligence or willful misconduct of the other party.
11.2 QORUS agrees to indemnify CYBERGATE, its directors, officers,
agents and employees harmless from and against any and all
losses, liabilities, judgments, damages, costs and expense,
including reasonable attorneys' fees and court costs,
resulting from or arising out of any charges, claims, suits,
actions, causes of action, of any kind and description,
brought by any third party as a result of or in connection
with any claim that the use or sale of the Services by
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CYBERGATE or any CYBERGATE Customer infringes on the
intellectual property rights of any third party or constitutes
a misappropriation of a trade secret of any third party;
provided, however, that:
(a) In the event that any Service is held in a suit or
proceeding to infringe any intellectual property rights of a
third party and the use or reselling of such Service is
enjoined, or QORUS reasonably believes that it is likely to be
found to infringe or likely to be enjoined, then QORUS shall,
at its sole cost and expense, either (i) procure for CYBERGATE
the right to continue using and reselling such Service, or
(ii) modify such Service so that it becomes non-infringing.
(b) QORUS shall have no obligation for any claim of
infringement arising from: (i) any combination of Services
with products or services not supplied by QORUS, where such
infringement would not have occurred but for such combination;
(ii) the adaptation or modification of Services not performed
by QORUS, where such infringement would not have occurred but
for such adaptation or modification; (iii) the use of Services
in an application for which it was not designed or intended,
where such infringement would not have occurred but for such
use; or (iv) a claim based on intellectual property rights
claimed by CYBERGATE or any of its Affiliates, nor shall QORUS
have any obligation or liability where such claim is based
upon content transmitted through the Services.
(c) This Section 11.1 states CYBERGATE's sole and exclusive
remedy in the event that a Service infringes on the
intellectual property right of any third party.
11.3. In the event a claim which is covered by the terms of this
Section is made by a third party against either CYBERGATE or
QORUS, the party receiving the claim and entitled to
indemnification hereunder (the "Indemnified Party") shall
promptly notify the other party (the "Indemnifying Party") of
the claim and the indemnification obligation arising
thereunder. The Indemnifying Party shall be accorded control
of the defense and of all negotiations for settlement or
compromise of such claim and the Indemnified Party shall
cooperate with the Indemnifying Party in the defense and
settlement of such claim. The Indemnified Party may at its own
expense, be represented in such defense. The Indemnifying
Party shall promptly adjust, settle, defend or otherwise
dispose of the claim at its sole cost and expense. The
Indemnifying Party may not agree to any settlement, which
imposes liability on the Indemnified Party without the prior
written consent of the Indemnified Party.
11.4 In the event a claim is based partially on an indemnified
claim described in Section 11.1 above and partially on a
non-indemnified claim, or is based partially on a claim
indemnified by QORUS pursuant to Section 11.1 above and
partially on a claim indemnified by CYBERGATE pursuant to
Section 11.1 above, any payments and reasonable attorney fees
incurred in connection with such claims are to be apportioned
between the Parties in accordance with the degree of cause
attributable to each Party.
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12. Governing Law.
The laws of the State of Florida shall govern this Agreement and the
parties consent to the exclusive jurisdiction and venue in the state
and federal courts sitting Broward County, Florida, USA. Each party
will be responsible for its own attorneys' fees.
13. Publicity.
No news, media or other informational releases public announcements,
public disclosures, advertising or marketing materials concerning or
referencing any part of the terms and conditions of this Agreement,
including exhibits hereto, either Party's performance hereunder, or any
other aspect of the Agreement shall be made or distributed without the
express prior written approval of the other Party.
14. Force Majeure.
Neither Party will be liable for any failure to perform (other than
payment obligations) due to unforeseen circumstances or causes beyond
its reasonable control, including, but not limited to, acts of God,
war, riot, embargoes, acts or civil or military authorities, fire,
flood, accident, shortages of fuel, raw materials or equipment,
provided that the delayed Party has taken reasonable measure to notify
the other in writing of the delay.
15. Miscellaneous.
15.1. Non Waiver. The failure of either Party to insist upon the
strict performance of any terms, covenants and conditions of
this Agreement at any time, or in any one or more instances,
or its failure to take advantage of any of its rights
hereunder, or any course of conduct or dealing, shall not be
construed as a waiver or relinquishment of any such rights or
conditions at any future time and shall in no way affect the
continuance in full force and effect of all the provisions of
this Agreement.
15.2. Relationship of Parties/Independent Contractors. Nothing
contained in this Agreement shall be deemed or construed as
creating a joint venture or partnership between QORUS and
CYBERGATE. Neither Party is by virtue of this Agreement
authorized as an agent, employee or legal representative of
the other. Neither Party shall have the power to control the
activities and operations of the other and their status is,
and at all times will continue to be, that of independent
contractors. Neither Party shall have any authority to bind or
commit the other. Except as expressly agreed in writing each
Party shall bear its own costs and expenses incurred under or
in conjunction with performance of this Agreement.
15.3. Headings. Headings used in this Agreement are for convenience
and reference only and shall not be construed as altering the
meaning of this Agreement or any of its parts.
15.4. Survival. The Parties agree that Section 6.3, 6.4, and
Articles 7, 10, 11, 12, 13, 14 and 15 shall survive the
expiration or any earlier termination of this Agreement.
15.5. Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable, the remaining terms shall
not be affected. The Agreement shall be interpreted as if the
illegal, invalid or unenforceable provision had not been
included in it, and the invalid or unenforceable provision
shall be replaced by a mutually acceptable provision which,
being valid and enforceable, comes closes to the intention of
the Parties underlying the invalid or unenforceable provision.
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15.6. Notices. All notices, request, demands, or communications
required or permitted hereunder shall be in writing, delivered
personally, by registered mail with return receipt, by
overnight delivery service, by electronic mail (with confirmed
receipt), or facsimile (with confirmed receipt), at the
respective addresses set forth below (or at such other
addresses as shall be given in writing by either Party to the
other). All notices, requests, demands or communications shall
be deemed effective upon receipt for personal delivery, on the
business day following the date of sending by electronic mail,
facsimile or overnight delivery service, or three days after
mailing.
QORUS: Chief Financial Officer
QORUS.COM
9800 Sepulveda Blvd., Suite 318
Los Angeles, CA 90045
Fax (310) 258-8460
CYBERGATE: COO, Jeff Rubenstein
CYBERGATE
350 NW 12th Avenue, Suite 200
Deerfield Beach, FL 33442
Fax (954) 429-8006
15.7. Assignment. This Agreement shall be binding on and inure to
the benefit of the Parties hereto and their respective
successors and assigns. Neither Party may assign this
Agreement without the prior express written consent of the
other Party, which consent shall not be unreasonably withheld
or delayed; provided, however, either Party, without the
consent of the other, assign its rights and obligations
hereunder to an Affiliate, or to a successor in interest or to
a purchaser of all or substantially all of its assets or of
the assets of that portion of its business as to which this
Agreement pertains. Any prohibited assignment shall be null
and void.
15.8. Entire Agreement. This Agreement, including the Exhibits
attached hereto, constitutes the entire understanding of the
Parties, and supersedes all prior or contemporaneous written
and oral agreements, representations or negotiations with
respect to the subject matter hereof. This Agreement may not
be modified or amended except in writing signed by both
Parties.
15.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
CYBERGATE QORUS.COM
Signature: Signature:
--------------------------- ---------------------------
Name: Jeffrey D. Rubenstein, Esq. Name: Richard E. Burton
Date: August 30, 1999 Date: August ____, 1999
Title: Chief Operating Officer Title: President
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EXHIBIT A
SERVICES AND PRICING
SERVICE DESCRIPTION
o GENERAL:
- 20MB allocated disk space for message storage
- Personal email address
- Personal direct DID and 800 (or 888/877) phone number for voice and
fax deposit and retrieval
o FAX CAPABILITIES:
- Fax to any fax number from web interface, Internet email client or
phone (retrieve existing fax from inbox via phone)
- Receive notice of incoming fax via pager or cell phone
- Send or forward fax to any fax number from telephone or browser
interface
- View faxes similarly to viewing e-mail
- Broadcast fax capabilities
- Forward fax to e-mail addresses
o E-MAIL CAPABILITIES:
- Send to and receive from all standard e-mail systems
- Send to multiple e-mail addresses
- Attach files to e-mail messages
- Send to any combination of e-mail, faxes, pagers
- Listen to e-mail on telephone in same fashion as listening to voice
mail
- Use QORUS features with existing POP3 e-mail clients
- Send to any fax number
- Send to multiple fax numbers
- Notification of e-mail arrival via pager or cell phone
- Consolidation of multiple email addresses into QORUS account - color
coded by address
o VOICE MAIL CAPABILITIES:
- Leave voice mail in QORUS via telephone
- Retrieve voice mail from QORUS telephone access
- Retrieve voice mail from computer with multimedia PC
- Notification by fax if a voice mail is received
- Send, reply, or forward voice mail to e-mail using the telephone
interface
- Notification by page or cell phone if a voice mail is received
o PAGING CAPABILITIES
- Page from telephone interface with address book option
- Send pages from browser interface with address book option
- Supports multiple paging providers: numeric, alphanumeric and pager
enabled cellular phones
o OTHER SERVICES
- Remote access to mailbox using the Internet or touch-tone phone
- Platform/operating system independent
- Full service e-mail/phone/fax/pager address book accessible from both
the Internet and the telephone interfaces
- Full scheduling features which allow user to create a unique set of
instructions for QORUS to handle, forward or hold incoming and
outgoing messages
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- Message transmission events can be pre-set based on any combination
of:
- Type of message(e-mail, fax, voice, page)
- Start and end date and/or start and end time
- Day of week
- Filter an incoming message by email address
- Address message to any type or individual
PRICING
QORUS provides services on a flat monthly fee basis. QORUS will bill CYBERGATE
USD $8.00 per month/per subscriber. QORUS' suggested standard retail price for
standard full service: US$16/mo
ADDITIONAL PRICING:
Pricing for additional features such as additional allocated disk space in 5MB
increments beyond 20MB will be billed to CYBERGATE at $.75 per 5MB increment per
month per subscriber.
Telco revenues for fax and pages outside of local California DID area code and
any 800/888/877-toll usage by subscribers, will be billed to CYBERGATE at $.075
USD per minute billed at 6 second increments.
Private labeling of the system to reflect CYBERGATE logos/brand is usually a
one-time fee of US $10,000.00 but waived for CYBERGATE.
Any additional consulting, programming and/or development (excluding repair to
the existing Services) will be billed at normal QORUS rates of US $110.00 per
hour. Any out of pocket expenses, including on-site visits, will be paid for by
CYBERGATE. Qorus must obtain prior written approval before commencing activities
for which CYBERGATE will incur the types of expenses described in this
paragraph.
START-UP PROGRAM:
Upon presentation of satisfactory incentive plans to accelerate market
penetration, QORUS will participate with CYBERGATE in developing and
implementing appropriate start-up programs. CYBERGATE and QORUS will each
provide $25,000.00 USD for marketing funds to be used in driving take-up of the
service. These funds will be used in programs jointly developed by QORUS and
CYBERGATE.
13
<PAGE> 14
EXHIBIT B
OPERATING PLAN
MARKETING AND SALES
CYBERGATE will make reasonable efforts to identify target customers, create
appropriate collateral, advertising and other specific sales efforts to secure
commitments from CYBERGATE's customers to buy QORUS services. Such activities
will be directed toward prospective market segments, which are known to have a
clear need for QORUS services.
QORUS will help CYBERGATE secure customers through any or all of the following
means:
- - Supply existing marketing materials to CYBERGATE for distribution or
original work for incorporation into CYBERGATE -developed materials.
- - Periodic visits to CYBERGATE by QORUS personnel to assist with presentation
and explanation of QORUS services.
- - Promotional programs as warranted (further discussion required)
ACCOUNT CREATION/CLOSURE
CYBERGATE customers will sign-up directly with CYBERGATE by calling a toll-free
number or through a CYBERGATE-branded registration web page. In either case, the
customer may supply a pre-assigned reference number identifying them as a
CYBERGATE customer and the appropriate account configuration.
The customer will be assigned appropriate telephone access numbers and email id.
The account will be available for usage at CYBERGATE's discretion within a
reasonable amount of time.
QORUS will work with CYBERGATE in providing an electronic means to interface
with CYBERGATE's existing account creation process. This interface detail will
be outlined in further discussion between the Parties.
The electronic means will allow CYBERGATE to disable or temporarily disable the
account for non-payment.
BILLING
QORUS will bill CYBERGATE at the end of each day electronically for those users
whose 30-day signup anniversary falls on that day. This includes the flat
monthly fee of $8.00 USD and for associated additional charges (additional
storage, minutes of toll usage, long distance faxes, etc.)
QORUS will provide to CYBERGATE an electronic means to allow CYBERGATE to bill
their customers for additional storage, minutes of toll usage, long distance
faxes, etc. The rate table will contain $.10 (or whatever pricing CYBERGATE
sets) per minute for these charges and additional storage will be billed $1.00
(or whatever pricing CYBERGATE sets) per month for each additional 5MB.
CyberGate will be provided an electronic means of imposing credit limits on any
Customer.
CUSTOMER SUPPORT
CYBERGATE will supply the first and second line of support to its users. This
includes telephone and email-based questions and problems. QORUS will provide
third tier support that includes system failures only.
14
<PAGE> 15
TRAINING
A. QORUS will provide customer service/technical support training to CYBERGATE
service support technicians at the CYBERGATE facility in Deerfield Beach,
FL in order for CYBERGATE to be able to provide first and second tier
support to CYBERGATE Customers, and to document escalation procedures.
Estimated length of this training - 2 days. CYBERGATE will pay out of
pocket expenses but not for training.
SERVICE ENHANCEMENTS
QORUS will, from time to time, add features to the services. These additional
features will be made available to CYBERGATE and its customers as well. If QORUS
adds significant functionality, which results in a retail price list change,
CYBERGATE will be given the option to offer these services at a revised pricing
schedule to reflect such new services.
PROJECT PLAN ESTIMATES
1. Contract execution - Aug. 31
2. Begin working on development and implementation of project plan to include
interface to billing and provisioning APIs, branding, minor changes based
on requests - Aug 30 - 4 to 6 weeks completion
3. Provisioning of 800#s and circuits at QORUS selected site - Begin Aug 30 -
4 to 6 weeks to completion
4. Testing of system for acceptance and any minor configuration updates -
appx. two weeks from the completion of number three
5. Full production launch between Oct 7 - 10, 1999
6. All marketing and advertising developed and implemented parallel to these
other projects
7. Aug. 30 -31- gather all CyberGate's requirements for branding and changes
to determine feasibility and timeframes.
15
<PAGE> 16
EXHIBIT C
Contacts
Contacts for Marketing Development
QORUS - John Kemp, VP of Marketing, [email protected]
CYBERGATE - Tom Benham Jr, VP of Marketing and Product Development
Contacts for Third Tier Support
QORUS - Alan Paige - mobile phone number 909-553-2030
Authorized CYBERGATE personnel for access to QORUS support - Kaushik Chokshi,
VP, Engineering - others to be added
Contacts for Development and Customization
Branding, API support contact QORUS - Bill Long, [email protected]
CYBERGATE - Jack Prehoda, VP of IS, 954.429.8110
16
<PAGE> 1
EXHIBIT 6.11
MASTER AGREEMENT
THIS MASTER AGREEMENT ("Agreement") is dated the 10th day of September, 1999 by
and between MOORE BUSINESS COMMUNICATION SERVICES, a division of Moore North
America, Inc., with offices located at Three Hawthorn Parkway, Vernon Hills,
Illinois 60061 ("MBCS"), and QORUS.COM, INC., with offices located at QORUS,
9800 Sepulveda Boulevard, Suite 318, Los Angeles, California 90045 ("QORUS").
- RECITALS -
Subject to the terms and conditions of this Agreement, MBCS desires from time
to time to obtain or have provided on its behalf in connection with its
customers, certain services offered by QORUS and QORUS desires to provide such
services to MBCS as requested by MBCS.
NOW, THEREFORE, in consideration of the mutual promises and covenants contained
herein and other good and valuable consideration, the receipt of which is
hereby acknowledged by the parties, MBCS and QORUS agree as follows:
1. SCOPE OF AGREEMENT; RELATIONSHIP OF PARTIES.
1.1 Scope of Agreement. From time to time during the term of this Agreement,
MBCS shall request QORUS to provide to MBCS and QORUS may agree to provide to
MBCS certain services ("Services") set forth in a Statement of Work to be
executed by the parties hereto. Each Statement of Work shall be substantially
in the form annexed hereto as Schedule A and made a part hereof, shall
incorporate therein all of the terms and conditions of this Agreement, and
shall contain such additional terms and conditions as MBCS and QORUS shall
agree upon. This Agreement shall not obligate MBCS to order from QORUS any
Services or QORUS to agree to provide them but merely establishes the terms and
conditions controlling if, as, and when a Statement of Work is entered into by
MBCS and QORUS and Services are ordered.
1.2 Relationship of Parties.
1.2.1 To the extent that any of the Products or Services are used by MBCS in
connection with work performed by MBCS for its customers, MBCS shall at all
times be the prime contractor and QORUS shall act only as supplier of the type
of Services covered under this Agreement. Unless otherwise expressly agreed to
in
<PAGE> 2
writing by MBCS, all interface by QORUS with customers of MBCS shall be by or
through MBCS.
1.2.2 Each party will act as an independent contractor and not as an agent for
the other for any purpose, and neither party shall have authority to bind the
other except to the extent authorized herein. QORUS shall indemnify MBCS
against all liability and loss in connection with, and shall assume
responsibility for, contributions imposed as required under employment
insurance, social security, and income tax laws with respect to QORUS and its
employees and subcontractors engaged in the performance of this Agreement.
1.3 Non-Exclusive Agreement. It is expressly understood and agreed that this
Agreement does not establish an exclusive relationship between the parties and
it is, therefore, understood that either party may contract with other vendors,
customers, or third parties for comparable or identical products, services,
and/or relationships so long as the provisions of this Agreement are not
otherwise breached.
1.4 Periodic Meetings. The parties shall arrange to have periodic meetings (not
more often than quarterly) for the purpose of discussing the status of the
business relationship and also to discuss and review, if and when pertinent,
(a) cost reduction initiatives with the intent of decreasing overall costs for
the Services, and (b) marketing and planning initiatives.
2. TERM.
2.1 This Agreement shall be for an initial period of five (5) years and
thereafter shall be automatically renewed for additional successive one-year
periods unless written notice of termination is given by either party to the
other not less than ninety (90) days prior to the expiration of the initial
term or any renewal term.
2.2 Notwithstanding the foregoing, the term for each Statement of Work shall be
as set forth on each such Statement of Work, and this Agreement shall be
considered to remain in effect so long as any Statement of Work remains in
effect.
3. PRICING; INVOICING.
3.1 Prices. Prices for the Services shall be as set forth in each particular
Statement of Work and shall be consistent with the Pricing Schedule attached
hereto as Schedule C. Unless otherwise provided for in the Statement of Work,
prices are firm for the initial twelve (12) months of each Statement of Work
and thereafter can be revised annually on thirty (30) days prior written notice
to MBCS but in no event shall the annual increase in the prices exceed the
greater of (i) the percentage increase in the consumer price index or (ii) five
percent (5%) per year. If MBCS determines that a price increase is
unacceptable, it may terminate the Statement of Work on fifteen (15) days
notice at any time prior to the date on which the price increase goes into
effect.
<PAGE> 3
3.2 Most Favored Customer. QORUS represents and warrants that the prices,
terms, and conditions offered by it to MBCS through this Agreement shall, at
all times, be equal to or more favorable to MBCS than those offered to any
other customer of QORUS which purchases similar types and amounts of services.
This Agreement shall automatically be amended to include prices, terms, or
conditions that are more favorable and which have been extended to any other
customer who has purchased similar types and amounts of services so that such
prices, terms, or conditions shall be extended to MBCS.
3.3 Taxes. MBCS shall be solely responsible for and shall pay QORUS all taxes
and similar charges levied, assessed, or imposed as a result of the Services
provided by QORUS excepting QORUS franchise taxes and taxes based upon income
or gross receipts, and excluding any costs of licenses and fees which are
generally required to enable QORUS to engage in its business. All sales taxes
that may be applicable to the Services shall be collected by QORUS from MBCS
unless MBCS furnishes to QORUS exemption certificates with respect thereto.
3.4 Reimbursement of Expenses. MBCS shall not reimburse QORUS for any business
expenses unless such business expenses have been pre-approved in writing by an
MBCS authorized representative. All statements and claims submitted for
reimbursement of pre-approved expenses shall be in the form attached hereto as
Schedule B and supported by documentation as described on Schedule B or in the
applicable written pre-approval.
3.5 Invoicing. QORUS will invoice MBCS for all Services provided as provided
for in an order and for any pre-authorized business expenses. Undisputed
invoices shall be due and payable thirty (30) days after receipt of the invoice
by MBCS and all supporting documentation required pursuant to Schedule B or any
applicable Statement of Work. Invoices not paid when due shall bear interest at
the lesser of one-and-one-half percent (1-1/2%) per month or the maximum amount
permitted by law. In the event of a bona fide dispute regarding any invoice,
the undisputed portion shall be paid in accordance with the foregoing, and the
disputed portion shall be paid into an interest-bearing bank account in the
joint names of the parties hereto at a mutually agreed upon national savings
bank until resolution of the dispute, with the interest earned to be paid over
to the prevailing party.
<PAGE> 4
4. ORDERING AND PROVIDING PRODUCTS AND SERVICES.
4.1 Submission of Orders. From time to time MBCS will submit a Statement of
Work to QORUS. Each Statement of Work will set forth (a) the Services to be
provided by QORUS, (b) the prices for the Services, (c) the time within which
the Services are to be provided, and (d) any additional or modified terms which
will apply. QORUS will have five (5) business days from the date the Statement
of Work is submitted to provide MBCS with written notice of its acceptance of a
Statement of Work. If MBCS does not receive timely written notice of acceptance
from QORUS, the Statement of Work shall be deemed rejected and QORUS shall not
be required to provide the Services. Except as otherwise specified in a
Statement of Work, all of the terms and conditions set forth in this Agreement
shall apply to the Services to be provided. In the event of any conflict or
inconsistency between the terms and conditions set forth in a Statement of Work
and the terms and conditions set forth in the body of this Agreement, the terms
and conditions set forth in the Statement of Work shall be controlling.
4.2 Performance by QORUS. QORUS agrees to provide the Services (including,
without limitation, the products of any deliverables), described in the
Statement of Work. All Services shall be provided in accordance with the
schedules set forth in the Statement of Work. All Services shall be performed
and provided strictly in accordance with the terms and conditions of this
Agreement, the Statement of Work, and all applicable specifications and
instructions. MBCS may be required to provide the Services to its customers
pursuant to a schedule in the prime contract, and the failure by QORUS to
timely provide and perform the Services may result in expense and damage to
MBCS. MBCS agrees to advise QORUS in writing of all schedules contained in
applicable prime contracts. Time is therefore of the essence in this Agreement
and in the event that performance is not times, then in addition to all other
rights MBCS may have against QORUS, MBCS reserves the right to cancel, purchase
elsewhere, and hold QORUS liable, subject to the limitations set forth in this
Agreement or the applicable Statement of Work.
4.3 Force Majeure. Neither party will be deemed to be in default for any delay
or failure in performance, and either party is excused from performance and
shall not be liable for any delay in delivery, or for non-delivery, in whole or
in part, arising out of conditions caused by the occurrence of any contingency
beyond its reasonable control and without its fault or negligence. If any such
conditions occur, the party claiming force majeure excuse will promptly give
notice to the other party. Performance by both parties will be suspended for
the duration of the condition and will resume once the condition ceases to
exist.
4.4 Change Control Process. MBCS and QORUS agree that a Statement of Work may
be amended in writing to provide for any additional Services to be provided or
changes to the Services and which shall be effected through the Change Control
Process. If MBCS desires to make any changes to the Services, whether before or
after an acceptance thereof, MBCS shall notify QORUS of the proposed change in
writing (or orally, with the requested change promptly confirmed
<PAGE> 5
in writing). QORUS shall inform MBCS within five (5) business days thereafter
of the estimated cost of making such change and the effect, if any, on the
timetable for completion of the Services and provide a written proposal to
complete the Services as so changed. If MBCS accepts in writing the proposal,
the Statement of Work shall be deemed amended, to the extent of the changes
agreed to by the parties. If the parties are unable to reach agreement as to
completion of the Service as amended to take into account the changes proposed
by MBCS and such changes are due to changes required by the customer(s) of
MBCS, MBCS may terminate the Statement of Work and shall pay QORUS all fees for
Services provided through the date of termination and reasonable time and
out-of-pocket expenses incurred by QORUS with respect to the start-up for the
particular project and not yet realized by QORUS over the initial term of such
Statement of Work as measured on a straight line basis. Payment thereof shall
be in lieu of payment referenced in Section 15.2 hereof.
5. DELIVERY AND TESTING.
5.1 Delivery. QORUS shall ship all deliverables F.O.B. destination. Costs for
expediting any shipment in order to meet scheduled delivery dates will be borne
by QORUS unless otherwise agreed upon in advance and in writing by MBCS. QORUS
shall bear the risk of loss until the deliverables have been received at the
destination indicated by MBCS.
5.2 Testing.
(a) If provided for in the Statement of Work, MBCS and QORUS will perform
agreed upon preliminary tests ("beta test") during time periods specified
in the Statement of Work, to demonstrate to the reasonable satisfaction of
MBCS that the Services and deliverables can operate in accordance with the
applicable specifications.
(b) Upon completion by QORUS and as may be provided for in the Statement of
Work, MBCS will test and evaluate each Service and deliverable provided by
QORUS during a specified test period as defined in the Statement of Work
to determine whether it conforms, appears and functions in accordance with
the specifications set forth in the Statement of Work. Prior to or at the
end of the testing period, MBCS shall inform QORUS whether the Services
and deliverables developed by QORUS have passed the acceptance tests. In
the event of a failure to pass, MBCS shall advise QORUS as to which
aspects have failed and QORUS shall, at no cost to MBCS, remedy such
failure and deliver the corrected version within the time period
established in the Statement of Work for retesting, or if none, within
fifteen (15) days. In the event the corrected version is not accepted by
MBCS, MBCS may, in its sole discretion, unless otherwise set forth in the
applicable Statement of Work either (1) again advise QORUS of the aspect
of the failure and QORUS shall, in accordance with the foregoing, provide
a corrected version for retesting, or (2) terminate the Statement of Work,
receive a full refund of all monies paid by it to QORUS with
<PAGE> 6
respect to such Service or deliverable and hold QORUS responsible for any
losses or liability that may be incurred by MBCS as a result of QORUS'
failure to perform, subject to the limitations set forth in this Agreement
or the applicable Statement of Work.
6. CONFIDENTIALITY; NON-COMPETITION.
6.1 Confidentiality.
(a) Each party acknowledges that in the course of 's providing services to
MBCS it may receive information and documents concerning the other or its
customers which contain information which is confidential and proprietary
to the disclosing party and/or its customers including, without
limitation, the following: technical specifications, information
concerning current, future, or proposed Services and combinations of
Services; product and service descriptions; business data; systems,
software and hardware design, plans combinations and architecture;
functional specifications; passwords and security procedures; computer
programs; specifications; customer or prospective customer or client lists
and printouts; records, procedure; data management; marketing, sales or
strategic business plans; and any or all other information, data or
materials relating to the business, trade secrets and technology of the
disclosing party, its customers, clients, employees, business affairs, and
affiliates (all of the foregoing are collectively referred to as
"Confidential Information").
(b) Each party shall maintain all of the other's Confidential Information in
confidence, shall maintain a secure system for its storage and handling,
and shall not use or disclose the Confidential Information to any third
person unless such use or disclosure is required for information to any
third person unless such use or disclosure is required for the performance
of its obligations under this Agreement and is made pursuant to a written
confidentiality agreement at least as extensive as the confidentiality
provisions of this Agreement, and then only with the prior written
approval of MBCS. Each shall inform each of its employees, subcontractors,
and agents of the confidentiality provisions of this Agreement. Neither
the recipient party nor its employees, subcontractors, or agents will
reveal, duplicate, or otherwise make available, any portion of the
Confidential Information except on a need to know basis, nor allow any
other person to copy, reproduce, or disclose, in whole or in part, the
Confidential Information, without the prior written approval of the
disclosing party. Each party further agrees to use the other's
Confidential Information only in and for performance of its obligations
pursuant to this Agreement and agrees not to use, disclose, or exploit the
other's Confidential Information as part of or in the development of any
product, service, idea, process, invention, discovery, work, or writing of
any kind except as requested by the disclosing party.
(c) Nothing herein shall limit a recipient party's disclosure of Confidential
Information which (i) is made public by the disclosing party, (ii) the
recipient party can show was rightfully in its possession at the time of
disclosure by the disclosing party to
<PAGE> 7
the recipient party and was not acquired, directly or indirectly, from the
disclosing party or any other person in violation of a restriction on
disclosure; (iii) at the time of disclosure by the disclosing party to the
recipient party, is in the public domain or which, after disclosure by the
disclosing party to the recipient party, becomes part of the public domain
by publication or otherwise through no action or fault of the recipient
party; (iv) was rightfully received by the recipient party from a third
person having the legal right to transmit the Confidential Information
free of any obligation of confidence; (v) is independently developed by
the recipient party without use of the Confidential Information; or (vi)
which the recipient party is required to disclose by law. The recipient
party shall notify the disclosing party immediately if a subpoena or other
legal process or demand related to the Confidential Information is served
upon or received by the recipient party or any employee, subcontractor, or
agent of the recipient party, and the recipient party shall cooperate at
the disclosing party's expense in any lawful effort by the disclosing
party to contest such subpoena or other legal process or demand.
(d) QORUS shall not advertise or publish the fact that the parties have
entered into this Agreement or otherwise use the name, logo, or trademarks
of MBCS or Moore North America, Inc. in any advertisement or other
publicity without the prior written consent of MBCS and subject to the
right of MBCS to revoke such consent at any time upon notice to QORUS.
6.2 Non-Competition. So long as a Statement of Work remains in effect and
thereafter for a period of twelve (12) months following its termination, QORUS
agrees that it will not, nor will it permit or allow any of its directors,
officers, employees, agents, or representatives to, directly or indirectly,
either for QORUS or for any entity in which QORUS has an ownership interest, or
as an agent on behalf of any person, firm, joint venture, partnership,
corporation, or any other entity, solicit, divert, take away, or attempt to
solicit, divert, or take away from MBCS and divert to QORUS or any affiliate of
QORUS any of the business of any customer that is disclosed by MBCS to QORUS
and with respect to which QORUS is providing Services on behalf of MBCS;
provided, however, that if either (a) MBCS, in its sole discretion, decides not
to renew its contract with such customer or (b) MBCS decides to replace QORUS
with a third party to provide the services to a customer, the preceding
restriction on competition shall not be applicable. Notwithstanding the
foregoing, MBCS understands and acknowledges that QORUS markets and distributes
its services through other third parties, and agrees that (i) nothing herein
shall be deemed to restrict in any way the right of any independent third party
who distributes services provided by QORUS ("Distributor") from pursuing any
business opportunity, and (ii) QORUS shall be permitted to provide services to
any customer brought by any Distributor, even if it could not have solicited
such customer directly as a result of its agreement
<PAGE> 8
hereunder, so long as it did not bring such customer to Distributor's attention
or provide direct assistance other than providing pricing and terms. Further,
any general advertising (whether by mail, broadcast or otherwise) by QORUS
shall not be deemed to be a "solicitation" for the purposes of this Section
6.2.
6.3 Injunctive Relief. QORUS acknowledges that any breach of the provisions of
this section of this Agreement will cause MBCS immediate and irreparable harm
for which there are no adequate remedies at law and will entitle MBCS to
immediate injunctive relief, in addition to any other remedies which may be
available. The provisions of this Section shall survive the expiration or
earlier termination of this Agreement.
7. OWNERSHIP.
(a) MBCS Intellectual Property. For purposes of this Agreement, MBCS
Intellectual Property includes: any and all patents, copyrights, trade
secret rights, MBCS Confidential Information, and other intellectual
property owned by MBCS on an MBCS customer, the ownership of which either
(i) predates the date of this Agreement, or (ii) arises exclusively as a
result of independent development by MBCS and not as a result of MBCS'
performance under this Agreement, or of MBCS' exposure to any QORUS
Confidential Information, and in either case, all derivatives thereof.
QORUS will return all MBCS Intellectual Property to MBCS upon termination
of this Agreement. MBCS grants QORUS a limited non-exclusive license to
use MBCS Intellectual Property provided by MBCS to QORUS solely to the
extent necessary for QORUS to perform its obligations under this
Agreement.
(b) QORUS Intellectual Property. For purposes of this Agreement, QORUS
Intellectual Property includes: any and all patents, copyrights, trade
secret rights, QORUS Confidential Information, and other intellectual
property owned by QORUS, the ownership of which by QORUS either (i)
predates the date of this Agreement, or (ii) arises exclusively as a
result of independent development by QORUS and not as a result of QORUS'
performance under this Agreement, or of QORUS' exposure to any MBCS
Confidential Information, and in either case, all derivatives thereof.
MBCS will return all such QORUS Intellectual Property to QORUS upon
termination o this Agreement. QORUS grants MBCS a limited non-exclusive
license to use QORUS Intellectual Property provided by QORUS to MBCS
solely to the extent necessary for MBCS to utilize the Services to be
provided by QORUS pursuant to this Agreement.
(c) Ownership of Intellectual Property. Unless otherwise expressly transferred
by QORUS, QORUS Intellectual Property shall remain the property of QORUS.
Unless otherwise expressly transferred by MBCS, MBCS Intellectual Property
shall remain the property of MBCS. Each party shall have no restriction
under
<PAGE> 9
this Agreement on its rights to use its own intellectual property for
purposes related to that party's business activities.
(d) Similar Technology. Nothing contained in this Section 7 shall prevent
either party from independently developing technology similar to that
owned by the other party provided such independently developed technology
is developed without use of the other's Confidential Information and does
not infringe any of the other party's intellectual property rights. (e)
QORUS acknowledges and agrees that MBCS may desire that certain materials
designated on Statement of Works as "Works For Hire To be Owned by MBCS"
(whether tangible or intangible) resulting or derived from any of the
Services, including but not limited to source codes pertaining to the
Services and any deliverable, and other materials developed or prepared by
QORUS and its employees, subcontractors, and agents pursuant to or in
connection with this Agreement, whether in hard copy or any electronic or
other media (all of the foregoing that are or may be subject to copyright
protection are herein collectively referred to as "Works" and all of the
foregoing, including, without limitation, the Works, are herein
collectively referred to as "Materials"), be considered works made for
hire by QORUS for MBCS. If so designated on any Statement of Work, such
Works shall be the sole and exclusive property of MBCS, whether developed,
created, conceived, or made solely by QORUS or in collaboration with any
person. In such case MBCS shall also own all intellectual property rights
in and to the Materials including, without limitation, use and derivative
use thereof, patent and copyright rights (including, without limitation,
copyrights in source code, object code, screen formats, program structure,
sequence and organization, and audiovisual elements). QORUS
(e) If, by operation of law or otherwise, any Material designated on a
Statement of Work as a "Work For Hire To be Owned by MBCS" is deemed not
to be a work made for hire, QORUS hereby irrevocably and unconditionally
sells, conveys, transfers and assigns, to MBCS and its successors and
assigns, all right, title, interest and ownership in and to all such
Materials. From time to time, upon request of MBCS, QORUS and/or its
personnel shall confirm such assignment by execution and delivery of such
assignments or other written instruments as MBCS may request. MBCS shall
have the right to obtain and hold in its own name all copyright
registrations and other protections that may be available for such
Materials and QORUS agrees to provide any assistance reasonably requested
by MBCS to perfect such protections.
(f) QORUS acknowledges and agrees that it retains no rights whatsoever in the
Materials designated on a Statement of Work as "Works For Hire To be Owned
by MBCS" including, without limitation, any right to make derivative works
and any other rights incident to copyright ownership. QORUS agrees not to
contest or challenge the rights of MBCS in and to the Materials,
including, without limitation, copyrights thereto.
<PAGE> 10
8. WARRANTIES AND REPRESENTATIONS. QORUS represents and warrants to MBCS that:
(a) it has full right, power, and authority to enter into this Agreement;
(b) this Agreement does not and will not contravene the provisions of any
agreement to which it is a party or is bound;
(c) it will comply with all applicable federal, state, and local statutes,
laws, regulations, and ordinances in the performance of this Agreement;
(d) it is adequately financed to meet all financial obligations it may be
required to meet hereunder;
(e) it will provide the Services in a professional and workmanlike manner
consistent with the highest professional standards of the industry;
(f) the Services shall be of good and merchantable quality, free of any
material defects, and comply strictly with all specifications, samples,
descriptions and representations (including, without limitation,
performance capabilities, accuracy, completeness, characteristics,
specifications, configurations, standards, functions, delivery dates,
response time, and requirements) and that should any of the Services be
defective or non-complying during the term of this Agreement, QORUS shall
promptly correct the Services at its sole cost and expense;
(g) it has the right to furnish the Services hereunder free of all liens,
claims, encumbrances, and other restrictions; and
(h) it will indemnify and save MBCS harmless from any and all damage or
liability suffered as a result of a breach of any of these warranties.
9. YEAR 2000. QORUS represents and warrants that provided that the data
supplied to QORUS by MBCS is Year 2000 compliant and is in the form requested
by QORUS, the date data QORUS receives will properly process in the hardware
and software used by QORUS to provide the Services so that (i) data involving
dates, including single-century formulas and multi-century formulas, will not
cause an abnormally ending scenario within the application or result in the
generation of incorrect values involving such dates, (ii) the date-related MBCS
interface functions and date fields include the indication of the century, and
(iii) date-related functions will include the indication of century. There will
be redesign charges if QORUS' programs need to be changed resulting from MBCS's
data that is not Year 2000 compliant. In the event that the Services, as the
case may be, fail to be Year 2000 compliant, QORUS will use its commercially
reasonable efforts to effectuate compliance (whether implementing work-arounds,
alternate solutions, remedial corrections, or otherwise) as soon as reasonably
practicable. Upon reasonable prior notice, QORUS shall provide MBCS with its
Year 2000 test plan and results.
<PAGE> 11
10. PROBLEM RESOLUTION. In addition to any other obligations of QORUS required
by this Agreement, in the event of a problem as to the performance by QORUS,
the parties agree that the following procedure will be followed:
- - MBCS will be notified by QORUS via telephone once a problem has been
identified.
- - QORUS will establish with MBCS an ongoing communication plan, including
who will be contacted, how often, and by which method (telephone, fax,
e-mail, etc.).
- - QORUS will provide a written explanation of the problem within three (3)
days after resolution of the problem, or sooner if required. This
explanation will include:
* What occurred
* How did it happen
* Corrective action taken
* Root cause analysis
* Scope/Containment
11. LIMITATION OF LIABILITY.
(a) UNDER NO CIRCUMSTANCES SHALL MBCS BE LIABLE TO QORUS FOR A LOSS OF
BUSINESS OR PROFIT, OR ANY INCIDENTAL, INDIRECT, SPECIAL, OR CONSEQUENTIAL
DAMAGES.
(b) EXCEPT WITH RESPECT TO THE INDEMNIFICATION PROVIDED IN SECTION 14 OR A
BREACH OF SECTIONS 6.1 (CONFIDENTIALITY) OR 6.2 (NON-COMPETE), UNDER NO
CIRCUMSTANCES SHALL QORUS BE LIABLE TO MBCS FOR A LOSS OF BUSINESS OR
PROFIT, OR ANY INCIDENTAL, INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES.
(c) Any other limitations on liability shall be as may be agreed upon by the
parties and set forth in a particular Statement of Work and applicable
only with respect to such Statement of Work.
12. INSURANCE. QORUS acknowledges and understands that since it will be
handling high value Services, it is appropriate for MBCS to require QORUS to
carry adequate insurance but that such insurance shall not act as a limit on
the liability of QORUS. QORUS shall, at its cost and expense, maintain the
following insurance with insurers satisfactory to MBCS and insuring QORUS
against losses by reason of its liability to MBCS under this Agreement or with
respect to the Services provided
<PAGE> 12
by QORUS:
<TABLE>
<CAPTION>
Insurance Minimum Coverage
-------------------------------------------------------------------
<S> <C> <C>
Workers Compensation Statutory limits
Employers Liability $1,000,000 per
occurrence/aggregate
General Liability $1,000,000 per
occurrence/aggregate
(to include Contractual Liability)
Auto Liability $1,000,000 per
occurrence/aggregate
Crime and Fidelity
(including employees) $1,000,000 per
occurrence/aggregate
</TABLE>
All such insurance shall be primary. Evidence of such insurance and coverage
satisfactory to MBCS shall be delivered to MBCS at its request. MBCS shall be
named as an additional insured on any such policy or policies and all such
policies shall require at least thirty (30) days prior written notice to MBCS
of any intention to cancel, terminate, or reduce the coverage provided thereby.
13. INDEMNIFICATION.
13.1 QORUS shall indemnify and hold MBCS harmless from and against any and all
costs, expenses, liabilities, damages, judgments, penalties, or fines
(including, without limitation, reasonable attorneys' fees and expenses) for
which MBCS may become liable or may incur or become compelled to pay whether by
way of suit, claim, settlement, or otherwise arising from the acts or omissions
of QORUS or its employees, the Services provided hereunder, or the breach of or
the performance of this Agreement by QORUS.
13.2 In addition to the foregoing, in the event MBCS is required to pay its
customer liquidated damages in accordance with the terms of a written contract
between MBCS and its customer due to the failure of QORUS to meet (a) the
delivery dates or (b) specifications or performance standards, and the terms of
such liquidated damages have been included and agreed upon by QORUS in the
applicable Statement of Work, then in addition to correction by QORUS at its
sole cost, QORUS shall reimburse MBCS for the actual amount of such liquidated
damages due MBCS's customer.
14. NON-INFRINGEMENT REPRESENTATION; INDEMNIFICATION. QORUS hereby represents
and warrants that the performance of the Services by QORUS, and the use of the
deliverables or any information or other materials or items furnished by QORUS
does not and will not violate or in any way infringe upon the rights of third
persons, including, without limitation, property, contractual, employment,
trade secrets, proprietary information and non-disclosure rights, or any
<PAGE> 13
trademark, copyright, patent or other intellectual property rights. QORUS
hereby agrees to indemnify and hold MBCS and its customers harmless from and
against any loss, claim, damage, cost, or expense of any kind, including,
without limitation, reasonable attorneys' fees, costs of arbitration and court
costs to which MBCS or its customers may be subjected by virtue of a breach of
the foregoing warranty. During the pendency of any such claim, QORUS shall
secure for MBCS and its customers the right to continue using such material, or
affected part thereof, pending a final determination of the claim, or replace
or modify such material or part thereof to make it non-infringing provided that
its functionality shall comply with the requirements of MBCS and its customer.
QORUS may not settle or compromise any claim or lawsuit without the prior
consent of MBCS if such settlement or compromise: (a) requires MBCS to forego
or relinquish any right or make any unindemnified payment; or (b) subject MBCS
to any injunction. MBCS shall have the right, at its option and expense, to
retain counsel to represent its interests in defending the claim or lawsuit.
The covenants and agreements of this section shall survive termination of this
Agreement for any reason.
15. TERMINATION.
15.1 Termination for Cause. Either party shall have the right to terminate this
Agreement or a Statement of Work:
(a) in the event of the failure by either party to perform any of its
obligations hereunder if such failure is not corrected after written
notice by the non-breaching party providing the other party with fifteen
(15) days to cure such default; or
(b) in the event the other party is declared insolvent or bankrupt or makes an
assignment for the benefit of creditors or a receiver is appointed or any
proceeding is demanded for or against the other under any provisions of
applicable bankruptcy law.
15.2 Termination for Convenience. MBCS may terminate this Agreement or any
Statement of Work at any time upon giving prior written notice to QORUS and
payment for all Services provided prior to termination plus a termination fee
in the amount of twenty-five percent (25%) of the total amount to be paid under
the Statement of Work (the "Termination Fee"). In such case, MBCS shall only be
liable for payment for the work actually completed up to and including the date
of receipt of any such written notice by QORUS plus the Termination Fee. In no
event shall the price therefor exceed the total price for the Services
requested.
<PAGE> 14
16. POST-TERMINATION OBLIGATIONS.
(a) Upon expiration or earlier termination, QORUS shall be paid any amounts
due for conforming Services completed prior to the date of termination,
less any holdback amounts if termination is for cause against QORUS. In
addition, MBCS will reimburse those expenses of QORUS which were
authorized pursuant to the terms of this Agreement and which were incurred
prior to termination.
(b) Upon termination of this Agreement or a Statement of work, or upon request
of MBCS, QORUS will surrender to MBCS all copies of the Confidential
Information of MBCS which are then in QORUS's possession, and all
memoranda, notes, records, drawings, manuals, software, and all other
materials which are the property of MBCS or which contain information
which is proprietary to MBCS. QORUS will not retain any copies of any
Confidential Information of MBCS.
(c) In addition, upon such a termination QORUS shall assist MBCS in the
orderly termination of this Agreement and the transfer of all aspects
hereof, tangible and intangible, as may be necessary for the orderly,
non-disrupted continuation of the business of MBCS and its customers.
17. SECURITY. All MBCS and customer property, information, materials, and the
Products shall be securely stored on premises. QORUS shall exercise all
reasonable care and take all reasonable and necessary procedures and
precautions to safeguard such materials to protect them from theft,
destruction, damage, misappropriation by third parties, or other loss. QORUS
shall implement security procedures designed for the protection of such
materials. QORUS and MBCS shall mutually agree on such security procedures by
written instruction and shall effect them immediately upon the execution of
this Agreement. As the need arises, such security procedures may be changed or
supplemented by mutual agreement between MBCS and QORUS. All security
procedures and precautions shall be maintained at QORUS's sole expense. In the
event QORUS discovers any breach of its security procedures and precautions,
or, in the event that QORUS discovers that any such materials have been
misappropriated, stolen, or have otherwise been tampered with, QORUS shall take
immediate and appropriate steps to remedy such breach to protect the materials
and to immediately notify MBCS, in writing and by telephone, of such event.
18. AUDIT RIGHTS. QORUS shall keep accurate records in the ordinary course with
respect to the Services provided for a period of three (3) years from the date
of the transaction. In order to verify QORUS's compliance with this Agreement,
QORUS shall, upon reasonable notice, at any time during the term of this
Agreement and for one (1) year thereafter, provide to MBCS, or its
representatives, reasonable access to inspect, examine, and audit QORUS's
operations and business records which are directly relevant to the Services and
the financial arrangements, as set forth in this Agreement. Such access will be
only for the
<PAGE> 15
following purposes: (a) to perform audits and inspections of MBCS; (b) verify
the integrity of MBCS data; (c) to examine QORUS's performance in rendering the
Services; (d) to perform audits necessary to enable MBCS or its customers to
meet applicable regulatory requirements; (e) to audit QORUS's general controls
and security practices and procedures; (f) to verify that payments made by MBCS
correspond to Services actually received; (g) to substantiate price
adjustments; and (h) to audit disaster recovery and back-up procedures. QORUS
will cooperate with and provide the auditors such assistance as they reasonable
require. If an audit leads MBCS to conclude that QORUS is not complying with
its obligations pursuant to this Agreement or that any of QORUS's business
practices related to its performance of this Agreement present a risk of
unauthorized disclosure of information, MBCS and QORUS shall use their best
efforts to reach a mutually satisfactory resolution. QORUS shall promptly
reimburse MBCS for any amounts which the inspection discloses were paid by MBCS
but were not in compliance with the terms of this Agreement.
19. DISPUTES RESOLUTION. In the event a dispute arises between QORUS and MBCS
relating to this Agreement, prior to either party pursuing other available
remedies, other than enforcement of any provision which would entitle the party
seeking enforcement to injunctive relief, specific performance or other
equitable relief as provided in this Agreement, a meeting regarding the dispute
shall be held promptly by the parties, to be attended by representatives with
decision-making authority, to attempt in good faith to negotiate a mutually
acceptable resolution of the dispute. If the parties have not successfully
concluded a resolution after a reasonable time after the first meeting, taking
into consideration the relevant facts and circumstances but not to exceed
thirty (30) days, then the parties may pursue such other remedies available to
them.
20. ADDITIONAL PROVISIONS.
20.1 Notices. All notices and correspondence pertaining to this Agreement will
be delivered by hand or certified mail, return receipt requested and postage
prepaid, or by a nationally recognized courier service, or by facsimile
transmission, and be addressed as follows:
If to MBCS:
Moore Business Communications Services
Three Hawthorn Parkway, Suite 310
Vernon Hills, Illinois 60061
Facsimile: 847 367 3006
Attn: Mr. William E. Block
If to QORUS:
Qorus.com
9800 Sepulveda Boulevard, Suite 318
Los Angeles, California 90045
Facsimile: 310 258 8460
Attn: Chief Financial Officer
<PAGE> 16
Notice will be effective only upon receipt by the party being served, except
that notice shall be deemed received seventy-two (72) hours after posting by
the United States Post Office, by the method described above. Confirmation of
receipt of any facsimile sent must be received in order to presume that the
transmission was received. Each party is responsible for informing the other of
any changes in his/her or its address by sending proper notice.
20.2 Media Releases. All media releases, public announcements, and public
disclosures by either party shall be coordinated with and approved by both
parties prior to the release thereof. Neither party shall unreasonably withhold
or delay its approval of any such release, announcement or disclosure.
20.3 Binding Nature and Assignment. Neither this Agreement nor any of the
rights, interests, or obligations hereunder shall be assigned by either party
without the prior written consent of the other party, which consent shall not
be unreasonably withheld. Subject to the foregoing, this Agreement and all of
the provisions hereof shall be binding upon, and inure to the benefit of, the
parties hereto and their respective successors and assigns. Any assignment made
in violation of this section shall be void and of no effect as between the
parties.
20.4 No Subcontracting. This Agreement contemplates direct performance by
QORUS, and no material part of the development Services to be performed
hereunder shall be subcontracted to any third party without the express prior
written consent of MBCS which shall not be unreasonably withheld or delayed. In
all instances, QORUS shall remain primarily responsible to MBCS for any
Services subcontracted by it to third parties.
20.5 Attorneys' Fees. In the event of the bringing of any proceeding by a party
hereto against the other by reason of a beach of any of the covenants,
conditions, agreements or provisions by the other party arising out of this
Agreement, the party in whose favor the final judgment decision shall be
entered shall be entitled to have and record from the other party or parties
all costs and expenses of suit, including reasonable attorneys' fees.
20.6 Waiver. Failure by either party at any time to enforce any obligation by
the other party, to claim a breach of any term of this Agreement, or to
exercise any power agreed to hereunder shall not be construed as a waiver of
any right, power, or obligation under this Agreement, or shall not affect any
subsequent breach, or shall not prejudice either party as regards any
subsequent action.
20.7 Severability. Whenever possible, each provision of this Agreement will be
<PAGE> 17
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be deemed restated to reflect the
original intentions of the parties as nearly as possible in accordance with
applicable law, and, if capable of substantial performance, the remaining
provisions of this Agreement shall be enforced as if this Agreement was entered
into without the invalid provision.
20.8 No Right to Use Name. QORUS may not use the name of MBCS or Moore North
America, Inc., or any trademark, service mark, trade name, logo, or other
commercial or product designations thereof, without the prior written consent
of MBCS in each instance. Neither MBCS nor Moore North America, Inc. may use
the name of QORUS, or any trademark, service mark, trade name, logo, or other
commercial or product designations thereof, without the prior written consent
of QORUS in each instance.
20.9 Survival. Any provision of this Agreement which contemplates performance
or observance subsequent to any termination or expiration of this Agreement
shall survive the termination or expiration of this Agreement.
20.10 Counterparts. This Agreement may be executed in several counterparts, all
of which taken together shall constitute one single agreement between the
parties.
20.11 Governing Law and Jurisdiction. This Agreement and performance hereunder
shall be governed by the laws of the State of Illinois without regard to
conflicts of laws. The parties hereto agree on behalf of themselves and any
person claiming by or through them that the sole jurisdiction and venue for any
litigation arising from or relating to this Agreement shall be an appropriate
federal or state court located in Illinois.
20.12 Entire Agreement. This Agreement and any Statement of Work constitutes
the complete and exclusive statement of the terms and conditions between the
parties, which supersedes and merges all prior proposals, understandings, and
all other agreements, oral and written, between the parties relating to the
subject matter of this Agreement. This Agreement may not be modified or altered
except by written instrument duly executed by both parties.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
date first set forth above.
QORUS.COM, INC. MOORE BUSINESS COMMUNICATION
SERVICES
By: By:
--------------------------- -----------------------------
Title: Title:
--------------------------- -----------------------------
<PAGE> 18
SCHEDULE A
Statement of Work
<PAGE> 19
STATEMENT OF WORK #
1. Description of Products and Services; Specifications:
2. Pricing:
3. Term:
4. Additional Provisions:
(a)
(b)
(c)
5. Limitation of Liability.
6. Period to Respond to Requests for Corrections Pursuant to Section 5.2(b).
7. Works for Hire to be Owned by MBCS.
8. Additional Items: This Statement of Work is expressly subject to, and
incorporates herein the terms of, the MBCS Master Agreement between the
MBCS and QORUS, dated __________________.
QORUS.COM, INC. MBCS BUSINESS COMMUNICATION SERVICES
By: By:
---------------------------
-----------------------------
Title: Title:
---------------------------
-----------------------------
<PAGE> 20
SCHEDULE B
Form of Claim for Reimbursement and Description of Documentation Required
<PAGE> 1
EXHIBIT 6.12
SCHEDULE A
STATEMENT OF WORK #NWA-1
MOORE BUSINESS COMMUNICATION SERVICES - QORUS
TRIP SUMMARY AND RECEIPT (TSR) SOLUTION FOR NORTH WEST AIRLINES
The purpose of this Statement of Work (SOW) is to document and define guidelines
for the development and operation of the process to provide the services for
North West Airlines (NWA) as outlined below.
1. DESCRIPTION OF PRODUCTS AND SERVICES; SPECIFICATIONS
A. PARTIES' INFORMATION
Moore Business Communication Services Qorus.com, Inc.
Three Hawthorne Parkway, Suite 310 9800 Sepulveda Blvd., Suite 318
Vernon Hills, IL 60061 Los Angeles, CA 90045
B. CONTACTS
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -------------------- -------------------------- ---------------------
QORUS CONTACTS TITLE PHONE FAX E-MAIL
- ----------------------------- ----------------------------- -------------------- -------------------------- ---------------------
<S> <C> <C> <C> <C>
Neil Ludwig VP Operations 310 258 8450(w) 310 258 8460 [email protected]
310 779 9269(c)
- ----------------------------- ----------------------------- -------------------- -------------------------- ---------------------
Bill Long Project Lead/Coder 310 250 8450(w) 310 258 8460 [email protected]
310 540 0234(h) [email protected]
- ----------------------------- ----------------------------- -------------------- -------------------------- ---------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------- -------------------------- --------------------- ------------------- ----------------------------------
MOORE BCS CONTACTS TITLE PHONE FAX E-MAIL
- ------------------------- -------------------------- --------------------- ------------------- ----------------------------------
<S> <C> <C> <C> <C>
Jim Olson Sr. Account Dir. 612-525-2481 612-525-8981 [email protected]
- ------------------------- -------------------------- --------------------- ------------------- ----------------------------------
Brian Hemann Account Mgr. 612-525-2480 612-525-8981 [email protected]
- ------------------------- -------------------------- --------------------- ------------------- ----------------------------------
Jon Klimstra Vast Mgr. 847-837-3226 847-837-3315 [email protected]
- ------------------------- -------------------------- --------------------- ------------------- ----------------------------------
Beth Gavin-Pearson Sr. Project Manager 847-837-3241 847-837-3315 [email protected]
- ------------------------- -------------------------- --------------------- ------------------- ----------------------------------
Donna Caldarulo Project Manager 847-837-3298 847-837-3315 [email protected]
- ------------------------- -------------------------- --------------------- ------------------- ----------------------------------
Brian Tuttle Sr. Programmer Analyst 847-837-3286 847-837-3315 [email protected]
- ------------------------- -------------------------- --------------------- ------------------- ----------------------------------
Tim Street Dir., Facility Operations 847-837-3211 847-837-3315 [email protected]
- ------------------------- -------------------------- --------------------- ------------------- ----------------------------------
William Block Director, E-Commerce 847-367-3066 847-367-3006 [email protected]
- ------------------------- -------------------------- --------------------- ------------------- ----------------------------------
</TABLE>
C. OBJECTIVES AND APPLICATION
The objective is to develop an application to process TSR's for (NWA) and fax or
email them accordingly to NWA customers.
Qorus will receive real-time electronic transmissions from NWA and will process
them and send them real-time to the end user. The transmissions will come
24/7/365 with maintenance windows to be agreed upon between NWA and Qorus.
1
<PAGE> 2
The E-Ticket receipt packages will contain inline variable marketing data. The
inline variable marketing will be customer specific based on data supplied by
Northwest. Inline variable marketing processing will be dependent upon TSR type
(fax or email).
D. DESCRIPTION OF SERVICES
PROCESS-FLOW DESCRIPTION
Step 1 -- Northwest provides data to Qorus for processing
Step 2 -- Qorus creates and faxes or e-mails message to consumer containing
detailed ticket confirmation and variable marketing messages.
Step 3 -- The end user reviews the detailed E-Ticket confirmation
Step 4 -- Qorus provides NWA real-time status for fax and e-mail. This
includes notification messages that were incomplete (wrong fax
number, undeliverable e-mail address, etc.).
Step 5 -- Qorus provides monthly summary reports to MBCS.
E. QORUS SERVICES
E.1 APPLICATION DEVELOPMENT
Qorus will provide the programming and project management support for the
development of the fax and e-mail TSR delivery options as described in this
document using a standard template for each distribution option. Qorus will
develop the fax and emails as per templates provided to them by either MBCS or
NWA.
E.2 DATA TRANSMISSION
NWA will send data via Sockets to the Qorus electronic processing hub for fax
and e-mail distribution on a real time basis. Method of delivery will be noted
as a flag in the data transmission to Qorus from NWA. Variable marketing
messages to be added to the TSR information will be in a pre-existing database,
which is updated by NWA periodically.
A pre-production confirmation of receipt will be provided by Qorus to NWA for
each delivery channel. A post-production audit will also be supplied to NWA, on
a monthly basis, to verify the distribution status.
E.3 FACSIMILE TRANSMISSION
For those NWA customers requesting fax communication Qorus will receive the data
transmission via Sockets in the Qorus electronic processing hub. Qorus, using a
standard fax template, will create the facsimile message and send it to the NWA
customer in an English only language format. This facsimile document will
contain marketing messages from NWA that are resident in a database at the
electronic processing hub. These messages will be inserted into the facsimile
document based on the business rules provided by NWA.
E.4 E-MAIL TRANSMISSION
For those NWA customers requesting e-mail communication Qorus will receive the
data transmission via Sockets in the Qorus electronic processing hub. Qorus,
using a standard e-mail template, will create the message and send it to the NWA
customer in an English only language format. This e-mail document will contain
marketing messages from NWA that are resident in a database at the electronic
processing hub. These messages will be inserted into the e-mail document based
on the business rules provided by NWA.
2
<PAGE> 3
E.5 ACTIVITY CONFIRMATION PROCESS
Qorus will provide real time activity confirmation for fax and e-mail requests
including delivery status. This confirmation will be via a sockets application.
NWA will then take this data, update the database and customer PNR.
E.6 REPORTING AND TRACKING
Qorus will provide activity reports via e-mail, or other agreed upon file
format. These reports, in a mutually agreeable layout format, will include a
detailed summary of the quantity of each distribution method, the service level
performance of each distribution method and a listing of exception reporting to
manage the quality of the data.
On a monthly basis Qorus will provide MBCS summary information in an electronic
format that reflects prior months TSR activity and is the basis for MBCS
billing.
F. MBCS AND NWA RESPONSIBILITIES
F.1 VARIABLE MARKETING MESSAGES
NWA will supply to Qorus all marketing message content. This marketing message
content will be provided by NWA as an entry to a marketing message database
stored in the Qorus electronic processing hub. NWA will supply the business
rules to drive the lookup process and Qorus will provide the logic to interpret
the data, look up the corresponding messages and format the document.
Included in the Qorus service are modifications to the textual content of the
marketing message database based on requests from NWA. Changes to TSR design,
layout, Web links will need to go through the change management process as
defined in this document. Qorus will provide a means for NWA to remotely change
the variable marketing database and transmit the data to MBCS for processing.
F.2 TESTING AND INTEGRATION
Qorus and NWA jointly have responsibility for the integration and testing, based
on a mutually agreed to process, of the Qorus solution in conjunction with the
NWA data transmission process. NWA or MBCS will provide, upon request by Qorus,
all sample data inputs for testing each application as soon as possible prior to
the start of production. NWA will have the responsibility to do a user
acceptance sign-off before moving from the testing phase to live production of
the fax and e-mail.
G. SERVICE LEVELS
G.1 AVAILABILITY
The Qorus facsimile and e-mail TSR distribution service availability is
twenty-four hours per day seven days per week.
Qorus will notify Project Manager in Mundelein by pager when fax and e-mail TSR
data has not been received for more than 2 hours. Qorus will send an electronic
page to the Moore BCS (MBCS) point person in the MBCS Mundelein facility
describing the problem. The page will continue every 10 minutes until a
connection is restored.
MBCS will then notify Northwest Airlines, per the following procedure once the
page is received.
3
<PAGE> 4
1) CONTACT THE NWA HELPDESK : 612-726-6955
2) MBCS TO IDENTIFY THEMSELVES AS THE FAX & E-MAIL VENDOR (MBCS) FOR
THE E-TICKET APPLICATION.
3) MBCS TO DESCRIBE THE PROBLEM.
4) NWA HELPDESK WILL OPEN A TROUBLE REPORT TO MARRES AREA.
5) MBCS TO REQUEST A PAGE FOR MARRES.
NWA does not require notification between the hours of 10pm and 6am (Central).
If NWA determines there will be any problems with the transmission of files, NWA
will follow these procedures:
1) CONTACT PROJECT MANAGER AT MBCS - DONNA CALDARULO: 847-837-3298.
LEAVE VOICE MAIL IF MBCS PROJECT MANAGER IS NOT AVAILABLE.
2) IF MBCS PROJECT MANAGER IS NOT AVAILABLE AND VOICE MAIL HAS BEEN
LEFT, NWA TO CONTACT MBCS DATA CENTER: 847-837-3262.
3) MBCS DATA CENTER WILL CONTACT BOTH THE PROJECT MANAGER AND QORUS IF
NECESSARY.
4) AFTER NORMAL BUSINESS HOURS AND WEEKENDS, CONTACT MBCS DATA CENTER
FOR ALL ISSUES.
Once the above is followed, the following is the procedure MBCS will follow to
access Qorus customer support staff for the NWA project:
1) CONTACT CUSTOMER SUPPORT AT 310-258-8450 DURING NORMAL (PST)
BUSINESS HOURS M-F.
2) OUTSIDE OF NORMAL BUSINESS HOURS CONTACT 310-258-8450 EXT. 35 AND
LEAVE MESSAGE; OR IN CASE OF EMERGENCY, CONTACT THE FOLLOWING:
BILL LONG 310 729 0603
ALAN PAIGE 909 553 2030
HOA LE 310 418 5507
NEIL LUDWIG 310 779 9269
G.2 RETENTION
Tracking information on e-mail and facsimile status will be available for a
maximum of thirty days. Additional retention time is an optional feature.
G.3 SERVICE EXPECTATIONS
FAX AND E-MAIL
Qorus has established a turnaround time of between 10 and 20 minutes for the
attempted transmission of NWA fax and e-mail customer confirmation
communications with an average time targeted for less than 15 minutes. This is
time is measured from the receipt by Qorus of the NWA TSR until Qorus first
attempts a communication via facsimile or via internet e-mail.
G.4 CAPACITY
Qorus will provide the following monthly and daily messaging capacity to MBCS
and MBCS will provide a minimum monthly messaging volume commitment to Qorus
according to the following table:
4
<PAGE> 5
<TABLE>
<CAPTION>
- -------------------------------- ----------------------------- ----------------------------- -----------------------
Distribution method Max. Monthly Capacity Max. Daily Capacity Min. Monthly Commitment
300,000 80,000*
- -------------------------------- ----------------------------- ----------------------------- -----------------------
<S> <C> <C> <C>
Estimated Distribution Method
Breakdown :
Facsimile distributed TSR 100,000 N/A 30,000
- -------------------------------- ----------------------------- ----------------------------- -----------------------
E-mail distributed TSR 200,000 N/A 50,000
- -------------------------------- ----------------------------- ----------------------------- -----------------------
</TABLE>
* Should MBCS pay the difference between the 80,000 and the actual monthly
volume, the price will be calculated based on 80,000 messages being provided.
If NWA requires additional capacity beyond what is depicted in the table, MBCS
and Qorus will jointly negotiate price and terms based upon the additional
requirements in accordance with the change management process. Any decrease in
the minimum monthly commitment must be jointly agreed to by MBCS and Qorus.
H. DATA INPUT
NWA will send data via electronic transmission to Qorus using a real-time
sockets based application. (TCP/IP) and a secure frame-relay connection which is
behind Qorus' and NWA's firewalls.
Actual production turnaround is contingent upon Qorus receiving a file for the
TSR in accordance to a mutually agreed upon schedule.
Transmission or input file issues will be resolved between Qorus and MBCS
Operations as described in the MBCS Operations Documentation.
I. CHANGE MANAGEMENT
Any change requests must be made in writing to the designated MBCS and Qorus
project management person or team member. Changes will be accepted only when
properly authorized by the designated client contact person. All changes will be
charged and invoiced. If the change requires variable rates or time elements, an
estimate of those variable items, such as programming hours, and estimated
completion schedule will be provided by Qorus for authorization to proceed.
Programming support for changes is available from 9:00 am - 5:00 pm Pacific
time. Qorus operational support will be provided 24 hr./day, 365 days/year for
critical problem resolution. Change authorization is acceptable from the
following persons: WILLIAM BLOCK-MBCS
NEIL LUDWIG-QORUS
J. INVOICING INSTRUCTIONS - Semi-Monthly invoices for Development Services and
Monthly invoices for Messaging Services are to be submitted to:
MBCS: attention Donna Caldarulo
111 S. Washington Blvd.
Mundelein, IL 60060
K. DEFINITIONS
"TSR" (Trip Summary and Receipt) - shall mean the travel confirmation sent to
NWA customers by Qorus
END OF (1) "DESCRIPTION OF PRODUCTS AND SERVICES; SPECIFICATIONS"
5
<PAGE> 6
2. PRICING:
Development Services
System design
Data feed from NWA to Qorus
Data parsing for one type of data
Dynamic email notification message construction for one layout
Dynamic fax page construction for one layout
Batch status reporting
System testing
<TABLE>
<CAPTION>
Estimated Hours
<S> <C>
Total Base Feature Development Hours 376 Hours
Real time status reporting 40 Hours
Individualized email presentation based on
User's profile 40 hours
Total Estimated Development Hours 456 hours
DEVELOPMENT PRICE PER HOUR $125.
Total estimated development price for NWA $57,000
</TABLE>
MESSAGING SERVICES
Email messaging and immediate results reporting
<TABLE>
<CAPTION>
- ---------------------------- ---------------
Volume per Month Price per Unit
- ---------------------------- ---------------
<S> <C>
10,000 $.15
- ---------------------------- ---------------
20,000 $.13
- ---------------------------- ---------------
30,000 $.12
- ---------------------------- ---------------
40,000 $.105
- ---------------------------- ---------------
50,000 $.09
- ---------------------------- ---------------
75,000 $.08
- ---------------------------- ---------------
100,000 $.07
- ---------------------------- ---------------
500,000 $.06
- ---------------------------- ---------------
1,000,000 $.05
- ---------------------------- ---------------
</TABLE>
US Facsimile messaging and immediate results reporting
<TABLE>
<CAPTION>
- -------------------------------------- ------------------------------------ -------- -----------
Time of Facsimile Per message Time Total
- -------------------------------------- ------------------------------------ -------- -----------
<S> <C> <C> <C>
30 seconds or less $.04 $.04 $.08
- -------------------------------------- ------------------------------------ -------- -----------
6 second increments rounded up $.04 until 1 minute is reached $.008
- -------------------------------------- ------------------------------------ -------- -----------
1 minute $.05 $.08 $.13
- -------------------------------------- ------------------------------------ -------- -----------
1 1/2minutes $.05 $.12 $.17
- -------------------------------------- ------------------------------------ -------- -----------
2 minutes $.05 $.16 $.21
- -------------------------------------- ------------------------------------ -------- -----------
</TABLE>
3. TERM - The initial term shall be for a period of 3 years. Should NWA
terminate its agreement with MBCS at any time for its convenience pursuant to
the NWA-MBCS agreement and MBCS in turn, terminates this Agreement with Qorus
for convenience as provided for in the Master Agreement, no Termination Fee as
provided for in Section 15.2 of the Master Agreement shall be payable by MBCS if
MBCS has either (1) previously provided another customer of at least similar
volume and business, or (2)
6
<PAGE> 7
provides another customer with at least similar volume and business within
ninety (90) days of the effective date of the termination by MBCS.
4. ADDITIONAL PROVISIONS: Preliminary "Beta" testing is scheduled to begin on or
about September 24, 1999.
5. LIMITATION OF LIABILITY: Except with respect to liability pursuant to
Sections 1.4, 6.1, or 6.2 of the Master Agreement, Qorus' liability for any
claims arising under this Statement of Work shall not exceed 150 percent of the
price charged by Qorus to MBCS for the products or services affected.
6. PERIOD TO RESPOND TO REQUESTS FOR CORRECTIONS PURSUANT TO 5.2(b) - shall be
15 days as stated in the Master Agreement.
7. WORKS FOR HIRE TO BE OWNED BY MBCS:
Data receipt and formatting of the Fax and E-mail Applications; specifically as
relating to the receiving of raw data from NWA, and according to NWA formatting
specifications. Any special coding performed in order to generate reports as
requested by NWA or MBCS. All of the Variable Marketing code, logic, and
interfaces.
8. ESCROW OF SOURCE CODE:
Immediately following the "user acceptance sign-off" (see F.2), Qorus shall
deposit with DSI Escrow ("Escrow Agent") a copy of the source code and all
relevant commentary, explanations, and other documentation (the "Program")
pursuant to a mutually agreed upon escrow agreement. In the event that Qorus
declares bankruptcy, ceases to do business, is insolvent, or is unable to
provide service or maintenance, MBCS shall be entitled to immediately receive
possession of a copy of Qorus' software source code, whether complete or
partial, for the Program. Qorus agrees to deposit, at such times as they are
made, copies of all revisions to the escrowed materials encompassing all
corrections and enhancements. Qorus and MBCS shall share equally any and all
costs charged by Escrow Agent. Further, in the event that MBCS becomes entitled
to receive the escrowed materials, Qorus agrees to grant access and make
available to MBCS any and all compilers, interpreters, and/or assemblers used
and/or included in the Program, as well as specific documentation with regard to
compilation/assembly options and linkage sequences, and provide such information
as MBCS may reasonably request in order to permit MBCS to recreate the operating
environment with respect to such Program.
9. ADDITIONAL ITEMS: This Statement of Work is expressly subject to, and
incorporates herein the terms of, the MBCS Master Agreement between MBCS and
Qorus, dated September 10, 1999.
10. Agreement to the foregoing Statement of Work:
X X
- ----------------------------------- -----------------------------------
MBCS Signature Qorus Signature
- ----------------------------------- -----------------------------------
Print Name Print Name
- ----------------------------------- -----------------------------------
Title Title
- ----------------------------------- -----------------------------------
Date Date
7
<PAGE> 1
EXHIBIT 6.13
BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT (this
"Agreement"), dated as of July 15, 1999, is entered into by and between
Qorus.com, Inc., a Delaware corporation ("Qorus"), and NetDox, Inc., a Delaware
corporation ("NetDox").
WHEREAS, Thurston Group, Inc. and Qorus entered into that certain
Agreement to Provide Funds dated as of March 19, 1999 (the "Loan Agreement")
pursuant to which Qorus agreed to make certain loans to Thurston as evidenced by
that certain Promissory Note dated as of March 19, 1999 in the original
principal amount of $3,200,000 (the "Revolving Promissory Note");
WHEREAS, pursuant to that certain Assignment and Assumption Agreement
dated as of June 4, 1999, Thurston assigned all of its rights and obligations
under the Loan Agreement and the Promissory Note to NetDox;
WHEREAS, NetDox wishes to sell, transfer and assign, and Qorus wishes
to acquire, certain assets of NetDox on the terms and conditions contained
herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
1. NetDox hereby sells, transfers, conveys, assigns, and delivers to
Qorus, its successors and assigns, forever, all of its right, title and interest
in and to those assets (the "Assets") listed on Annex I attached hereto and
incorporated herein by this reference, free and clear of any and all
liabilities, pledges, mortgages, security interests, liens, charges,
obligations, claims and other encumbrances whatsoever (whether absolute,
accrued, contingent or otherwise).
2. From time to time, at the request of Qorus, and without further
consideration, NetDox shall do, execute, acknowledge and deliver, or will cause
to be done, executed, acknowledged and delivered, all such further acts, deeds,
assignments, transfers, conveyances and assurances that may reasonably be
required for the transfer, conveyance, assignment, delivery, assurance and
confirmation to Qorus, or to its successors and assigns of, or for aiding and
assisting in collecting or reducing to possession, any or all of the Assets.
3. In partial consideration of NetDox's transfer of the Assets hereby
to Qorus, Qorus hereby assumes and agrees to pay, honor and discharge when due
certain liabilities of NetDox, but only those liabilities of NetDox listed on
Annex B attached hereto and incorporated herein by this reference. Qorus and
NetDox agree to use reasonable efforts to cause any and all collateral and/or
personal guarantees provided by Thurston Group, Inc. or any of its affiliates in
connection with any of the liabilities assumed pursuant to this paragraph 3 to
be released within thirty (30) days of the date of this Agreement.
4. An aggregate amount of $2,370,346.24 is outstanding under the
Promissory Note as of the date hereof. In partial consideration of NetDox's
transfer of the Assets hereby to Qorus, Qorus hereby forgives $2,100,000 of the
$2,370,346.24 indebtedness owed to Qorus by NetDox and evidenced by the Note.
NetDox shall execute and deliver concurrently herewith an Amended and Restated
Promissory Note in the form attached hereto as Annex C evidencing NetDox's
continuing
<PAGE> 2
obligation to Qorus with respect to the remaining $270,346.24 in principal
outstanding under the Note.
5. This Agreement may not be changed, modified, discharged or
terminated orally or in any manner, other than by an agreement in writing signed
by the parties hereto or their respective successors and assigns.
6. If any provision of this Agreement is invalid, illegal or
unenforceable, such provision shall be ineffective to the extent, but only to
the extent of, such invalidity, illegality or unenforceability, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
7. This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns. This
Agreement shall be governed by and construed in accordance with the internal
substantive laws of the State of Delaware without giving effect to conflict of
laws principles thereof, except if it is necessary in any other jurisdiction to
have the law of such other jurisdiction govern this Agreement with respect to
such matter.
[BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
QORUS.COM, INC.,
a Delaware corporation
By: /s/ Patrick J. Haynes, III
-----------------------------------------
Patrick J. Haynes, III
Chief Executive Officer
NETDOX, INC.,
a Delaware corporation
By: /s/ Neil Ludwig
-----------------------------------------
Neil Ludwig
President
3
<PAGE> 4
ANNEX A
Assets
<PAGE> 5
ANNEX B
Assumed Liabilities
<PAGE> 6
ANNEX C
Form of Amended and Restated Promissory Note
<PAGE> 1
EXHIBIT 6.14
RESCISSION AGREEMENT
THIS RESCISSION AGREEMENT (this "Agreement"), dated as of December 31,
1999, is entered into by and between Qorus.com, Inc., a Delaware corporation
("Qorus"), and NetDox, Inc., a Delaware corporation ("NetDox").
WHEREAS, Qorus and NetDox entered into that certain Bill of Sale,
Assignment and Assumption Agreement, dated as of July 15, 1999 (the "Acquisition
Agreement"), by which Qorus acquired from NetDox certain assets listed on Annex
A attached hereto and incorporated herein by this reference (the "Assets") of
NetDox;
WHEREAS, in consideration of the transfer by NetDox to Qorus of the Assets,
(i) Qorus assumed and agreed to pay, honor and discharge when due those
liabilities of NetDox listed on Annex B attached hereto and incorporated herein
by this reference (the "Assumed Liabilities") and (ii) Qorus forgave $2,100,000
of the $2,370,346.24 indebtedness owed to Qorus by NetDox as evidenced by that
certain Promissory Note dated as of March 19, 1999 in the original principal
amount of $3,200,000 (the "Revolving Promissory Note") (The Revolving Promissory
Note was assumed by NetDox pursuant to that certain Assignment and Assumption
Agreement dated as of June 7, 1999 by and between NetDox and Thurston Group,
Inc. (the "Assignment of Note"));
WHEREAS, certain of the Assets were sold by Qorus subsequent to July 15,
1999;
WHEREAS, the parties wish to rescind the transactions contemplated by the
Acquisition Agreement on the terms and conditions contained herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
1. Qorus and NetDox agree to rescind the sale and transfer of the Assets
effected by the Acquisition Agreement. Accordingly, Qorus hereby sells,
transfers, conveys, assigns, and delivers to NetDox, its successors and assigns,
forever, all of its right, title and interest in and to the Assets, save and
except the equipment described in Item 3 of Annex A and more particularly
described on the attachment to Annex A (the "Retained Assets"), free and clear
of any and all liabilities, pledges, mortgages, security interests, liens,
charges, obligations, claims and other encumbrances whatsoever (whether
absolute, accrued, contingent or otherwise). The Retained Assets are excluded
from the rescission and retained by Qorus in consideration of payments made by
Qorus to NetDox in the amount of $350,000. NetDox acknowledges and agrees that
the Retained Assets have been sold by Qorus subsequent to July 15, 1999 and
specifically waives the rights, if any, that NetDox may have to include the
Retained Assets as part of the rescission contemplated by this Rescission
Agreement.
2. From time to time, at the request of NetDox, and without further
consideration, Qorus shall do, execute, acknowledge and deliver, or will cause
to be done, executed, acknowledged and delivered, all such further acts, deeds,
assignments, transfers, conveyances and assurances that may reasonably be
required for the transfer, conveyance, assignment, delivery, assurance and
confirmation to NetDox, or to its successors and assigns of, or for aiding and
assisting in collecting or reducing to possession, any or all of the Assets
other than the Retained Assets.
<PAGE> 2
3. Qorus hereby transfers and assigns to NetDox, and NetDox hereby assumes
and agrees to pay, honor and discharge, the Assumed Liabilities. NetDox and
Qorus shall execute and deliver any and all documents, agreements, certificates
or other documentation as may be required by the lenders to evidence such
transfer, assignment and assumption. Contemporaneously herewith, NetDox shall
have delivered to Qorus evidence of payment in full of all liabilities and
obligations to, and/or a release from each of, Northern Trust Bank, Thurston
Interests, LLC, Apex Investment Fund III and Apex Strategic Partners.
4. The forgiveness of $2,100,000 in debt owed to Qorus by NetDox pursuant
to the Revolving Promissory Note as contemplated by Paragraph 4 of the
Acquisition Agreement is hereby rescinded and shall be of no force or effect.
The Amended and Restated Promissory Note dated July 15, 1999 executed by NetDox
and payable to Qorus is hereby canceled and shall be of no further force or
effect. The entire $2,370,346.24 balance outstanding under the Revolving
Promissory Note as of July 15, 1999 is due and payable by NetDox to Qorus in
accordance with the terms of the Revolving Promissory Note. A copy of the
Revolving Promissory Note and the Assignment of Note is attached hereto as Annex
C. Attached hereto as Annex D is a schedule of advances and payments made by or
on behalf of NetDox under the Revolving Promissory Note resulting in a total
outstanding balance under the Revolving Promissory Note as of the date hereof of
$1,488,987. Such outstanding balance shall be due and payable by NetDox to Qorus
pursuant to the terms of the Revolving Promissory Note.
5. NetDox, on behalf of itself and its predecessors, successors and
assigns, hereby releases and forever discharges Qorus and its predecessors,
successors and assigns from any and all claims, demands, suits, causes of
action, obligations, contracts, agreements, debts and liabilities whatsoever,
whether known or unknown, suspected or unsuspected, both at law and in equity,
which NetDox now has, has ever had or may hereafter have against Qorus arising
contemporaneously with or prior to the date hereof, or on account of or arising
out of any matter, cause or event occurring contemporaneously with or prior to
the date hereof. Qorus, on behalf of itself and its predecessors, successors and
assigns, hereby releases and forever discharges NetDox and its predecessors,
successors and assigns from any and all claims, demands, suits, causes of
action, obligations, contracts, agreements, debts and liabilities whatsoever,
whether known or unknown, suspected or unsuspected, both at law and in equity,
which Qorus now has, has ever had or may hereafter have against NetDox arising
contemporaneously with or prior to the date hereof, or on account of or arising
out of any matter, cause or event occurring contemporaneously with or prior to
the date hereof. Provided, however, that nothing contained in this paragraph 6
shall operate to release any obligations of NetDox arising under the Revolving
Promissory Note.
6. The obligations of NetDox to Qorus pursuant to this Rescission Agreement
have been guaranteed by Russell Stern and Waveland, LLC. Upon the payment in
full and satisfaction of all liabilities and obligations owed to Qorus by
NetDox, neither of Russell Stern or Waveland, LLC shall have any further
obligation to Qorus under the terms of this Rescission Agreement. Each of Qorus
and NetDox, on behalf of itself and its predecessors, successors and assigns,
hereby releases and forever discharges each of Russell Stern and Waveland, LLC,
and each of his or its predecessors, successors and assigns, from any and all
claims, demands, suits, causes of action, obligations, contracts, agreements,
debts and liabilities whatsoever, whether known or unknown, suspected or
2
<PAGE> 3
unsuspected, both at law and in equity, which either NetDox or Qorus now has,
has ever had or may hereafter have against Russell Stern or Waveland, LLC
arising contemporaneously with or prior to the date hereof, or on account of or
arising out of any matter, cause or event occurring contemporaneously with or
prior to the date hereof. Each of Qorus and NetDox, jointly and severally, shall
indemnify and hold harmless each of Russell Stern and Waveland, LLC for any and
all damages, costs, fees or expenses arising out of or incurred in connection
with any matter, cause or event occurring contemporaneously with or prior to the
date hereof.
7. This Agreement may not be changed, modified, discharged or terminated
orally or in any manner, other than by an agreement in writing signed by the
parties hereto or their respective successors and assigns.
8. If any provision of this Agreement is invalid, illegal or unenforceable,
such provision shall be ineffective to the extent, but only to the extent of,
such invalidity, illegality or unenforceability, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
9. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns. This Agreement
shall be governed by and construed in accordance with the internal substantive
laws of the State of Delaware without giving effect to conflict of laws
principles thereof, except if it is necessary in any other jurisdiction to have
the law of such other jurisdiction govern this Agreement with respect to such
matter.
10. This Agreement may be executed in several counterparts, each of which
shall be deemed an original and all of which shall together constitute one and
the same instruments. Signatures to this Agreement may be transmitted by
facsimile and to the extent so transmitted shall be deemed an original.
[BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
QORUS.COM, INC.,
a Delaware corporation
By:
---------------------------------------
Michael Sohn
Chief Executive Officer
NETDOX, INC.,
a Delaware corporation
By:
---------------------------------------
Neil Ludwig
President
4
<PAGE> 5
ANNEX A
Assets
<PAGE> 6
ANNEX B
Assumed Liabilities
<PAGE> 7
ANNEX C
Revolving Promissory Note and Assignment of Note
<PAGE> 8
ANNEX D
Schedule of Advances and Payments
<PAGE> 1
EXHIBIT 6.15
COMMISSION AGREEMENT
THIS COMMISSION AGREEMENT (this "Agreement"), dated as of December 31,
1999, is entered into by and between Qorus.com, Inc., a Delaware corporation
("Qorus"), and NetDox, Inc., a Delaware corporation ("NetDox").
WHEREAS, Qorus and NetDox entered into that certain Bill of Sale,
Assignment and Assumption Agreement, dated as of July 15, 1999 (the "Acquisition
Agreement"), by which Qorus acquired from NetDox certain assets of NetDox,
including, but not limited to all customer lists, contacts and prospects;
WHEREAS, subsequent to July 15, 1999, Qorus entered into that certain
Master Agreement (the "Moore Contract") with Moore Business Communication
Services, a division of Moore North America, Inc. ("Moore");
WHEREAS, NetDox negotiated with Moore for approximately six months
prior to the date of the Acquisition Agreement and was in current negotiations
with Moore at the time the transactions contemplated by the Acquisition
Agreement were consummated;
WHEREAS, Qorus wishes to compensate NetDox for its efforts in securing
the Moore Contract prior to the time the relationship with Moore was acquired by
Qorus pursuant to the Acquisition Agreement on the terms and conditions
contained herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
1. Qorus shall pay and deliver to NetDox an amount equal to twenty
percent (20%) of all gross revenues received by Qorus under the Moore Contract.
Such amounts shall be payable by Qorus to NetDox in cash within fourteen (14)
business days of receipt thereof by Qorus. For purposes of this Agreement, gross
revenues shall be deemed to include only recurring revenues. Development fees
and any other such non-recurring fees or revenues shall be excluded from the
calculation of commissions hereunder. NetDox shall have reasonable access during
normal business hours to all invoices and payment records relating to the Moore
Contract.
2. This Agreement may not be changed, modified, discharged or
terminated orally or in any manner, other than by an agreement in writing signed
by the parties hereto or their respective successors and assigns.
3. If any provision of this Agreement is invalid, illegal or
unenforceable, such provision shall be ineffective to the extent, but only to
the extent of, such invalidity, illegality or unenforceability, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
4. This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns. This
Agreement shall be governed by and construed in accordance with the internal
substantive laws of the State of Delaware without giving
<PAGE> 2
effect to conflict of laws principles thereof, except if it is necessary in any
other jurisdiction to have the law of such other jurisdiction govern this
Agreement with respect to such matter.
5. This Agreement may be executed in several counterparts, each of
which shall be deemed an original and all of which shall together constitute one
and the same instruments. Signatures to this Agreement may be transmitted by
facsimile and to the extent so transmitted shall be deemed an original.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
QORUS.COM, INC.,
a Delaware corporation
By:
-------------------------
Michael Sohn
Chief Executive Officer
NETDOX, INC.,
a Delaware corporation
By:
-------------------------
Neil Ludwig
President
2
<PAGE> 1
EXHIBIT 6.16
CONSULTING AGREEMENT
This Agreement is made as of March 1, 1999, between Qorus.com, Inc., a
Delaware Corporation (the "Company"), and the Thurston Group, Inc., a Delaware
Corporation (the "Consultant").
WITNESSETH
WHEREAS, the Company desires to obtain equity, quasi-equity or debt
financing from private and or public markets ("Financing") necessary to develop,
establish and expand a business providing third-party verified and insured
transmission services via the Internet, and to merge, acquire or sell business
operations and assets, and/or enter into strategic partnerships in order to
expand such a business;
WHEREAS, the Company has requested the services of Consultant and its
agents and representatives, if any, as an independent contractor to advise the
Company generally in connection with such efforts to obtain Financing in private
placements of and or public offerings of common stock or other quasi-equity
securities or debt of the Company ("Securities" or "Security"), and to advise it
and act as its exclusive agent in connection with any business combination,
including but not limited to any merger, acquisition or sale for the benefit of
the Company ("Transaction").
NOW THEREFORE, in consideration of the mutual promises of the parties
hereto, the adequacy and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Engagement. The Company hereby engages Consultant until March 31,
2002 (the "Expiration Date") as an independent contractor to advise the Company
on and with respect to obtaining Financing of any sort and to advise it and act
as its agent in connection with any Transaction, including but not limited to
any business combination, merger, acquisition or sale. The Consultant, as the
Company's financial advisor, will provide the following services:
o Distribute an informational memorandum outlining the Company's
business plans and expectations and/or contemplating specific
transactions for business combinations;
o Identify potential sources of capital;
o Provide sale, merger, acquisition financial analysis;
o Advise on structure of any potential Transaction;
o Assist with negotiations;
o Assist with due diligence.
2. Compensation.
(a) In consideration of such advice, the Company agrees to pay
Consultant in cash an amount equal to the total of eight percent (8%)
of any Financing raised by the Company over the term of this agreement,
or eight percent (8%) of the value to the Company or its
<PAGE> 2
shareholders of any business combination transaction, including but
not limited to any merger, acquisition or sale.
(b) Consultant shall receive its compensation hereunder within five
(5) days of receipt by the Company of the Financing or the closing of
any Transaction or upon other arrangements as mutually agreed by the
parties.
(c) If the Board of Directors of the Company, in its reasonable
discretion, determines to engage an additional third-party consultant
to provide fund raising or advice on behalf of the Company, any fees to
the Consultant shall be reduced to the extent fees are payable to the
third-party consultant.
3. Representation and Warranties. Each party represents and warrants to
the other (which representations and warranties shall survive the execution and
delivery of this Agreement regardless of what examinations, inspections and
other investigations either party has heretofore made or may hereafter make,
with respect to such representations and warranties) as follows:
(a) Organization. Each party is a corporation duly organized and
validly existing as a corporation under the laws of its respective
state of incorporation.
(b) Authorization. Each party has full right and power to enter into
and perform its obligations under this Agreement and has taken all
requisite corporate action to authorize the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby. This Agreement has been properly and duly executed
and delivered by each party to the other and is binding upon and
enforceable against each party in accordance with its terms, except to
the extent such enforceability may be limited by the laws of
bankruptcy, insolvency or other laws affecting creditors rights
generally or by general principles of equity.
(c) Conflicts. Neither the execution, delivery or performance of
this Agreement by either party nor the consummation of the transactions
contemplated hereby do or will, after the giving of notice, or the
lapse of time, or otherwise conflict with, result in a breach of or
constitute a default under, either party's articles or certificate of
incorporation, bylaws or other constituent documents to which it is
bound or, to the best of each party's knowledge, any applicable
federal, state or local law, statute, ordinance, rule or regulation of
any court or administrative order or process or any material contract,
agreement, arrangement, commitment or plan to which either party is a
party or by which either party or any of its assets may be bound.
4. Confidentiality. The parties agree with respect to all technical,
commercial and other information furnished or disclosed by another party,
including, but not limited to, information regarding such party's organization,
personnel, business activities, customers, policies, assets, finances, costs,
sales, revenues, technology, rights, obligations, liabilities and strategies
- 2 -
<PAGE> 3
("Information"), that (a) such Information is confidential and/or proprietary to
the furnishing/disclosing party and is entitled to and shall receive treatment
as such by the receiving party; (b) the receiving party will hold in confidence
and not disclose (except in respect of the transactions contemplated by this
Agreement) any such Information, treating such Information with the same degree
of care and confidentiality as it treats its own confidential and proprietary
Information; provided, however, that the receiving party shall not have any
restrictive obligation with respect to any Information which (i) is contained in
a printed publication available to the general public, (ii) is or becomes
publicly known through no wrongful act or omission of the receiving party, or
(iii) is known by the receiving party without any proprietary restrictions by
the furnishing/disclosing party at the time of receipt of such Information; and
(c) all such Information furnished to either party by the other, unless
otherwise specified in writing, shall remain the property of the
furnishing/disclosing party and, in the event this Agreement is terminated,
shall be returned to it, together with any and all copies made thereof, as well
as any internal documents prepared by the recipient describing, analyzing or
otherwise containing Information furnished by the other party upon request for
such return (except for documents which the disclosing party has been required
to submit to a governmental agency). In the alternative, upon request, all such
writings and documents shall be destroyed, rather than returned, in the event
this Agreement is terminated, and each party shall confirm in writing to the
other compliance with either such request.
5. Remedies for Breach of Confidentiality. Each party hereto
acknowledges that the remedy at law for any breach by either party of its
obligations under Section 4 hereof is inadequate and that the other party shall
be entitled to equitable remedies, including an injunction and/or specific
performance, in the event of breach by any other party.
6. Termination of the Agreement. This Agreement shall terminate
pursuant to the terms and conditions of any one or more of paragraphs (a)
through (d) below:
(a) This Agreement shall terminate without further action of any
party, upon occurrence of any of the following events: (i) the
Expiration Date; (ii) upon the written consent and agreement of each
party hereto; or (iii) the termination of the Agreement by one of the
parties hereto pursuant to any of paragraphs (b), (c), or (d) of this
Section; or (iv) the consummation of an offering by the Company of
Securities registered under the Securities Act.
(b) Termination by Consultant. The Consultant shall have the right
at its option, to terminate this Agreement upon written notice to the
Company in the event of: (i) the Company's failure to make any payment
due under Section 2 of this Agreement for a period of ten (10) days
after the Consultant shall have given written notice thereof to the
Company; or (ii) the Company's breach of any of the terms or
conditions, representations, warranties or covenants and agreements of
this Agreement, which breach shall continue uncured for a period of
thirty (30) days from the receipt of written notice by the Consultant
specifying the breach or breaches in reasonable detail.
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<PAGE> 4
(c) Termination by the Company. The Company shall have the right, at
its option, to terminate this Agreement upon the occurrence of the
following event: the Consultant's breach of any of the terms or
conditions, representations, warranties or covenants and agreements of
this Agreement, which breach shall continue uncured for a period of
thirty (30) days after the receipt of written notice by the Consultant
specifying the breach or breaches in reasonable detail.
(d) Termination Upon the Occurrence of an Event of Default. A
non-defaulting party may terminate this Agreement upon thirty (30)
days' prior written notice to the defaulting party upon the happening
of any of the following Events of Default:
(i) a decree or order by a court of competent jurisdiction
shall be entered against a party either: (A) ordering relief
under Title 11 of the United States Code or adjudging a party
hereto insolvent, or (B) approving a petition seeking
reorganization of a party hereto under Title 11 of the United
States Code or any other similar federal or state law, and any
such decree or order is not discharged or otherwise set aside
within sixty (60) days, or (C) appointing a receiver or trustee
or assignee, or liquidator or conservator in bankruptcy or
insolvency of a party hereto or a receiver of all or any
substantial portion of its property, and any such decree or
order is not discharged or otherwise set aside within sixty (60)
days, or (D) occurrence of any of the foregoing or similar
results in a non-United States jurisdiction; provided, however,
a final order or decree shall have been entered after the
expiration or the discharge or set aside periods set forth in
subparagraphs (2) and (3) above;
(ii) A party shall: (A) institute a case under Title 11 of
the United States Code, or consent to the filing of a bankruptcy
petition against it, or file a petition or answer or consent to
entry of an order for relief under Title 11 of the United States
Code or relief under any other similar federal or state law, or
(B) consent to the appointment of a receiver or trustee or
assignee or liquidator or conservator in bankruptcy or
insolvency of its or for all or any substantial portion of its
property, or make a general assignment for the benefit of
creditors, or admit in writing its inability to pay its debts
generally as they become due, or (C) accomplish any of the
foregoing or similar results in a non-United States
jurisdiction; provided, however, that a final order or decree
shall have been entered after the expiration of the discharge or
set aside set forth in subparagraphs (2) and (3) above.
7. Indemnification. Each of the Consultant and the Company (the
"Indemnifying Party") shall indemnify the other and hold each of the other's
employees, agents and representatives (collectively the "Indemnitees") harmless
from any and all demands, claims, actions, suits and proceedings which may at
any time be brought against either party and any and all liabilities, losses,
damages, costs and expenses (including, but not limited to, reasonable
attorney's fees and other legal costs and expenses) which may at any time be
suffered or incurred by any Indemnitee as a result of
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<PAGE> 5
or in connection with (i) any act or omission of the Indemnifying Party in
connection with the performance of its obligations under this Agreement, or (ii)
any representation or warranty of the Indemnifying Party contained herein
proving to be untrue or incorrect in any material respect.
The right of either party to be indemnified and held harmless under
this Section shall not be exclusive but shall be in addition to any and all
other rights and remedies to which either party may be entitled under this
Agreement or otherwise.
8. Miscellaneous:
(a) The relationship of the Company and Consultant under this
Agreement is that of a purchaser of services and independent
contractor, respectively, and nothing contained in this agreement and
no action taken by either party to this Agreement shall be deemed to
constitute either party or any of such party's employees, agents or
representatives to be an employee, agent or representative of the other
party or will be deemed to create any partnership, joint venture,
association or syndicate among or between the parties, or will be
deemed to confer on either party any express or implied right, power or
authority to enter into any agreement or commitment, express or
implied, or to incur any obligation or liability on behalf of the other
party.
(b) This Agreement shall be governed by and construed and
interpreted in accordance with the internal laws of the State of
Illinois.
(c) Subject to Section 7(j) below, this Agreement is binding upon
and will inure to the benefit of the parties hereto and to their
respective heirs, executors, administrators, successors and assigns.
(d) In the event that any provision or clause of this Agreement
conflicts with or is held invalid under applicable law, such conflict
or invalidity shall not affect the other provisions of this Agreement
which can be given effect without the conflicting provision. To this
end the provisions of this Agreement are declared to be several.
(e) This Agreement may not be changed without the written consent of
the parties. All proposed modifications, notices, approvals, or other
communications provided for herein shall be in writing and shall be
personally delivered or sent by certified mail, postage full prepaid,
return receipt requested, addressed to each party.
(f) As used herein, an "Affiliate" of another person or entity means
a person or entity that directly or indirectly controls or is
controlled by, or is under common control with, the person or entity
specified.
(g) Each party to this Agreement shall pay all of the expenses
incurred by it in connection with this Agreement including without
limitation, its legal fees.
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<PAGE> 6
(h) This Agreement may be executed simultaneously in counterparts
any one of which need not contain the signature of more than one party
but all such counterparts taken together will constitute one and the
same Agreement.
(i) Except as expressly provided herein, this Agreement constitutes
the entire and final agreement of the parties in respect of the subject
matter hereof and supersedes any and all prior understandings (whether
written or oral) in respect of such subject matter.
(j) Neither party may assign or otherwise transfer (whether by
operation of law or otherwise) this Agreement to any person or entity
without the express written consent of the non-assigning party.
IN WITNESS WHEREOF, the Company and Consultant have executed and
delivered this Agreement on the date first written above.
QORUS.COM, INC. THE THURSTON GROUP, INC.
By: /s/ PATRICK J. HAYNES, III By: /s/ ROBERT T. ISHAM, JR.
-------------------------------- ---------------------------------
Its: Chairman Its: Managing Director
------------------------------- --------------------------------
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<PAGE> 1
EXHIBIT 6.17
LEASE AND SERVICE AGREEMENT
This Agreement is made this 23rd day of December, 1999, by and between
VANTAS/FairOaks ("Lessor") having offices known and numbered as Suites 650 and
800 (the "Facility") in the building located at 11350 Random Hills Road,
Fairfax, Virginia 22030 (the "Building") Southern European Communications
Corp., ("Lessee") a(n) (corporation) with an address of 190 South LaSalle,
Suite 1710, Chicago, IL, 60603.
The parties for themselves, their heirs, legal representatives, successors and
assigns, agree as follows:
1. DEMISE AND DESCRIPTION OF PROPERTY.
a. Lessor leases to Lessee and Lessee leases from Lessor, the "Premises"
(defined below), being a subpart of Lessor's total leased Facility space, for
the term and subject to the conditions and covenants hereinafter set forth and
to all encumbrances, restrictions, zoning laws, regulations or statutes
affecting the Building, Facility or Premises.
b. The Premises consists of Facility office space number(s) 618, 618A and
618B as shown in the floor plan annexed hereto. Lessor hereby grants Lessee the
privilege to use in common with other lessees and parties that Lessor may
designate certain office amenities located in the Facility; the use of all of
which are subject to such reasonable rules and regulations as Lessor
currently has in place and may adopt from time to time. The amenities are more
particularly described in attached Exhibit "A." "The Operating Standards" as
presently in place and governing the use of the Premises and the Facility are
attached in Exhibit "B".
2. USE.
a. The Premises shall be used by Lessee solely for (general office use)
and such other normally incident uses and for no other purpose, in strict
accordance with the Operation Standards. Additionally, Lessee shall not offer
at the Premises any services which Lessor provides to its lessees, including,
but not limited to those amenities or services described in attached Exhibit
"A". In the event Lessee breaches any provision of this paragraph, Lessor shall
be entitled to exercise any rights or remedies available to the Lessor pursuant
to this Agreement together with such other rights and remedies as the Lessor
may otherwise have and choose to exercise.
b. Lessee shall not make nor permit to be made any use of the Premises
which would violate any of the terms of this Agreement or which, directly or
indirectly, is forbidden by statute, ordinance or government regulations, which
may be dangerous to life, limb or property, which may invalidate or increase the
premium of any policy of insurance carried on the Building or on the Facility,
which will suffer or permit the Premises to be used in any manner or anything to
be brought into or kept there which, in the sole judgment of Lessor, shall in
any way impair or tend to impair the high quality character, reputation or
appearance of the Building or the Facility, or which may or tend to impair or
interfere with any services performed by Lessor for Lessee or for others.
3. TERM.
a. The term of this Agreement shall be for a period of approximately 6
months, commencing 9:00 a.m. on the 3rd day of January, 2000, and ending 5:00
p.m. on the 30th day of June, 2000, unless renewed as provided in paragraph
"3(b)" herein.
b. Upon the ending term date set forth herein or any extension thereof,
the Agreement shall be extended for the same period of time as the initial term
and upon the same terms and conditions as herein contained except for the
amount of base rental charges, which shall each be increased by ten percent
(10%), unless either party notifies the other in writing by certified or
registered mail, return receipt requested, or delivered by hand that the
Agreement shall not be extended within the period hereinafter specified or
automatically renewed. If Lessee has less than three offices, such notice shall
be given at least 60 days prior to the expiration date of this Agreement. If
Lessee has three or more offices, such notice shall be given at least 90 days
prior to the expiration date of this Agreement.
c. In the event the entire Premises or the Facility are damaged, destroyed
or taken by eminent domain or acquired by private purchase in lieu of eminent
domain so as to render the Premises fully untenantable and unrestorable in
Lessor's sole judgment, then within 90 days thereafter by written notice to the
other party, either party shall be able to terminate this Agreement, which will
terminate as of the date thereof.
4. RENT.
a. For and during the term of this Agreement, Lessee shall pay Lessor as
rent for the Premises a total rental of $31812.00, payable in 6 equal monthly
installments of $5302.00, each payable in advance of the first day of each
calendar month after the commencement of the term, or a daily prorated amount
for any partial calendar month during the term. If any payment of rent or other
charges due under this Agreement is not received within five (5) calendar days
after its due date, the Lessee will also pay, as additional rent, a late
payment charge which shall be an amount equal to 10% of any amount owed to
Lessor or $50 whichever is greater.
b. It is additionally specifically covenanted and agreed that the
financial terms of this Agreement are strictly confidential and Lessee agrees
not to knowingly or willfully divulge this information to or any other Lessee
or potential Lessee of Lessor. Any such disclosure by the Lessee of the
financial terms of this Agreement as set forth herein above, shall constitute a
material breach of this Lease. THIS CLAUSE DOES NOT APPLY TO FINANCIAL OR
REGULATORY DISCLOSURES BY LESSEE TO ATTORNEYS, ACCOUNTANTS, FINANCIAL
CONSULTANTS/ADVISORS OR REGULATORY AGENCIES INVOLVED IN DAY TO DAY BUSINESS
OPERATIONS OR THE GROWTH OF LESSEE'S COMPANY.
c. The first such payment of rental as well as the payment of the Deposit
as set forth in below shall be paid by Lessee simultaneously with execution of
this Agreement. Should the Lessee fail to make such payment prior to the
commencement of the term of this Agreement, then, at Lessor's sole option, the
Agreement shall be null and void and of no further effect.
d. The rental payable during the term of this Agreement shall be increased
on the first day of the month following notification of any rental increase
(however designated) which the Lessor might receive from the Lessor's
over-landlord ("Building"). The term
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"direct expenses" as used herein shall refer to the same items and costs as are
used by the Building in its determination of expenses and costs passed on to
Lessor. Lessor shall immediately notify Lessee in writing of any such increase,
and shall bill Lessee for its pro rata share thereof, which bill Lessee shall
pay promptly upon such notification for each and every month thereafter for the
balance of the term.
e. Rent charges are based on the value of the rental Premises and services
to be used by 1 person(s) only. If more than said number of person(s)
habitually use the Premises or services, the Fixed Monthly Rental Charges will
be increased by a factor of $150 for each additional person who habitually uses
the Premises.
f. If a Lessee check is returned for any reason, Lessee will pay an
additional charge of $100.00 per returned check and, for the purpose of
considering default and/or late charges, it will be as if the payment
represented by the returned check had never been made.
5. SECURITY DEPOSIT.
a. Lessee shall deposit with Lessor $10604.00, or the equivalent of two
months rent, in good or certified funds with a domestic bank, as a non-interest
bearing security deposit. Lessor may use the security deposit to cure any
default of Lessee under this Agreement, restore the Premises including any and
all furniture, fixtures and equipment provided by Lessor and vendors at the
Premises to their original condition and configuration, reasonable wear and
tear excepted, to pay for repairs to any damage to the Premises, Executive
Suite or Building, caused by Lessee or Lessee's guests, to pay any rent or
other charges which Lessee owes Lessor at or prior to the expiration of this
Agreement, and to reimburse Lessor for costs or expenses arising from any other
obligation of Lessee which Lessee has failed to perform. If Lessor transfers
control or ownership of the Premises and Lessor transfers the security deposit
to such purchaser, Lessee will look solely to the new Lessor for the return of
the security deposit, and the Lessor named in this Agreement shall be released
from all liability for the return of the security deposit.
b. The security deposit (less any sums used by Lessor in accordance with
the terms and conditions of this Agreement) will be returned within sixty (60)
days after the termination of any services rendered or expiration of the term
hereof. The security deposit shall not under any circumstance be applied in
lieu of the final payment(s) of Fixed Monthly Rental charges or service charges
under this Agreement.
c. In the event that, by reason of the Lessee's default in its obligations
pursuant to this Agreement or otherwise, including but not limited to the
payment of the Fixed Monthly Rental Charge, any amounts due by reason of the
Lessee's use of additional services hereto and/or by reason of the Lessee's use
of telephone services as supplied pursuant to this Agreement, Lessor shall be
entitled to apply any of the security deposited pursuant to this Agreement to
any outstanding sums due or owing to the Lessor, and Lessor shall have the
right to charge the Lessee, as additional rent, such sums as are necessary to
replenish any and all amounts applied so as to cause the security to be
returned to its entire amount. The failure to pay such amounts as are necessary
to replenish the security shall be considered a breach of this Agreement and
shall entitle the Lessor to exercise any of its rights pursuant to this
Agreement or otherwise.
6. DELIVERY OF POSSESSION.
If, for any reason whatsoever, Lessor cannot deliver possession of the
Premises to Lessee at the commencement of the term, this Agreement shall not be
void nor voidable nor shall Lessor be liable to Lessee for any loss or damage
resulting therefrom; but there shall be an abatement of rent for the period
between the stated term commencement and the time when Lessor does deliver
possession of the Premises.
7. SERVICES.
a. So long as Lessee is not in default hereunder, Lessor shall make
available certain amenities to Lessee as more particularly described in Exhibit
"A." Such services shall be offered to Lessee, in conjunction with such
services being offered by Lessor to its other lessees, without charge for the
reasonable use of the same.
b. In addition, provided Lessee is not in default hereunder and provided
the cost thereof does not exceed the Security Deposit, Lessor shall make
available to Lessee certain other services the cost of which shall be billed to
the Lessee as additional rent and the payment of which shall be subject to the
same terms and conditions as those governing the payment of the Fixed Monthly
Rental Charge herein regardless of when such charges are billed to the Lessee.
8. TELEPHONE SERVICES.
a. Provided Lessee is not in default of any of the terms, covenants,
conditions or provisions of this Agreement, Lessor will make available to
Lessee, a telecommunications package which will consist of some combination of
telephone equipment, numbers, lines, conference calling, voice mail, local,
long distance and international service, and directory listing. All components
of the telecommunications package including any telephone numbers used by
Lessee will remain at all times the property of Lessor and Lessee will acquire
no rights in the components beyond the term specified by Lessor.
b. Upon Lessee's written request, Lessee shall be entitled to appoint
Lessor as its exclusive agent for the sole purpose of procuring and arranging
Lessee's local "white pages" listings. Lessor shall have no involvement nor
responsibility for any "yellow pages" listings desired by Lessee.
c. Lessor shall not be liable for any interruption or error in the
performance of its services to Lessee under this Section. Lessee waives any
recourse as against the Lessor for any claimed liability arising from the
provision of telecommunication services including, but not limited to; injuries
to persons or property arising out of mistakes, omissions, interruptions,
delays, errors or defects in transmissions occurring in the course of
furnishing telecommunications services provided same are not caused by the
willful acts of the Lessor, as well any claim for business interruption and for
consequential damages.
d. Lessor shall use reasonable efforts to provide Telephone Services to
Lessee in a first-class, professional manner. Telephone service charges shall
be as per Lessor's then scheduled rates for the same, or as the same may be
amended by Lessor from time to time.
e. In the event that any toll fraud is traceable to telecommunications
services employed by Lessee, such toll fraud shall be deemed to be a material
default in the Lessee's obligations hereunder. Lessee further hereby agrees to
indemnify, hold harmless and to reimburse Lessor for all charges associated
with any such toll fraud including, but not limited to, unauthorized use of
calling cards or telephone lines.
f. It is expressly acknowledged and agreed that Lessor shall be the sole
and exclusive provider of telecommunication services to Lessee. Lessee hereby
agrees and covenants that it will not use any other telephone service or
telephone carrier to provide it service in the Premises. In the event that
Lessee uses or acquires any other
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<PAGE> 3
telephone service at the Premises, such use and/or installation shall
constitute a material default in the Lessee's obligations hereunder.
9. FURNITURE AND FIXTURES.
At its own cost and expense, Lessor shall furnish and install furniture,
fixtures and equipment as are in Lessor's sole opinion necessary to provide
suitable office accommodations for Lessee, upon such terms and conditions
routinely applicable to the Facility. All such furniture, fixtures and
equipment shall remain Lessor's property.
10. INSURANCE: WAIVER OF CLAIMS.
a. Lessor has no obligation to and will not carry insurance for Lessee's
benefit. Lessor will not be liable to Lessee or to any other person for damages
on account of loss, damage or theft, to any business or personal property of
Lessee. Lessee hereby waives any claims against Lessor from any loss, cost,
liability or expense (including reasonable attorneys' fees) arising from
Lessee's use of the Premises or any common areas made available to Lessee by
Lessor or from the conduct of Lessee's business, or from any activity, work, or
thing done in the Premises or common areas by Lessee or Lessee's agents,
contractors, visitors or employees. To the extent that Lessor has any liability
for any of the forgoing pursuant to any law, ordinance or statute, Lessee shall
seek recovery for such loss(es)/or damage(s) from its own insurance company as
provided for in subparagraph (c) herein prior to making any claims against
Lessor.
b. The Lessor shall not be liable or responsible to the Lessee for any
injury or damage resulting from the acts or omissions of Lessor, its employees,
persons leasing office space or obtaining services from the Lessor, or other
persons occupying any part of the Premises or Building, or for any failure of
services provided such as water, gas or electricity, HVAC or for any injury or
damage to person or property caused by any person except for such loss or
damage arising from the willful or grossly negligent misconduct of the Lessor,
its agents, servants, or employees or from the Lessor's failure to make repairs
which it is obligated to make hereunder. Neither Lessor or any of its agents,
employees, officers or directors shall be responsible for damages resulting
from any error, omission or defect in any work performed or provided as part of
the services rendered, whether uncompensated services or compensated services.
c. Lessee shall provide Lessor with a certificate of insurance evidencing
General/Public Liability coverage with liability limits of not less than One
Million Dollars ($1,000,000) per occurrence for Bodily Injury and/or Property
Damage Liability and One Hundred Thousand Dollars ($100,000) per occurrence for
Fire/Legal Liability. Said insurance coverage shall remain in force during the
term of this Agreement and renewals thereof. The Lessor, Alliance National,
Inc., and Alliance Business Centers, Inc. shall be named as an additional named
insured on each of these policies. Lessee's failure to provide or maintain such
insurance shall not reduce or otherwise alter Lessee's liability or
responsibility to pay any judgment rendered against Lessee for such Liability
and Damages. Failure to maintain such insurance and/or to name the Lessor and
its designees, as set forth above, shall constitute a material breach of this
Agreement.
d. Both parties hereby agree to defend, indemnify and hold the other
harmless from and against any and all claims, damages, injury, loss and
expenses to or of any person or property resulting from the acts or negligence
of their agents, employees, invitees and/or licensees while in the Building,
Executive Suite and/or Premises.
e. Any fire and extended risk casualty insurance that Lessee maintains
shall include a waiver of subrogation in favor of Lessor and Building Landlord,
and any fire and extended risk insurance carried on the Facility by Lessor
shall likewise contain a waiver of subrogation in favor of Lessee.
11. WAIVER OF BREACH.
Should Lessor not insist upon the strict performance of any term or
condition of this Agreement or to exercise any right or remedy available for a
breach thereof, and no acceptance of full or partial payment during the
continuance of any such breach shall constitute a waiver of any such breach or
any such term or condition. No term or condition of this Agreement required to
be performed by Lessee and no breach thereof, shall be waived, altered or
modified, except by a written instrument executed by Lessor. No waiver of any
breach shall affect or alter any term or condition in this Agreement, and each
term or condition shall continue in full force and effect with respect to any
other then existing or subsequent breach thereof.
12. OPERATING STANDARDS.
The Operating Standards attached to this Agreement as Exhibit "B" are
hereby made an integral part of this Agreement. Lessee, its employees, agents,
guests, invitees, visitors and/or any other persons caused to be present in and
around the Premises by the Lessee shall perform and abide by the rules and
regulations and any amendments or additions to said rules and regulations as
Lessor may make. In addition, Lessee, its employees and agents shall abide by
all applicable governmental rules, regulations, statutes and ordinances
relating in any way to the Premises or the Facility or Lessee's use or
occupancy of the Premises or the Facility; failing which Lessee shall be in
default hereunder and shall pay any fines or penalties imposed for such
violation(s) directly to the appropriate governmental authority or to Lessor,
if Lessor has paid such amount on behalf of Lessee. Such remedy shall not be
exclusive. It is hereby further explicitly agreed and understood that full
compliance with the Operating Standards as set forth constitutes a material
obligation of this Agreement, and that the failure to so comply shall
constitute a violation of this Agreement entitling the Lessor to exercise any
of its remedies pursuant to this Agreement or otherwise.
13. EMPLOYMENT OF LESSOR'S EMPLOYEES.
a. Lessee agrees that it will not, during the term of this Agreement and
any renewals thereof, or for a period of one year after the expiration or
sooner termination of this Agreement, hire or issue an offer to employ any
person who is or has been an employee of Lessor or Lessor's agent without prior
consent from Lessor. If Lessee either hires an employee of Lessor or Lessor's
agent; or hires any person who has been an employee of Lessor or its agent
within six months prior to the time they are hired by Lessee, Lessee will, at
Lessors sole option, be liable to Lessor for liquidated damages equal to six
months wages of the employee, at the rate last paid that employee by Lessor.
b. If Lessor assists in hiring an employee for Lessee, Lessee shall pay to
the Lessor a commission equal to 20% of that employee's annual salary. The
provisions hereof shall survive the expiration or sooner termination of the
term thereof.
14. ALTERATION.
If Lessee requires any special wiring or office alterations for
extraordinary business machines or other purposes not consistent with the
current wiring, extraordinary telephone equipment or computer equipment. Such
alteration shall be done (i) only with the
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express written permission of the Lessor, and if said permission is granted,
then (ii) by an agent designated by Lessor at Lessee's cost. The electrical
current shall be used for ordinary lighting purposes only, unless written
permission to do otherwise shall first have been obtained from Lessor at an
agreed cost to Lessee. Lessor further reserves the sole and exclusive right to
limit the number and type of lines and telephone equipment Lessee can install
in the leased Premises.
15. RE-ENTRY.
Lessor and its agents shall have the right to enter the Premises at any
time for the purpose of making any repairs, alterations, inspections which it
shall deem necessary for the preservation, safety or improvements of said
Premises, without in any way being deemed or held to have committed an eviction
(constructive or otherwise) of or trespass against Lessee.
16. RELOCATION.
a. Lessee agrees that the Lessor may, in its sole discretion, relocate
the lessee from its present Premises to a like or similar office space within
the same facility upon ten (10) days notice to the Lessee. In the event that
the Lessor requires the Lessee to relocate, the Lessor hereby agrees to bear
the reasonable cost of any such relocation, which cost shall be limited to the
cost associated with the physical transfer of the Lessee's property to any
different office, which the Lessor may designate.
b. In the event that any such relocation is effected, the Lessee hereby
acknowledges that, unless otherwise agreed in writing, that all of the terms and
conditions of this Agreement shall remain in full force and effect.
17. ASSIGNMENT AND SUBLETTING.
No assignment or subletting of the Premises, this Agreement or any part
thereof shall be made by Lessee without Lessor's prior written consent, which
consent may be withheld for any or no reason in Lessor's sole discretion.
Neither all nor any part of Lessee's interest in the Premises or this Agreement
shall be encumbered, assigned or transferred, in whole or in part, either by
act of the Lessee or by operation of law.
18. SURRENDER.
a. On expiration of the term, any extended term, or sooner termination of
this Agreement, Lessee shall promptly surrender and deliver the Premises to
Lessor, without demand, and in as good condition as when let, ordinary wear and
tear expected.
b. Upon Lessee serving a notice of cancellation as provided in 3b herein
Lessor shall have the right to show Lessee's Premises during the 60 day period
(for one or two offices) or 90 day period (for three or more offices) as the
case may be.
c. Without prior written approval of Lessor, Lessee shall not remove any
of its property from the Premises upon termination of this Agreement or at any
other time, except during Lessor's normal business hours. In the event Lessor
consents to Lessee's removing property before or after normal business hours,
any expenses incurred by Lessor as a result, including but not limited to
expenses for personnel, security, elevator, utilities and the like shall be
paid by Lessee in advance, to the extent determinable by Lessor, by certified
and/or bank check.
d. If Lessee vacates the Premises and leaves behind any property,
whatsoever, same will be deemed abandoned by Lessee and may be disposed of by
Lessor at Lessee's expense. If Lessee defaults in the payment of sums due to
Lessor, and Lessor changes the locks, removes Lessee's property, or otherwise
denies access to Lessee, Lessor shall not be liable for conversion or partial,
actual and/or constructive eviction.
19. HOLDING OVER.
a. In the event that Lessee, should not renew this Agreement in
accordance with the terms and conditions hereof, and/or fail to surrender the
Premises upon the expiration of the term of the Agreement as provided herein,
Lessee agrees to pay Lessor, as liquidated damages, a sum equal to twice the
monthly rent and all additional charges for services provided by Lessor to
Lessee, for each month that Lessee retains possession of the Premises or any
part thereof; provided, however, that the acceptance of such sums, representing
liquidated damages shall not be deemed to be permission to Lessee to continue
in possession of the Premises.
20. DEFAULT AND REMEDIES.
a. If the Lessee shall default in fulfilling any of its terms,
conditions, covenants or provisions of this Agreement, including but not
limited to:
1. Payment of fixed Monthly Rental Charges and/or any other charges
hereunder within ten days of the date such charges become due;
2. Becomes insolvent, makes an assignment for benefit of creditors,
or files a voluntary petition under any bankruptcy or insolvency law, or
has filed against it an involuntary petition under any such law;
3. Defaults in fulfilling any of the terms, conditions, covenants or
provisions of this Agreement including but not limited to the breach of any
of the terms and conditions set forth in the exhibits attached hereto;
4. The abandonment and/or vacatur of the Premises by the Lessee;
then, after five days notice of any such default(s), the Lessor may, at its sole
discretion, terminate this Agreement upon five days notice to the Lessee, and
upon the expiration of such notice period, the Lessee shall quit and surrender
the Premises to the Lessor. In the event that the Lessee fails to quit and
surrender the Premises, the Lessor may re-enter and take possession of the
Premises and remove all persons and property therefrom, as well as disconnect
any telephone lines installed for the benefit of Lessee, without any liability
whatsoever to Lessee. In addition, Lessor may elect concurrently or alternately
to accelerate all of Lessee's obligations hereunder including without limitation
the rental, direct expenses, Schedule B Costs, and Telephone Services costs,
and/or the re-letting of the Premises or any part thereof, for all or any part
of the remainder of said term, to a party satisfactory to Lessor, at any monthly
rental rate. Lessor, in its sole discretion, may accept notwithstanding the
foregoing, Lessor shall have no obligation, implied or otherwise, to mitigate
its damage(s) under such circumstances.
b. Should Lessor be unable to re-let the Premises, or should each
monthly re-rental be less than the rental, Lessee is obligated to pay under
this Agreement or any renewal thereof, at Lessor's option Lessee shall pay the
amount of such deficiency, plus the expenses of reletting, immediately in one
lump sum (if allowable under law) to Lessor upon demand and/or as such
obligations accrue.
4 /s/ WCM Initials Initials
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<PAGE> 5
c. If Lessee shall default in the observance or performance of any term or
covenant on Lessee's part to be observed or performed under or by virtue of any
of the terms or provisions in any article of this lease, then, unless otherwise
provided elsewhere in this lease, Lessor may immediately or at any time
thereafter and with notice perform the obligation of Lessee thereunder, and if
Lessor, in connection therewith or in connection with any default by Lessee in
the covenant to pay rent hereunder, makes any expenditures or incurs any
obligations for the payment of money, including but not limited to attorney's
fees, in instituting, prosecuting or defending any actions or proceeding, such
sums so paid or obligations incurred with interest and costs shall be deemed to
be additional rent hereunder and shall be paid by Lessee to Lessor rendition of
any bill or statement to Lessee therefor, and if Lessee's lease term shall have
expired at the time of making of such expenditures or incurring of such
obligations, such sums shall be recoverable by Lessor as damages.
21. MAIL & TELEPHONE FORWARDING.
a. After termination or expiration of the term of this Agreement, Lessee
hereby agrees that it will take all reasonable steps to notify all parties of
Lessee's new address and phone numbers. Lessor shall have no obligation, to
notify any person or entity of Lessee's new address and/or phone numbers, except
as expressly provided herein.
b. Lessor will, unless otherwise instructed by Lessee in writing, forward
mail to Lessee at its new address and give out new telephone number via a voice
mail message for a period of three (3) months at the rate of $150.00 per month,
which sums shall be deducted from any amounts deposited with the Lessor as
security hereunder and paid to the Lessor in advance. In the event that there is
not sufficient security remaining on deposit to pay for the charges set forth
herein, unless the Lessee shall pay the charges set forth herein to the Lessor
in advance, Lessor shall have no obligation to provide the services set forth
herein.
22. NOTICES.
Any notice under this Agreement shall be in writing and shall be either
delivered by hand or by first class mail to the party at the address set forth
below. Lessor hereby designates its address as:
VANTAS/FairOaks
11350 Random Hills Road
Suite 800
Fairfax, VA 22030
Attn: Management
with a copy by regular first class mail to:
VANTAS
90 Park Avenue, 3100
New York, NY 10016
Attn: Legal Department
Lessee hereby designates its address (which address must be an address within
the United States), as
Southern European Communications Corp.
Attn: Bill McNitt
190 South LaSalle, Suite 1710
Chicago, IL 60603
Phone: 312-419-0077
Fax: 312-419-0172
If such mail is properly address and mailed, as above, it shall be deemed notice
for all purposes, given when sent or delivered even if returned as undelivered.
23. LANDLORD'S ELECTION UNDER THIS AGREEMENT.
Upon early termination of the main Building lease, this Agreement shall
terminate unless the Building Landlord under the main lease elects to have this
Agreement assigned to the Building Landlord or another entity as provided in the
main lease. Upon notice to Lessor of the termination of the main lease and such
election, (i) the Agreement shall be deemed to have been assigned by Lessor to
the Building Landlord or to such other entity as is designated in such notice by
the Building Landlord, (ii) the Building Landlord shall be deemed to be Lessor
under this Agreement and shall assume all rights and responsibilities of Lessor
under this Agreement, and (iii) Lessee shall be deemed to have attorned to the
Building Landlord as Lessor under this Agreement.
24. TIME OF ESSENCE.
Time is of the essence as to the performance by Lessee of all covenants,
terms and provisions of this Agreement.
25. SEVERABILITY.
The invalidity of any one or more of the sections, subsections, sentences,
clauses or words contained in this Agreement or the application thereof to any
particular set of circumstances, shall not affect the validity of the remaining
portions of this Agreement or of their valid application to any other set of
circumstances. All of said sections, subsections, sentences, clauses and words
are inserted conditionally on being valid in law; and in the event that one or
more of the sections, subsections, sentences, clauses or words contained herein
shall be deemed invalid, this Agreement shall be construed as if such invalid
sections, subsections, sentences, clauses or words had not been inserted. In
the event that any part of this Agreement shall be held to be unenforceable or
invalid, the remaining parts of this Agreement shall nevertheless continue to
be valid and enforceable as though the invalid portions had not been a part
hereof. In addition, the parties acknowledge (i) that this Agreement has been
fully negotiated by and between the parties in good faith and is the result of
the joint efforts of both parties, (ii) that both parties have been provided
with the opportunity to consult with the legal counsel regarding its terms,
conditions and provisions and (iii) that regardless of whether or not either
party has elected to consult with legal counsel, it is the intent of the
parties that in no event shall the terms, conditions or provisions of this
Agreement be construed against either party as the drafter of this Agreement.
26. EXECUTION BY LESSEE.
The party or parties executing this Agreement on behalf of the Lessee
warrant(s) and represent(s): (i) that such executing party (or parties) has (or
have) complete and full authority to execute this Agreement on behalf of
Lessee; (ii) that Lessee shall fully perform its obligations hereunder.
27. ASSUMPTION AGREEMENTS AND COVENANTS.
This Agreement is subject and subordinate to the main Building lease
governing the Facility, under which Lessor is bound as tenant; and the
provisions of the main lease, other than as to the
5 /s/ WCM Initials Initials
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<PAGE> 6
payment of rent or other monies, are incorporated into this Agreement as if
completely herein rewritten. Lessee shall comply with and be bound by all
provisions of the main lease except that the payment of rent shall be governed
by the provisions of this Agreement, and Lessee shall indemnify and hold Lessor
harmless from and against any claim or liability under the main lease of Lessor
arising from Lessee's breach of the Main Lease or this Agreement. Lessor
covenants and warrants that the use of the Premises as a business office is
consistent with and does not violate the terms of the main lease.
28. COVENANT AND CONDITIONS.
Each term, provision and obligation of this Agreement to be performed by
Lessee shall be construed as both a covenant and condition.
29. ENTIRE AGREEMENT.
This Agreement embodies the entire understandings between the parties
relative to its subject matter, and shall not be modified, changed or altered in
any respect except in writing signed by all parties.
30. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Agreement as of
the date first above written.
LESSOR: VANTAS/FAIROAKS
By:
------------------------------------------
Coretta Organ, Area General Manager
LESSEE: /s/ Southern European Communications Corp.
------------------------------------------
(If a corporation)
By: /s/ WILLARD C. MCNITT
----------------------------------------------
Title: Chief Financial Officer
-------------------------------------------
[Corporate Seal]
Signed this 27th day of December, 1999 by Willard C. McNitt, Chief Financial
Officer.
LESSEE: /s/ BARBARA J. PHILLIPS
-----------------------
(If an individual or partnership) Notary Public
By:
----------------------------
By:
----------------------------
[Notary Seal]
EXHIBIT "A"
o Furnished Private Office
o 24 hour access to suite/office 317 - 12020 Sunrise Valley Dr. Reston, VA
22901
o Furnished, Decorated Reception Room with Professional Receptionist
o Personalized Telephone Answering During Office Hours
o 24 hour Voicemail
o 12 hours of Conference Room or private furnished offices, subject to prior
scheduling and use by other lessees
o Corporate Identity on Lobby Directory where Available
o Complete Mail Room Facility
o Receipt of Mail and Packages
o Complete Kitchen Facilities with Coffee Machine
o Utilities and Maintenance
o HVAC During Normal Business Hours
o Janitorial Services
o 8 hours per month courtesy use of other ALLIANCE Business Centers
affiliated facilities. Locations subject to current affiliation and
availability.
6 /s/ WCM Initials Initials
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<PAGE> 7
EXHIBIT "B" OPERATING STANDARDS
1. Lessees and their guests will conduct themselves in a businesslike manner;
proper attire will be worn at all times; and the noise level will be kept
to a level so as not to interfere with or annoy other Lessees.
2. Lessee shall not provide or offer to provide any services to Lessor's
customers if such services are available from Lessor.
3. Lessee will not affix anything to the walls of the Premises without the
prior written consent of the Lessor.
4. Lessee will not prop open any corridor doors, exit doors or doors
connecting corridors during or after business hours.
5. Lessees using public areas may only do so with the consent of the Lessor,
and those areas must be kept neat and attractive at all times.
6. Lessee will not conduct any activity within the Premises, Executive Suite
or Building, which in the sole judgment of the Landlord will create
excessive traffic or is inappropriate to the executive office suite
environment.
7. Lessee may not conduct business in the corridors or any other areas except
in its designated offices or conference rooms without the written consent
of Lessor.
8. All corridors, halls, elevators and stairways shall not be obstructed by
Lessee or used for any purpose other than normal egress and ingress.
9. No advertisement, identifying signs or other notices shall be inscribed,
painted or affixed on any part of the corridors, doors, or public areas.
10. Without Lessor's specific prior written permission, Lessee is not
permitted to place "mass market", direct mail or advertising (i.e.
newspaper, classified advertisements, yellow pages, billboards) using
Lessor's assigned telephone number or take any such action that would
generate an excessive of incoming calls.
11. Lessee shall not solicit clients of Lessor or and their employees in the
Building without first obtaining Lessor's prior written approval.
12. Immediately following Lessee's use of conference room space and/or
audio/visual equipment, Lessee shall clean up and return the space and
equipment to the state and condition it was in prior to Lessee's use. If
not, Lessor may charge Lessee for any other expenses required to restore
the conference space and/or equipment to its original condition.
13. Lessor must be notified in writing if Lessee desires to utilize the
conference room or other common areas of the Executive Suite during evening
or weekend hours. Lessor may deny the Lessee access if the desired usage
is inappropriate and may disrupt normal operations.
14. Lessee shall not, without Lessor's written consent, store or operate any
computer (except a desktop/laptop computer or fax machine) or any other
large business machines, reproduction equipment, heating equipment, stove,
speaker phones, radios, stereo equipment or other mechanical amplification
equipment, refrigerator or coffee equipment, or conduct a mechanical
business, do any cooking, or use or allow to be used on the Premises oil,
burning fluids, gasoline, kerosene for heating, warming or lighting. No
article deemed extra hazardous on account of fire or any explosives shall
be brought into said Premises or Facility. No offensive gases, odors on
liquids shall be permitted.
15. Lessee will bring no animals into the Premises or Facility except for
those assisting disabled individuals.
16. Lessee shall not remove furniture fixtures or decorative material from
offices or common areas without the written consent of Lessor.
17. Lessee shall not make any additional copies of any Lessor issued keys.
All keys and security cards are the property of Lessor and must be
returned upon request or by the close of the business on the expiration or
sooner termination of the Agreement term. Any lost or unreturned keys or
cards shall incur a $25.00 per item charge and the cost to re-key the
office.
18. Lessee shall not smoke nor allow smoking in any area of the Facility,
including the Premises, and shall comply with all governmental regulations
and ordinances concerning smoking.
19. Lessee shall not allow more than three visitors in the reception lobby of
the Premises at any one time.
20. Lessee's parking rights (if any) are defined by Lessor's Agreement with the
owner of the Building. Landlord reserves the right to modify parking
arrangements if required to do so by Building management.
21. Lessee shall cooperate and be courteous with all other occupants of the
Facility and Lessor's staff and personnel.
22. Lessor reserves the right to make such other reasonable rules and
regulations as in its judgment may from time to time be needed for the
safety, care, appropriate operation and cleanliness of the Facility.
/s/ WCM
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<PAGE> 8
Tenant: Southern European Communications Corporation
Landlord: VANTAS/FairOaks
Term: 6 Months
Move in date: January 1, 2000
Move out date: June 30, 2000
Office/Suite No.(s): 618, 618A and 618B
<TABLE>
<CAPTION>
Terms Quantity Amount Total
<S> <C> <C> <C> <C>
Fixed Monthly Fees:
Conference Room Usage Allowance: 8 hours/monthly/contract Included
Fixed Monthly Office Rental: Suite(s) 618, 618A and 618B $5302 $5302
Fixed Monthly Furniture Rental: 1 Desk, Credenza, Chair, Floor mat,
2 guest chairs) -- per office 3 sets $ 50 each Included
Additional Furniture: TBD TBD
Fixed Monthly Phone Charge: per set $125 3 $ 125 $ 375
$60 per fax 1 $ 60 $ 60
$125/month/T1 access 3 $ 125 $ 375
Fixed Monthly Add'l People Charge: $ 150 TBD
Fixed Monthly Parking: $ 35.00 per pass TBD
Other Fixed Monthly Charges: Business Support Services offices $ 120/office $ 360
</TABLE>
TOTAL FIXED MONTHLY CHARGES $6,472.00
<TABLE>
<S> <C> <C> <C> <C>
Payment Due at Signing:
Pro Rated Rent Pro-Rated Suite N/a
1st Months Rent Suite 618, 618A and 618B $ 5302
1st Months Furniture Above Set $ 50 each Included
Additional Furniture TBD
1st Months Parking N/a
1st Months Telephone Charges: $125 per set with speakerphone 3 $125 $ 375
1st Months Data/Modem/Fax Charges: $60 per fax 1 $ 60 $ 60
$125 T1 access/month 3 $125 $ 375
Line Installation Charges
(phone/data/T1) $150 per line $150 $ 1050
1st Months Add'l Person $150 TBD
Start-up Fee Administration and Set up $150 per office $150 $ 450
Refundable Service Deposit Two Month's Rent $ $10604
Other Fixed Monthly Charges: Business Support Services offices $120/office $ 360
</TABLE>
TOTAL 1ST MONTH'S RENT, CHARGES AND DEPOSIT $18,576.00
State Tax will be calculated for the following services as provided: Production,
Furniture, Copies, Catering, Additional Furniture, Equipment Rental, Incoming
Facsimile, Line Charges, Moves, Adds & Changes, Office Supplies and Telephone
Equipment Rental.
/s/ WCM
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<PAGE> 9
SCHEDULE OF SERVICES
BILLABLE SERVICES
CLERICAL SERVICES (MINIMUM 12 MINUTES)....................................$24/HR
Examples include filing, extensive fax transmissions, photocopying, handwritten
messages, metering mail for mass mailings, on-demand time patching or paging,
concierge services, catering preparation, UPS and express package preparation,
telemarketing and notary services.
WORD PROCESSING (MINIMUM 18 MINUTES).....................................$30/HR
Examples include straight keyboarding without any additional attributes, tape
transcription and database entry.
DESKTOP PUBLISHING/ADVANCED COMPUTER SERVICES
(MINIMUM 18 MINUTES) ..........................................STARTS AT $40/HR
Examples include charts and graphs, database development, page layout and
composition, scanning, powerpoint presentations, resumes and internet services.
o Standard turnaround time for a billable services project is 8 business hours
from the time of the request. A rush charge of 50% will apply if another
client's project must be put on hold in order to complete the "rush"
client's project before the 8 business hours are up.
o If overtime is requested by the client to complete a project, an additional
100% will apply over and above the standard hourly rate.
o All billing is in accordance with Industry Production Standards published by
the Executive Suite Association.
o Billed in 6 minute increments in accordance with Industry Production
Standards.
TELECOMMUNICATION SERVICES
TELEPHONE EQUIPMENT .........................................$125/PER SET/MONTH
Includes phone with built-in speaker phone, DID phone number and 2 roll-over
lines, and one line directory listing.
FAX OR DATA LINE ............................................$60/PER LINE/MONTH
ADDITIONAL DID LINE .........................................$50/PER LINE/MONTH
PHONE, FAX OR DATA LINE INSTALLATION ......$150/ONE-TIME CHARGE/LINE/SET-UP FEE
ADDITIONAL VOICE MAIL BOX OR AUTO ATTENDANT...........................$25/MONTH
VIDEO CONFERENCING (WHERE AVAILABLE) ..........$150/HR + $50 SET-UP FEE + USAGE
OUTPAGING ..................................................$25/MONTH PER PAGER
PROGRAMMING VOICEMAIL TO PAGER .......................$25 PROGRAMMING FEE/PAGER
CALL PATCHING-UP TO 100 PATCHES ...................$50/MONTH PER PERSON + USAGE
CALL PATCHING SET-UP FEE ........................................$25/PER NUMBER
CALL SCREENING ........................................$50/PER MONTH PER PERSON
TELECOM MOVES, ADDS, OR CHANGES ................................STARTING AT $75
OFFICE ACCESS PROGRAMS
MAIL ACCESS .............................................$75/MONTH
TELEPHONE ACCESS ............................................$100/MONTH
OFFICEACCESS ............................................$225/MONTH
o OfficeAccess includes 4 hours of conference room, office and/or
workstation time; can be customized if the client requires additional
hours.
[VANTAS LOGO]
/s/ WCM
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<PAGE> 10
SCHEDULE OF SERVICES
TECHNICAL SERVICES
TECHNICAL SERVICES ...................................................$75-125/HR
Including, but not limited to installing computer equipment, troubleshooting,
software installation and hardware upgrades
LAN CONNECTIVITY .................................................$25/MONTH/USER
DEDICATED T-1 OR DSL (REQUIRES LAN CONNECTIVITY) ................$100/MONTH/USER
LAN CONNECTIVITY AND CABLE INSTALLATION ...........................$150/PER DROP
T-1 INSTALLATION/TECHNICAL SERVICES ...................................$125/HOUR
EMAIL ACCOUNTS (GENERIC) ...............................................$8/MONTH
EMAIL ACCOUNTS (PERSONAL DOMAIN) ......................................$12/MONTH
DOMAIN NAME REGISTRATION ..............................................$150/EACH
WEB PAGE DESIGN ......................$180/FRONT PAGE; $120/EACH ADDITIONAL PAGE
WEB PAGE EDITS AND UPDATES (MINIMUM 30 MINUTES;
BILLED IN 15-MINUTE INCREMENTS) ......................................$100/HR
o Minimum 30 minutes; billed 15-minute increments
MISCELLANEOUS SUPPORT SERVICES
PHOTOCOPIES .......................................................1-350 $.15 EA
350-700 $.12 EA
701-1000 $.10 EA
1001-2000 $.08 EA
2001+ $.06 EA
FACSIMILE SERVICES ................................$1.50 PER PAGE + COST OF CALL
OFFICE SUPPLIES ....................................NATIONAL DISCOUNTS AVAILABLE
POSTAL SERVICE, UPS, LOCAL COURIER ..............................20% SERVICE FEE
FEDERAL EXPRESS ....................................NATIONAL DISCOUNTS AVAILABLE
STORAGE ......................................VARIES PER CENTER; WHERE AVAILABLE
CONFERENCE ROOMS OR GUEST OFFICES ..............................$25/HR; $150/DAY
o Training Rooms available in some locations
o Cancellation fee of 50% if scheduled conference room is not cancelled
within 8 hours of scheduled time
LCD PROJECTOR RENTAL ...............................$250/HALF DAY; $400/FULL DAY
o Includes Complimentary Overhead, Easel and VCR
MOVING FURNITURE ......................................................$25/PIECE
OFFICE SET-UP FEE ..........................................$150-$250/PER OFFICE
RELOCATING OFFICES WITHIN THE CENTER ..............................$50.OO/OFFICE
ADDITIONAL FURNITURE .......................................PRICES VARY BY PIECE
LOST SECURITY CARD, KEYS, ETC. ...........................................$25.00
PARKING ......................................VARIES PER CENTER; WHERE AVAILABLE
VANTAS RESERVES THE RIGHT TO ADJUST PRICING AS NECESSARY
[VANTAS LOGO]
/s/ WCM
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<PAGE> 1
EXHIBIT 6.18
EXODUS COMMUNICATIONS, INC.
INTERNET DATA CENTER SERVICES AGREEMENT
THIS INTERNET DATA CENTER SERVICES AGREEMENT (this "Agreement") is made
effective as of the Submission Date (________ ___, 199_) indicated in the
initial Internet Data Center Services Order Form accepted by Exodus, by and
between Exodus Communications, Inc. ("Exodus") and the customer identified
below ("Customer").
PARTIES:
CUSTOMER NAME: QORUS
----------------------
ADDRESS: 9600 SEPULVEDA BLVD.
----------------------
LOS ANGELES, CA 90045
----------------------
PHONE:
----------------------
FAX:
----------------------
EXODUS COMMUNICATIONS, INC.
2650 San Toques Expressway
Santa Clara, CA 95051
Phone: (408) 346-2200
Fax: (408) 346-2420
1. INTERNET DATA CENTER SERVICES.
Subject to the terms and conditions of this Agreement, during the term of this
Agreement, Exodus will provide to Customer the services described in the
Internet Data Center Services Order Form(s) ("IDC" Services Order Form(s)")
accepted by Exodus or substantially similar services if such substantially
similar services would provide Customer with substantially similar benefits
("Internet Data Center Services"). All IDC Services Order Forms accepted by
Exodus are incorporated herein by this reference, each as of the Submission Date
indicated in such form.
2. FEES AND BILLING.
2.1 Fees. Customer will pay all fees due according to the IDC
Services Order Form(s).
2.2 Billing Commencement. Billing for Internet Data Center Services,
other than Setup Fees, indicated in the initial IDC Services Order
Form shall commence on the earlier to occur of (i) the "Installation
Date" indicated in the initial IDC Services Order Form, regardless of
whether Customer has commenced use of the Internet Data Center
Services, unless Customer is unable to install the Customer Equipment
and/or use the Internet Data Center Services by the Installation Date
due to the fault of Exodus, then billing will not begin until the date
Exodus has remedied such fault and (ii) the date the "Customer
Equipment" (Customer's computer hardware and other tangible equipment,
as identified in the Customer Equipment List which is incorporated
herein by this reference) is placed by Customer in the "Customer Area"
(the portion(s) of the Internet Data Center, as defined in Section 3.1
below, made available to Customer hereunder for the placement of
Customer Equipment) and is operational. All Setup Fees will be billed
upon receipt of a Customer signed IDC Services Order Form. In the
event that Customer orders additional Internet Data Center Services,
billing for such services shall commence on the date Exodus first
provides such additional Internet Data Center Services to Customer or
as otherwise agreed to by Customer and Exodus.
2.3 Billing and Payment Terms. Customer will be billed monthly in
advance of the provision of Internet Data Center Services and payment of such
fees will be due within thirty (30) days of the date of each Exodus invoice.
All payments will be made in U.S. dollars. Late payments hereunder will
acquire interest at a rate of one and one-half percent (1 1/2%) per month,
or the highest rate allowed by applicable law, whichever is lower. If in its
judgment Exodus determines that Customer is not creditworthy or is otherwise not
financially secure, Exodus may, upon written notice to Customer, modify the
payment terms to require full payment before the provision of Internet Data
Center Services or other assurances to secure Customer's payment obligations
hereunder.
2.4 Taxes. All payments required by this Agreement are exclusive of all
national, state, municipal or other governmental excise, sales, value-added,
use, personal property, and occupational taxes, excises, withholding taxes and
obligations and other levies now in force or enacted in the future, all of which
Customer will be responsible for and will pay in full, except for taxes based
on Exodus' net income.
3. CUSTOMER'S OBLIGATIONS.
3.1 Compliance with Law and Rules and Regulations. Customer agrees
that Customer will comply at all times with all applicable laws and regulations
and Exodus' general rules and regulations relating to its provision of Internet
Data Center Services as updated by Exodus from time to time ("Rules and
Regulations"). Customer acknowledges that Exodus exercises no control
whatsoever over the content of the information passing through its sites
outlining the Customer Area and equipment and facilities used by Exodus to
provide Internet Data Center Services ("Internet Data Center"), and that it is
the sole responsibility of Customer to ensure that the information it transmits
and receives complies with all applicable laws and regulations.
3.2 Customer's Code. Customer agrees that it will be solely
responsible, and at Exodus' request will reimburse Exodus, for all costs and
expenses (other than those included as part of the Internet Data Center Services
and except as otherwise expressly provided herein) it incurs in connection with
this Agreement.
3.3 Access and Security. Customer will be fully responsible for any
charges, costs, expenses (other than those included in the Internet Data Center
Services) and third party claims that may result from its use of, or access to,
the Internet Data Centers and/or the Customer Area including but not limited to
any unauthorized use of any access devices provided by Exodus hereunder.
Except with the advanced written consent of Exodus. Customer's access to the
Internet Data Centers will be limited solely to the individuals identified and
authorized by Customer to have access to the Internet Data Centers and the
Customer Area in accordance with this Agreement, as identified in the Customer
Registration Form, as amended from time to time, which is hereby incorporated
by this reference ("Representatives").
3.4 No Competitive Services. Customer may not at any time permit any
Internet Data Center Services to be utilized for the provision of any services
that compete with any Exodus services, without Exodus' prior written consent.
3.5 Insurance.
(a) Minimum Levels. Customer will keep in full force and effect
during the term of this Agreement: (i) comprehensive general liability
insurance in an amount not less than $5 million per occurrence for bodily injury
and property damage; (ii) employer's liability insurance in an amount not less
than $1 million per occurrence and (iii) workers' compensation insurance in an
amount not less than that required by applicable law. Customer also agrees that
it will, and will be solely responsible for ensuring that its agents (including
contractors and subcontractors) maintain, other insurance at levels no less than
those required by applicable law and customary in Customer's and its agents'
industries.
(b) Certificate of Insurance. Prior to installation of any Customer
Equipment in the Customer Area, Customer will furnish Exodus with certificates
of Insurance which evidence the minimum levels of insurance set forth above.
(c) Naming Exodus as an Additional Insured. Customer agrees that prior
to the installation of any Customer Equipment, Customer will cause its insurance
provider(s) to name Exodus as an additional insured and notify Exodus in writing
of the effective date thereof.
4. CONFIDENTIAL INFORMATION.
4.1 Confidential Information. Each party acknowledges that it will have
access to certain confidential information of the other party concerning the
other party's business plans, customers, technology, and products, including the
terms and conditions of this Agreement ("Confidential Information").
Confidential Information will include, but not be limited to, each party's
proprietary software and customer information. Each party agrees that it will
not use in any way, for its own account or the account of any third party,
except as expressly permitted by this Agreement, nor disclose to any third party
(except as required by law or to that party's attorneys, accountants and other
advisors as reasonably necessary) any of the other party's Confidential
Information and will take reasonable precautions to protect the confidentiality
of such information.
4.2 Exceptions. Information will not be deemed Confidential
Information hereunder if such information: (i) Is known to the receiving
party prior to receipt from the disclosing party directly or indirectly from a
source other than one having an obligation of confidentiality to the disclosing
party; (ii) becomes known (independently of disclosure by the disclosing
party) to the receiving party directly or indirectly from a source other than
one having an obligation of confidentiality to the disclosing party; (iii)
becomes publicly known or otherwise ceases to be secret or confidential, except
through a breach of this Agreement by the receiving party; or (iv) is
independently developed by the receiving party.
5. REPRESENTATIONS AND WARRANTIES.
5.1 Warranties by Customer.
(a) Customer Equipment. Customer represents and warrants that it owns
or has the legal right and authority, and will continue to own or maintain the
legal right and authority during the term of this Agreement, to place and use
the Customer Equipment as contemplated by this Agreement. Customer further
represents and warrants that its placement, arrangement, and use of the
Customer Equipment in the Internet Data Centers complies with the Customer
Equipment Manufacturer's environmental and other specifications.
(b) Customer's Business. Customer represents and warrants that
Customer's services, products, materials, data, information and Customer
Equipment used by Customer in connection with this Agreement as well as
Customer's and its permitted customers' and users' use of the Internet Data
Center Services (collectively, "Customer's Network") does not as of the
Installation Date, and will not during the term of this Agreement operate in
any manner that would violate any applicable law or regulation.
(c) Rules and Regulations. Customer has read the Rules and Regulations
and represents and warrants that Customer and Customer's Business are currently
in full compliance with the Rules and Regulations, and will remain so at all
times during the term of this Agreement.
(d) Breach of Warranties. In the event of any breach, or reasonably
anticipated breach, of any of the foregoing warranties, in addition to any other
remedies available at law or in equity, Exodus will have the right immediately,
in Exodus' sole discretion to suspend any related Internet Data Center Services
if deemed reasonably necessary by Exodus to prevent any harm to Exodus and its
business.
STANDARD
EXODUS COMMUNICATIONS, INC. CONFIDENTIAL AND PROPRIETARY (REV 6/98) PAGE 1
<PAGE> 2
5.2 Warranties and Disclaimers by Exodus.
5.2(a) Service Level Warranty. In the event Customer experiences any
of the following and Exodus determines in its reasonable judgment that such
inability was caused by Exodus' failure to provide Internet Data Center
Services for reasons within Exodus' reasonable control and not as a result of
any actions or inactions of Customer or any third parties (including Customer
Equipment and third party equipment), Exodus will, upon Customer's request in
accordance with paragraph (iii) below, credit Customer's account as described
below:
(i) Inability to Access the Internet (Downtime). If Customer is unable
to transmit and receive information from Exodus' Internet Data Centers (i.e.,
Exodus' LAN and WAN) to other portions of the Internet because Exodus failed to
provide the Internet Data Center Services for more than fifteen (15) consecutive
minutes, Exodus will credit Customer's account the pro-rata connectivity charges
(i.e., all bandwidth related charges) for one (1) day of service, up to an
aggregate maximum credit of connectivity charges for seven (7) days of service
in any one calendar (1) month. Exodus' scheduled maintenance of the Internet
Data Centers and Internet Data Center Services, as described in the Rules and
Regulations, shall not be deemed to be a failure of Exodus to provide Internet
Data Center Services. For purposes of the foregoing, "unable to transmit and
receive" shall mean sustained packet loss in excess of 50% based on Exodus'
measurements.
(ii) Packet Loss and Latency. Exodus does not proactively monitor the
packet loss or transmission latency of specific customers. Exodus does, however,
proactively monitor the aggregate packet loss and transmission latency within
its LAN and WAN. In the event that Exodus discovers (either from its own efforts
or after being notified by Customer) that Customer is experiencing packet loss
in excess of one percent (1%) ("Excess Packet Loss") or transmission latency in
excess of 120 milliseconds round trip time (based on Exodus' measurements)
between any two Internet Data Centers within Exodus' U.S. network (collectively,
"Excess Latency", and with Excess Packet Loss "Excess Packet Loss/Latency"), and
Customer notifies Exodus (or confirms that Exodus has notified Customer), Exodus
will take all actions necessary to determine the source of the Excess Packet
Loss/Latency.
(A) Time to Discover Excess Packet Loss/Latency; Notification of
Customer. Within two (2) hours of discovering the existence of Excess Packet
Loss/Latency, Exodus will determine whether the source of the Excess Packet
Loss/Latency is limited to the Customer Equipment and the Exodus equipment
connecting the Customer Equipment to Exodus' LAN ("Customer Specific Packet
Loss/Latency"). If the Excess Packet Loss/Latency is not a Customer Specific
Packet Loss/Latency, Exodus will determine the source of the Excess Packet
Loss/Latency within two (2) hours after determining that it is not a Customer
Specific Packet Loss/Latency. In any event, Exodus will notify Customer of the
source of the Excess Packet Loss/Latency within sixty (60) minutes after
identifying the source.
(B) Remedy of Excess Packet Loss/Latency. If the Excess Packet
Loss/Latency remedy is within the sole control of Exodus, Exodus will remedy the
Excess Packet Loss/Latency within two (2) hours of determining the source of the
Excess Packet Loss/Latency. If the Excess Packet Loss/Latency is caused from
outside of the Exodus LAN or WAN, Exodus will notify Customer and will use
commercially reasonable efforts to notify the party(ies) responsible for the
source and cooperate with it (them) to resolve the problem as soon as possible.
(C) Failure to Determine Source and/or Resolve Problem. In the
event that Exodus is unable to determine the source of and remedy the Excess
Packet Loss/Latency within the time periods described above (where Exodus was
solely in control of the source), Exodus will credit Customer's account the
pro-rata connectivity charges for one (1) day of service for every two (2) hours
after the time periods described above that it takes Exodus to resolve the
problem, up to an aggregate maximum credit of connectivity charges for seven (7)
days of service in any one (1) month.
(iii) Customer Must Request Credit. To receive any of the credits
described in this section 5.2(a), Customer must notify Exodus within three (3)
business days from the time Customer becomes eligible to receive a credit.
Failure to comply with this requirement will forfeit Customer's right to receive
a credit.
(iv) Remedies Shall Not Be Cumulative: Maximum Credit. In the event
that Customer is entitled to multiple credits hereunder arising from the same
event, such credits shall not be cumulative and Customer shall be entitled to
receive only the maximum single credit available for such event. In no event
will Exodus be required to credit Customer in any one (1) calendar month
connectivity charges in excess of seven (7) days of service. A credit shall be
applied only to the month in which there was the incident that resulted in the
credit. Customer shall not be eligible to receive any credits for periods in
which Customer received any Internet Data Center Services free of charge.
(v) Termination Option for Chronic Problems. If, in any single
calendar month, Customer would be able to receive credits totaling fifteen (15)
or more days (but for the limitation in paragraph (iv) above) resulting from
three (3) or more events during such calendar month or, if any single event
entitling customer to credits under paragraph 5.2(a)(i) exists for a period of
eight (8) consecutive hours, then, Customer may terminate this Agreement for
cause and without penalty by notifying Exodus within five (5) days following the
end of such calendar month. Such termination will be effective thirty (30) days
after receipt of such notice by Exodus.
THIS WARRANTY DOES NOT APPLY TO ANY INTERNET DATA CENTER SERVICES THAT EXPRESSLY
EXCLUDE THIS WARRANTY (AS DESCRIBED IN THE SPECIFICATION SHEETS FOR SUCH
PRODUCTS). THIS SECTION 5.2(a) STATES CUSTOMER'S SOLE AND EXCLUSIVE REMEDY FOR
ANY FAILURE BY EXODUS TO PROVIDE INTERNET DATA SERVICES.
(b) No Other Warranty. EXCEPT FOR THE EXPRESS WARRANTY SET OUT IN
SUBSECTION (a) ABOVE, THE INTERNET DATA CENTER SERVICES ARE PROVIDED ON AN "AS
IS" BASIS, AND CUSTOMER'S USE OF THE INTERNET DATA CENTER SERVICES IS AT ITS OWN
RISK. EXODUS DOES NOT MAKE, AND HEREBY DISCLAIMS, ANY AND ALL OTHER EXPRESS
AND/OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT AND TITLE,
AND ANY WARRANTIES ARISING FROM A COURSE OF DEALING, USAGE, OR TRADE PRACTICE.
EXODUS DOES NOT WARRANT THAT THE INTERNET DATA CENTER SERVICES WILL BE
UNINTERRUPTED, ERROR-FREE, OR COMPLETELY SECURE.
(c) Disclaimer of Actions Caused by and/or Under the Control of Third
Parties. EXODUS DOES NOT AND CANNOT CONTROL THE FLOW OF DATA TO OR FROM EXODUS'
INTERNET DATA CENTERS AND OTHER PORTIONS OF THE INTERNET. SUCH FLOW DEPENDS IN
LARGE PART ON THE PERFORMANCE OF INTERNET SERVICES PROVIDED OR CONTROLLED BY
THIRD PARTIES. AT TIMES, ACTIONS OR INACTIONS CAUSED BY THESE THIRD PARTIES CAN
PRODUCE SITUATIONS IN WHICH EXODUS' CUSTOMERS' CONNECTIONS TO THE INTERNET (OR
PORTIONS THEREOF) MAY BE IMPAIRED OR DISRUPTED. ALTHOUGH EXODUS WILL USE
COMMERCIALLY REASONABLE EFFORTS TO TAKE ACTIONS IT DEEMS APPROPRIATE TO REMEDY
AND AVOID SUCH EVENTS, EXODUS CANNOT GUARANTEE THAT THEY WILL NOT OCCUR.
ACCORDINGLY, EXODUS DISCLAIMS ANY AND ALL LIABILITY RESULTING FROM OR RELATED TO
SUCH EVENTS.
6. LIMITATIONS OF LIABILITY.
6.1 Personal Injury. EACH REPRESENTATIVE AND ANY OTHER PERSONS VISITING THE
INTERNET DATA CENTERS DOES SO AT ITS OWN RISK AND EXODUS ASSUMES NO LIABILITY
WHATSOEVER FOR ANY HARM TO SUCH PERSONS RESULTING FROM ANY CAUSE OTHER THAN
EXODUS' NEGLIGENCE OR WILLFUL MISCONDUCT RESULTING IN PERSONAL INJURY TO SUCH
PERSONS DURING SUCH A VISIT.
6.2 Damage to Customer Equipment or Business. EXODUS ASSUMES NO LIABILITY
FOR ANY DAMAGE TO, OR LOSS RELATING TO, CUSTOMER'S BUSINESS RESULTING FROM ANY
CAUSE WHATSOEVER. CERTAIN CUSTOMER EQUIPMENT, INCLUDING BUT NOT LIMITED TO
CUSTOMER EQUIPMENT LOCATED ON CYBERRACKS, MAY BE DIRECTLY ACCESSIBLE BY OTHER
CUSTOMERS. EXODUS ASSUMES NO LIABILITY FOR ANY DAMAGE TO, OR LOSS OF, ANY
CUSTOMER EQUIPMENT RESULTING FROM ANY CAUSE OTHER THAN EXODUS' GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT. TO THE EXTENT EXODUS IS LIABLE FOR ANY DAMAGE TO, OR LOSS
OF, THE CUSTOMER EQUIPMENT FOR ANY REASON, SUCH LIABILITY WILL BE LIMITED SOLELY
TO THE THEN-CURRENT VALUE OF THE CUSTOMER EQUIPMENT.
6.3 Exclusions. EXCEPT AS SPECIFIED IN SECTIONS 6.1 AND 6.2, IN NO EVENT
WILL EXODUS BE LIABLE TO CUSTOMER, ANY REPRESENTATIVE, OR ANY THIRD PARTY FOR
ANY CLAIMS ARISING OUT OF OR RELATED TO THIS AGREEMENT, CUSTOMER EQUIPMENT,
CUSTOMER'S BUSINESS OR OTHERWISE, AND ANY LOST REVENUE, LOST PROFITS,
REPLACEMENT GOODS, LOSS OF TECHNOLOGY, RIGHTS OR SERVICES, INCIDENTAL, PUNITIVE,
INDIRECT OR CONSEQUENTIAL DAMAGES, LOSS OF DATA, OR INTERRUPTION OR
LOSS OF USE OF SERVICE OR OF ANY CUSTOMER EQUIPMENT OR CUSTOMER'S BUSINESS, EVEN
IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER UNDER THEORY OF CONTRACT,
TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE.
6.4 Maximum Liability. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
AGREEMENT, EXODUS'S MAXIMUM AGGREGATE LIABILITY TO CUSTOMER RELATED TO OR IN
CONNECTION WITH THIS AGREEMENT WILL BE LIMITED TO THE TOTAL AMOUNT PAID BY
CUSTOMER TO EXODUS HEREUNDER FOR THE PRIOR TWELVE (12) MONTH PERIOD.
6.5 Customer's Insurance. Customer agrees that it will not pursue any
claims against Exodus for any liability Exodus may have under or relating to
this Agreement until Customer first makes claims against Customer's insurance
provider(s) and such insurance provider(s) finally resolve(s) such claims.
6.6 Basis of the Bargain: Failure of Essential Purpose. Customer
acknowledges that Exodus has set its prices and entered into this Agreement in
reliance upon the limitations of liability and the disclaimers of warranties
and damages set forth herein, and that the same form an essential basis of the
bargain between the parties. The parties agree that the limitations and
exclusions of liability and disclaimers specified in this Agreement will survive
and apply even if found to have failed of their essential purposes.
7. INDEMNIFICATION.
7.1 Exodus' Indemnification of Customer. Exodus will indemnify, defend and
hold Customer harmless from and against any and all costs, liabilities, losses,
and expenses (including, but not limited to, reasonable attorneys' fees)
(collectively, "Losses") resulting from any claim, suit, action, or proceeding
(each, an "Action") brought against Customer alleging (i) the infringement of
any third party registered U.S. copyright or issued U.S. patent resulting from
the provision of Internet Data Center Services pursuant to this Agreement (but
excluding any infringement contributorily caused by Customer's Business or
Customer Equipment) and (ii) personal injury to Customer's Representatives from
Exodus's gross negligence or willful misconduct.
7.2 Customer's Indemnification of Exodus. Customer will indemnify, defend
and hold Exodus, its affiliates and customers harmless from and against any and
all Losses resulting from or arising out of any Action brought by or against
Exodus, its affiliates or customers alleging: (a) with respect to the Customer's
Business: (i) infringement or misappropriation of any intellectual property
rights; (ii) defamation, libel, slander, obscenity, pornography, or violation of
the rights of privacy or publicity; or (iii) spamming, or any other offensive,
harassing or illegal conduct or violation of the Rules and Regulations; (b) any
damage or
STANDARD
EXODUS COMMUNICATIONS, INC. CONFIDENTIAL AND PROPRIETARY (REV 6/98) PAGE 2
<PAGE> 3
destruction to the Customer Area, the Internet Data Centers or the equipment of
Exodus or any other customer by Customer or Representative(s) or Customer's
designees; or (c) any other damage arising from the Customer Equipment or
Customer's Business.
7.3 Notice. Each party will provide the other party prompt written notice
upon of the existence of any such event of which it becomes aware, and an
opportunity to participate in the defense thereof.
8. TERM AND TERMINATION.
8.1 Term. This Agreement will be effective for a period of one (1) year
from the Installation Date unless earlier terminated according to the
provisions of this Section 8. The Agreement will automatically renew for
additional terms of one (1) year each.
8.2 Termination.
(a) For Convenience.
(i) By Customer During First Thirty Days. Customer may terminate this
Agreement for convenience by providing written notice to Exodus at any time
during the thirty (30) day period beginning on the Installation Date.
(ii) By Either Party. Either party may terminate this Agreement for
convenience at any time effective after the first (1st) anniversary of the
Installation Date by providing ninety (90) days' prior written notice to the
other party at any time thereafter.
(b) For Cause. Either party will have the right to terminate this Agreement
if: (i) the other party breaches any material term or condition of this
Agreement and fails to cure such breach within thirty (30) days after receipt of
written notice of the same, except in the case of failure to pay fees, which
must be cured within five (5) days after receipt of written notice from Exodus;
(ii) the other party becomes the subject of a voluntary petition in bankruptcy
or any voluntary proceeding relating to insolvency receivership, liquidation, or
composition for the benefit of creditors; or (iii) the other party becomes the
subject of an involuntary petition in bankruptcy or any involuntary proceeding
relating to insolvency, receivership, liquidation, or composition for the
benefit of creditors, if such petition or proceeding is not dismissed within
sixty (60) days of filing.
8.3 No Liability for Termination. Neither party will be liable to the
other for any termination or expiration of this Agreement in accordance with
its terms.
8.4 Effect of Termination. Upon the effective date of expiration or
termination of this Agreement: (a) Exodus will immediately cease providing the
Internet Data Center Services; (b) any and all payment obligations of Customer
under this Agreement will become due immediately; (c) within thirty (30) days
after such expiration or termination, each party will return all Confidential
Information of the other party in its possession at the time of expiration or
termination and will not make or retain any copies of such Confidential
Information except as required to comply with any applicable legal or
accounting record keeping requirement; and (d) Customer will remove from the
Internet Data Centers all Customer Equipment and any of its other property
within the Internet Data Centers within five (5) days of such expiration or
termination and return the Customer Area to Exodus in the same condition as it
was on the Installation Date, normal wear and tear excepted. If Customer does
not remove such property within such five-day period, Exodus will have the
option to (i) move any and all such property to secure storage and charge
Customer for the cost of such removal and storage and/or (ii) liquidate the
property in any reasonable manner.
8.5 Customer Equipment and Security. In the event that Customer fails to
pay Exodus all amounts owed Exodus under this Agreement when due, Customer
Agrees that upon written notice, Exodus may take possession of any Customer
Equipment and store it, at Customer's expense, until taken in full or partial
satisfaction of any lien or judgment, all without being liable to prosecution
or for damages.
8.6 Survival. The following provisions will survive any expiration or
termination of the Agreement: Sections 2, 3, 4, 5, 6, 7, 8 and 9.
9. MISCELLANEOUS PROVISIONS.
9.1 Force Majeure. Except for the obligation to pay money, neither party
will be liable for any failure or delay in its performance under this Agreement
due to any cause beyond its reasonable control, including act of war, acts of
God, earthquake, flood, embargo, riot, sabotage, labor shortage or dispute,
governmental act or failure of the Internet, provided that the delayed party:
(a) gives the other party prompt notice of such cause, and (b) uses its
reasonable commercial efforts to correct promptly such failure or delay in
performance.
9.2 No Lease. This Agreement is a services agreement and is not intended to
and will not constitute a lease of any real or personal property. Customer
acknowledges and agrees that (i) it has been granted only a license to occupy
the Customer Space and use the Internet Data Centers and any equipment provided
by Exodus in accordance with this Agreement, (ii) Customer has not been granted
any real property interest in the Customer Space or Internet Data Centers, and
(iii) Customer has no rights as a tenant or otherwise under any real property
or landlord/tenant laws, regulations or ordinances. For good cause, including
the exercise of any rights under Section 8.5 above, Exodus may suspend the right
of any Representative or other person to visit the Internet Data Centers.
9.3 Marketing. Customer agrees that Exodus may refer to Customer by trade
name and trademark, and may briefly describe Customer's Business in Exodus'
marketing materials and web site. Customer hereby grants Exodus a license to
use any Customer trade names and trademarks solely in connection with the
rights granted to Exodus pursuant to this Section 9.3.
9.4 Government Regulations. Customer will not export, re-export, transfer,
or make available, whether directly or indirectly, any regulated item or
information to anyone outside the U.S. in connection with this Agreement
without first complying with all export control laws and regulations which may
be imported by the U.S. Government and any country or organization of nations
within whose jurisdiction Customer operates or does business.
9.5 Non-Solicitation. During the period beginning on the Installation Date
and ending on the first anniversary of the termination or expiration of this
Agreement in accordance with its terms, Customer agrees that it will not, and
will ensure that its affiliates do not, directly or indirectly, solicit or
attempt to solicit for employment any persons employed by Exodus during such
period.
9.6 Governing Law; Dispute Resolution, Severability; Wavier. This
Agreement is made under and will be governed by and construed in accordance with
the laws of the State of California (except that body of law controlling
conflicts of law) and specifically excluding from application to this Agreement
that law known as the United Nations Convention on the International Sale of
Goods. Any dispute relating to the terms, interpretation or performance of this
Agreement (other than claims for preliminary injunctive relief or other
pre-judgment remedies) will be resolved at the request of either party through
binding arbitration. Arbitration will be conducted in Santa Clara County,
California, under the rules and procedures of the Judicial Arbitration and
Mediation Society ("JAMS"). The parties will request that JAMS appoint a single
arbitrator possessing knowledge of online services agreements; however the
arbitration will proceed even if such a person is unavailable. In the event any
provision of this Agreement is held by a tribunal of competent jurisdiction to
be contrary to the law, the remaining provisions of this Agreement will remain
in full force and effect. The waiver of any breach or default of this Agreement
will not constitute a waiver of any subsequent breach or default, and will not
act to amend or negate the rights of the waiving party.
9.7 Assignment; Notices. Customer may not assign its rights or delegate
its duties under this Agreement either in whole or in part without the prior
written consent of Exodus, except that Customer may assign this Agreement in
whole as part of a corporate reorganization, consolidation, merger, or sale of
substantially all of its assets. Any attempted assignment or delegation without
such consent will be void. Exodus may assign this Agreement in whole or part.
This Agreement will bind and inure to the benefit of each party's successors
and permitted assigns. Any notice or communication required or permitted to be
given hereunder may be delivered by hand, deposited with an overnight courier,
sent by confirmed facsimile, or mailed by registered or certified mail, return
receipt requested, postage prepaid, in each case to the address of the receiving
party indicated on the signature page hereof, or at such other address as may
hereafter be furnished in writing by either party hereto to the other. Such
notice will be deemed to have been given as of the date it is delivered, mailed
or sent, whichever is earlier.
9.8 Relationship of Parties. Exodus and Customer are independent
contractors and this Agreement will not establish any relationship of
partnership, joint venture, employment, franchise or agency between
Exodus and Customer. Neither Exodus nor Customer will have the power to bind the
other or incur obligations on the other's behalf without the other's prior
written consent, except as otherwise expressly provided herein.
9.9 Entire Agreement; Counterparts. This Agreement, including all
documents incorporated herein by reference, constitutes the complete and
exclusive agreement between the parties with respect to the subject matter
hereof, and supersedes and replaces any and all prior or contemporaneous
discussions, negotiations, understandings and agreements, written and oral,
regarding such subject matter. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together shall constitute one and the same instrument.
Customer's and Exodus' authorized representatives have read the foregoing and
all documents incorporated therein and agree and accept such terms effective as
of the date first above written.
CUSTOMER EXODUS COMMUNICATIONS, INC.
Signature: /s/ Neil C. Ludwig Signature:
---------------------- -----------------------
Print Name: /s/ Neil C. Ludwig Print Name:
--------------------- ------------------------
Title: VP Operations Title:
-------------------------- ---------------------------
STANDARD
EXODUS COMMUNICATIONS, INC. CONFIDENTIAL AND PROPRIETARY (REV 6/98) PAGE 3
<PAGE> 4
EXODUS COMMUNICATIONS, INC.
SERVICES ORDER FORM
<TABLE>
<S> <C> <C>
CUSTOMER NAME: QORUS
FORM DATE: JULY 26, 1999
FORM NO.: 0726-RB
REQUESTED SERVICE DATE:
</TABLE>
ORDER FORM TERMS AND CONDITIONS:
(1) Customer hereby orders and Exodus Communications, Inc. (Exodus) agrees to
provide the Services described in this Order Form.
(2) The Customer representative signing below hereby acknowledges and agrees
that in the event that the Customer does not issue a purchase order prior
to the Requested Service Date, this Order shall serve as Customer's
purchase order. Customer further acknowledges that any additional or
conflicting terms and conditions contained in Customer's purchase order
shall not be applicable to the Services to be provided hereunder, even if
Exodus uses such purchase order for invoicing purposes.
(3) Neither Customer nor Exodus will be bound by this Order Form until an
authorized representative of each party has signed the Order Form.
(4) Changes or modifications to this Order Form will not be accepted.
THERE ARE SIGNIFICANT ADDITIONAL TERMS AND CONDITIONS, WARRANTY DISCLAIMERS AND
LIABILITY LIMITATIONS CONTAINED IN THE SERVICES AGREEMENT (EITHER THE MASTER
SERVICES AGREEMENT, INTERNET DATA CENTER SERVICES AGREEMENT AND/OR PROFESSIONAL
SERVICES AGREEMENT) BETWEEN CUSTOMER AND EXODUS. THERE ARE ALSO DETAILED
DESCRIPTIONS OF EACH SERVICE, AND SPECIFIC TERMS APPLICABLE TO EACH SERVICE,
CONTAINED IN THE SPECIFICATION SHEETS AND/OR STATEMENTS OF WORK FOR EACH
SERVICE.
DO NOT SIGN THIS ORDER FORM BEFORE YOU HAVE READ ALL OF THE PROVISIONS OF THE
SERVICES AGREEMENT AND THE SPECIFICATION SHEETS AND/OR STATEMENT OF WORK. YOUR
SIGNATURE BELOW INDICATES THAT YOU HAVE READ THE SERVICES AGREEMENT AND THE
SPECIFICATION SHEETS AND/OR STATEMENTS OF WORK AND AGREE TO BE BOUND BY THEIR
PROVISIONS.
CUSTOMER EXODUS COMMUNICATIONS, INC.
SIGNATURE: /s/ NEIL C. LUDWIG SIGNATURE:
PRINT NAME: Neil C. Ludwig PRINT NAME:
TITLE: VP Operations TITLE:
DATE: 7/27/99 DATE:
More detailed descriptions of the Services are contained in the specification
sheets and/or Statement of Work for each service, which are incorporated herein
by this reference.
CUSTOMER'S INITIALS /s/ NCL
----------------
EXODUS COMMUNICATIONS, INC. PROPRIETARY AND CONFIDENTIAL (REV 07/99)
<PAGE> 5
EXODUS COMMUNICATIONS, INC.
SERVICES ORDER FORM
CUSTOMER NAME: QORUS
FORM DATE: JULY 26, 1999
FORM NO.: 0726-RB
STERLING IDC:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNET DATA BRIEF DESCRIPTION QTY UNIT PRICE EXTENDED EXTENDED
CENTER SERVICES (DETAILED DESCRIPTION ATTACHED) NON- MONTHLY FEES
RECURRING
FEES
- --------------- --------------- ------------------------------- ---- ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
BANDWIDTH OPTIONS
/S/ NCL EXO-FAST-U10 10 Mbps Fast Ethernet with 100 Mbps burstability 1 $10,653 $10,010
EXO-FAST-SU Setup - Fast Ethernet Network 1 $3,850 $3,850
EXO-FAST-UV10 Variable Usage Cost per Megabit Above Base 1 $1,650
Amount ($/megabit)
HOUSING OPTIONS
/S/ NCL EXO-VDC50 Half Virtual Data Center (7' x 4') 1 $3,124 $3,124
EXO-VDC50-SU Setup fees for Half Virtual Data Center 1 $2,200 $2,200
EXO-VDC Virtual Data Center (7' x 8') 1 $5,857 $5,857
EXO-VDC-SU Setup fees for Full Virtual Data Center 1 $3,330 $3,300
MANAGED MONITORING
/S/ NCL EXO-MMS-ENH- Managed Monitoring Service Enhanced (Standard) 1 $250 $250
STAN Per Application Server
EXO-MMS-ENH- Setup fees for Managed Monitoring Service $500
STAN-SU Enhanced (Standard) Per Application Server
FIREWALL
/S/ NCL EXO-SSFW-PIX Exodus Dedicated Firewall Service with Cisco PIX 1 $3,300 $3,300
EXO-SSFW-SU Setup - Firewall Installation and Configuration of 1 $2,200 $2,200
Standard Firewall
TOTAL:
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
COMPLETE THE FOLLOWING PAGE BEFORE SUBMITTING
*More detailed descriptions of the Services are contained in the specification
sheets and/or Statement of Work for each service, which are incorporated herein
by this reference.
CUSTOMER'S INITIALS /s/ NCL
---------------
EXODUS COMMUNICATIONS, INC. PROPRIETARY AND CONFIDENTIAL (REV 07/99)
<PAGE> 1
EXHIBIT 6.19
AMENDMENT NO. 2
TO
ACQUISITION AGREEMENT
This is Amendment No. 2 (this "Amendment") to that certain Acquisition
Agreement dated May ___, 1999, as amended by Amendment No. 1 thereto (the
"Agreement"), by, between and among GOLF BALL WORLD, INC., a company
incorporated under the laws of the State of Florida; QORUS.COM, INC., a company
incorporated under the laws of the State of Delaware; and the persons listed on
Exhibit "A" attached thereto and made a part thereof, being all of QORUS's
stockholders now and as of the closing date of the Agreement. All terms not
defined herein are used with the same meanings as defined in the Agreement.
1. The first sentence of Section 2 of the Agreement is hereby
amended to read in its entirety as follows:
2. Purchase Price. The aggregate purchase price to be
paid by GOLF for the QORUS Common Shares shall be 5,333,145
(post-reverse split) shares of GOLF $.001 par value voting
common stock (the "GOLF Common Shares").
2. Each and every reference in the Agreement to "5,332,334" is
hereby amended to read "5,333,145," and any mathematical calculation set forth
in the Agreement, including, without limitation, the calculation of any
percentages, which included the number "5,332,334" is hereby amended accordingly
to reflect the use of "5,333,145" in lieu thereof.
3. Except as expressly modified hereby, each of the other terms
and provisions of the Agreement are hereby ratified and confirmed in all
respects and shall remain in full force and effect in accordance with their
respective terms.
4. This Amendment may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this Amendment and all of
which, when taken together, will be deemed to constitute one and the same
agreement.
IN WITNESS WHEREOF, the Parties have executed and delivered this
Amendment as of the date first written above.
GOLF BALL WORLD, INC.
By:
-------------------------------
Name: Robert Hensberry
Title: President and Chief
Executive Officer
QORUS.COM, INC.
By:
-------------------------------
Name:
Title:
STOCKHOLDERS
(See Attached Schedule)
File Information
<PAGE> 1
EXHIBIT 6.20
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release (this "Agreement") is made as of
October 28, 1999 by and between Tornado Development, Inc. ("Tornado") and
QORUS.COM, INC. ("Qorus") (each, individually, a "Party" and collectively, the
"Parties") with reference to the following facts:
A. On April 15, 1999, Tornado and Qorus entered into a Software
License Agreement (the "License Agreement"), in which Tornado as licensor
granted Qorus a license to use Tornado's proprietary Software (as defined
therein) upon the terms and conditions set forth therein.
B. The Parties disagree about the nature and extent of Qorus'
performance of its obligations to date as a licensee under the License
Agreement.
C. Tornado and Qorus now desire to settle forever certain issues
and potential claims related to or arising out of the License Agreement and
transactions between Qorus and Tornado.
NOW, THEREFORE in consideration of the promises and covenants
hereinafter set forth, the Parties hereto agree as follows:
1. Releases. In consideration of the mutual agreements,
covenants and releases contained herein, and with the exception of the rights
and obligations created or preserved by this Agreement:
(a) Tornado hereby agrees that Qorus shall be
deemed to have paid, and shall have no liability to Tornado whatsoever as a
result of any failure to pay, the Initial License Fee (as defined in the License
Agreement) and invoices outstanding s of October 28, 1999 in the aggregate
amount of $432,222 (the "Past Due Fee Obligation"). Accordingly, Tornado hereby
forever relieves, releases and discharges Qorus of and from any and all claims,
debts, liens, liabilities, demands, obligations, promises, acts, agreements,
costs and expenses (including, but not limited to, attorneys' fees), damages,
actions and causes of action, of whatever kind or nature, now existing, based
on, arising out of, or in connection with the failure of Qorus to pay the Past
Due Fee Obligation as provided in the License Agreement.
(b) Qorus, on behalf of its, agents,
contractors, attorneys, employees, heirs, predecessors, successors and all other
persons, firms or corporations related to or in any way affiliated with,
claiming by or through, otherwise acting on behalf or under their direction or
control of the foregoing (all of which collectively shall be included
hereinafter in the defined term "Qorus"), hereby agrees that Tornado and its
officers, directors, shareholders, subsidiaries, parents, affiliates,
distributors, licensees, agents, employees, partners, successors, assigns,
attorneys, and all persons and entities operating on their behalf or under their
direction or control (all of which shall collectively hereinafter be
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included in the defined term "Tornado") shall have no liability to Qorus
whatsoever as a result of any act, omission, condition or occurrence existing at
any time from the beginning of the world through the date of this Agreement,
concerning those matters referred to, arising out of or connected in any way
with or relating in any manner whatsoever, directly or indirectly, to the
License Agreement or any transaction or agreement by and between Qorus and
Tornado (the "Section 1(b) Released Matters"). Accordingly, Qorus hereby forever
relieves, releases and discharges Tornado of and from any and all claims, debts,
liens, liabilities, demands, obligations, promises, acts, agreements, costs and
expenses (including, but not limited to, attorneys' fees), damages, actions and
causes of action, of whatever kind or nature, whether known or unknown,
suspected or unsuspected, now existing or arising in the future, based on,
arising out of, or in connection with the Section 1(b) Released Matters.
2. Additional Essential Consideration for Mutual
Release: In connection with, and as conditions to, the mutual releases stated by
the parties herein, the Parties agree as follows:
(a) Qorus will, simultaneously with execution of this Agreement, return to
Tornado for cancellation, Series B Preferred Stock Certificate No. 1 for
127,324 shares;
(b) Qorus will, simultaneously with execution of this Agreement, return to
Tornado for cancellation Tornado Development, Inc. Class A Common Stock
Purchase Warrant, Certificate No. W-1, issued April 15, 1999 (the "Original
Warrant") to purchase 50,000 shares;
(c) Tornado will within 10 days from the date hereof issue to Qorus, (i)a Class
A Common Stock Purchase Warrant (the "Replacement Warrant") exercisable for
25,000 shares of Class A Common Stock, dated as of the date of issuance of
the Replacement Warrant but otherwise in form identical to the form of the
Original Warrant (ii) a credit of $67,778 to be applied by Tornado to
payments for additional services or other fees payable by Qorus to Tornado,
and (iii) Series B Preferred Stock Certificate No. 2 for 64,843 shares of
Series B Preferred Stock;
(d) Qorus shall cause Patrick Haynes to resign as a member of the Tornado Board
of Directors, effective as of the date of this Agreement pursuant to a
resignation in form substantially similar to the form of resignation
attached as Attachment 2(d); and Qorus hereby forever waives and
relinquishes any and all rights to designate a director to the board of
directors of Tornado whether existing or arising under that certain CoSale
Agreement dated July 9, by and among Kevin Torf, Hurricane, LLC, Tornado
and holders of Series C Preferred Stock (the "CoSale Agreement"), the
Stockholders Rights Agreement dated July 9, 1999,by and between Tornado and
the persons and entities listed on Exhibit A thereto (the "Stockholders
Rights Agreement"), the Corporation's Articles of Incorporation as
currently in effect, or otherwise and agrees that this Agreement shall be
waiver in accordance with the provisions of the foregoing agreements listed
in this Section 2(d), and shall be effective regardless of the
accomplishments of the amendments contemplated by clauses (g) and (h)
below.
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(e) Qorus will execute and deliver to Tornado all shareholder consents and such
other consents, certificates and documents as are deemed necessary by
Tornado and its counsel to file with the Secretary of State of California
an Amended and Restated Certificate of Determination for the Series B
Preferred Stock, deleting Section 6.2 of the certificate of determination
which had required that Qorus appoint one member to the Tornado Board of
Directors; and
(f) Qorus hereby consents and agrees to, and will execute and deliver to
Tornado, an amendment to the License Agreement (the "Amended License
Agreement") in the form attached hereto as Attachment 2(f) whereby all
references in the License Agreement to favored nations status or pricing
will be deleted.
(g) Qorus hereby consents and agrees to, and agrees to execute and deliver to
Tornado, an amendment to the CoSale Agreement (the "Amended CoSale
Agreement") in the form attached hereto as Attachment 2(g) substantially in
the form consistent with the intent of this Agreement whereby all
references to any right of Qorus to nominate or elect any director of
Tornado shall be eliminated.
(h) Qorus hereby consents and agrees to, and agrees to execute and deliver to
Tornado, an amendment to the Stockholders Rights Agreement (the "Amended
Stockholders Rights Agreement") in the form attached hereto as Attachment
3(h) substantially in the form consistent with the intent of this Agreement
whereby all references to any right of Qorus to nominate or elect any
director of Tornado shall be eliminated.
3. Agreements Survive. All obligations of the parties
not specifically released pursuant to Section 1 above survive the execution of
this Agreement.
4. Civil Code Section 1542 Waiver. Qorus intend and
agree that this Agreement shall be effective as a full and final accord and
satisfaction and general release of and from all Section 1(b) Released Matters.
In furtherance thereof, the Qorus acknowledges that it is familiar with Section
1542 of the Civil Code of the State of California, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM, MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT
WITH THE DEBTOR.
Except as otherwise specifically set forth in this Agreement, Qorus waive any
and all rights it has or may have under California Civil Code Section 1542,
and/or any similar provision of law or successor statute to it, with respect to
the Section 1(b) Released Matters. In connection with this waiver, Qorus
acknowledges that it is aware that they it may hereafter discover claims
presently unknown or unsuspected, or facts in addition to or different from
those which they now know or believe to be true, with respect to the subject
matter of this Agreement. Nevertheless, Qorus intends by this Agreement, and
with and upon the advice of its own independently selected counsel, to release
fully, finally and forever all Section 2(b)Released Matters under this
Agreement. In furtherance of such intention, the releases
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set forth in this Agreement shall be and shall remain in effect as full and
complete releases notwithstanding the discovery or existence of any such
additional or different claims or facts relevant hereto.
6. No Assignment. The Parties warrant and represent that
each is the sole and lawful owner of all right, title and interest in and to
every potential claim and other matter constituting the matters released by that
party under Section 2 of this Agreement, and that they have not assigned or
transferred or purported to assign or transfer to any person or entity, any
right, title or interest in or to the matters released by that party under
Section 2 of this Agreement. Each Party shall indemnify, defend and hold all
other Parties harmless from and against any and all claims which may now or
hereafter be made against such other Parties by virtue of any breach of the
provisions of this paragraph.
7. Independent Legal Advice. Each Party acknowledges,
warrants and represents that it has sought such independent legal advice as he
or it deems necessary with respect to the advisability of making this Agreement
and the meaning and effect of all aspects of the Agreement, and executes this
Agreement with full knowledge of all rights which he or it may have. Each Party
represents that it enters into this Agreement freely, knowingly and voluntarily,
and that the execution and delivery of the Agreement is not the result of any
fraud, duress, mistake or undue influence whatsoever.
8. Construction of Agreement. Each Party acknowledges
that it has had an opportunity to review and revise this Agreement, and the
normal rule of construction to the effect that ambiguities in an agreement are
to be resolved against the drafting party shall not apply to the interpretation
of this Agreement.
9. Continued Effect. This Agreement shall inure to the
benefit of and shall be binding upon the successors, assigns, representatives,
heirs and beneficiaries of the Parties, and each of them.
10. Further Assurances and Survival of Obligations. The
releases, representations and warranties made by the Parties herein shall
continue in full force and effect notwithstanding the performance of other
obligations hereunder. Qorus will, at its own expense, make, execute, endorse,
acknowledge, file and/or deliver to Tornado from time to time such vouchers,
assignments, conveyances, transfer endorsements, powers of attorney,
certificates, reports and other assurances or instruments and take such further
steps relating to the covenants and obligations or Qorus hereunder as Tornado
may reasonably require.
11. Choice of Law, Jurisdiction and Venue. This Agreement
shall be construed in accordance with, and be governed by, the laws of the State
of California. Each of the Parties agrees and irrevocably submits to the
jurisdiction and venue of the courts of the State of California, County of Los
Angeles in the event of any action or proceeding filed to enforce or interpret
the terms of this Agreement or to recover damages for breach thereof.
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12. Costs and Attorneys' Fees. The Parties hereto agree
to pay their own costs and attorneys' fees incurred in connection with the
drafting, negotiation and execution of this Agreement and all matters prior
thereto. However, in any action or proceeding filed to enforce or interpret the
terms of this Agreement or to recover damages for breach thereof, the prevailing
Party shall be entitled to recover reasonable attorneys' fees and other costs of
suit in addition to any other relief that may be granted.
13. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which, when taken together, shall constitute one and the same Agreement.
14. Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall become
prohibited or invalid under applicable law, such provision 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.
15. Warranty of Authority. Each of the persons executing
this Agreement on behalf of a Party hereto warrants and represents that he or
she is duly authorized to execute this Agreement on behalf of such Party.
16. Complete Agreement. This Agreement embodies the
entire understanding of the Parties, and there are no other agreements,
understandings or representations in effect between the Parties relating to the
subject matter of this Agreement. This Agreement may be amended or modified only
by a written agreement executed by all of the Parties.
17. Headings. The various headings in the Agreement are
inserted for convenience only and shall not be deemed to be a part of or in any
manner affect this Agreement or any provision hereof.
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IN WITNESS WHEREOF, the parties have approved and executed this
Agreement as of the date hereinabove set forth.
Dated: October 28, 1999 Tornado Development, Inc.
By:
----------------------------------
Printed name:
------------------------
Its:
--------------------------------
Dated: October 28, 1999 QORUS.COM, INC.
By:
----------------------------------
Printed name:
------------------------
Its:
--------------------------------
APPROVED AS TO FORM AND CONTENT:
Dated: October 28, 1999 TROOP STUEBER PASICH REDDICK & TOBEY
By:
----------------------------------
Murray Markiles, Esq.
Attorneys for Tornado Development, Inc.
Dated: October 28, 1999
By:
----------------------------------
Printed name:
------------------------
Its:
--------------------------------
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EXHIBIT 6.21
ATTACHMENT 2(F)
AMENDMENT NO. 1 TO SOFTWARE LICENSE AGREEMENT
THIS AMENDMENT NO. 1 (this "AMENDMENT NO. 1") dated as of October 28,
1999 to the Software License Agreement (the "License Agreement") of April 15,
1999, by and between Tornado Development, Inc., a California corporation, with
offices at 1201 Morningside Drive, Suite 100, Manhattan Beach, California 90266
("Tornado"), and QORUS.COM, INC., a Delaware Corporation, with offices at 3875
Telegraph Road, A239, Ventura, California 93003 (the "Licensee") (Tornado and
the Licensee collectively referred to herein as, the "Parties").
1. RECITALS
WHEREAS, the Parties have entered into the Settlement Agreement and
Mutual Release (the "Settlement Agreement") dated as of October 28, 1999, in
satisfaction of certain obligations owed by Licensee to Tornado under the
License Agreement; and
WHEREAS, in connection with the execution of the Settlement Agreement
and pursuant to Section 14.4 of the License Agreement, the Parties desire to
amend and restate Section 4.1 of the License Agreement to remove all references
to `favored nations' pricing'.
2. AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises, the Parties
to this Amendment No.1 hereby agree as follows:
1. Section 4.1 of the License Agreement is amended and restated in its
entirety to read as follows:
4.1 LICENSE FEES. In consideration of the license granted
hereunder, Licensee will pay to Tornado license fees for each
Subscriber under the terms set forth in Attachment 4.1 hereto
("License Fees").
2. Unless as otherwise stated in the above Section 1, the terms of the
License Agreement shall remain in effect and unchanged by this
Amendment No. 1.
3. This Amendment No. 1 may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the undersigned, intending to be legally
bound, have duly executed this Amendment No. 1 to become effective as of
the date first above written.
"TORNADO"
TORNADO DEVELOPMENT, INC.
By: Kevin Torf
-----------------------------
Title: Chief Executive Officer
Date: October 28, 1999
"Licensee"
QORUS.COM, INC.
By: John Sohn
-----------------------------
Title:
Date: October 28, 1999
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