<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
COLLEGE BOUND STUDENT ALLIANCE, INC.
(Name of Small Business Issuer in its charter)
COLORADO 84-1416023
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5275 DTC PARKWAY, SUITE 110, ENGLEWOOD, COLORADO 80111-5275
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (303) 804-0155
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, $0.001 PAR VALUE
(Title of class)
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
College Bound Student Alliance, Inc. (the "Company") was organized
under the laws of the State of Colorado on July 15, 1993 under the name Winter
Park Ventures, Inc. On April 22, 1997, the Company changed its name to
SportsStar Marketing, Inc. On July 13, 1999, the Company changed its name to
College Bound Student Alliance, Inc. The Company, using a staff of regional
directors and sales representatives nationwide, represents high school students
and student-athletes seeking financial, informational, recruiting, and
admissions assistance to attend college. The Company's offices are located at
5275 DTC Parkway, Suite 110, Englewood, Colorado 80111-5275, and its telephone
number is (303) 804-0155.
The Company was dormant until 1997. In June 1997, the Company
entered into an agreement with National College Recruiting Association, Inc.
("NCRA"), a wholly-owned subsidiary of Chartwell International, Inc.
Chartwell International was at the time and still is a principal stockholder
of the Company. NCRA granted the Company an exclusive license for the use,
rights, and interests in and to all of the assets constituting the business
of NCRA, along with the rights to sell new and service existing franchises of
NCRA and to publish the BLUE CHIP ILLUSTRATED magazine. NCRA owns the rights
to a program to promote high school athletes to colleges in the pursuit of
broadening exposure and choice of schools as well as increasing their
opportunities for scholarship money. The program's principal method of
promotion is through profiles prepared and distributed to various colleges.
The term of the Agreement is for five years, with unlimited five-year
renewals under the same terms and conditions. As consideration for the
license, the Company agreed to pay NCRA an initial payment of $150,000 and
2.5% of the gross revenues realized from the business operations of NCRA. An
additional license fee of $100,000 is to be paid to NCRA upon receipt of
additional financing by the Company.
In April 1999, the Company acquired College Bound Student-Athletes,
Inc., a Wisconsin corporation ("CBS-Athletes"), for $1,307,000, consisting of
$1,040,000 debt, 545,000 shares of the Company's common stock, and an option to
purchase up to 500,000 shares of the Company's common stock at $.50 per share.
Additional payments of up to $1.1 million and options to purchase 500,000 shares
of the Company's common stock could be made upon CBS-Athletes achieving certain
performance thresholds. It is presently uncertain whether such performance
thresholds will be met, but additional consideration, if any, will be recorded
if and when said thresholds are met.
SERVICES OFFERED
The Company offers a placement service to college-bound students, their
parents, and college staff, which focuses on matching a student's talents and
abilities, via a student profile, with colleges that the student is qualified to
attend. Students pay a fee to become a client of the Company. This fee may be
underwritten by a corporate sponsor that has set aside funds for students
needing financial assistance. Corporate sponsors include NFL Charities,
McDonalds, various professional sports teams, and others.
The Company is currently seeking financing to expand and develop
related products and to develop an Internet-driven delivery vehicle that
provides students, parents, high schools and college staffs worldwide with
comprehensive and cost-effective programs and services for helping to bring
students and colleges together. The focus of the Company will be to greatly
broaden its efforts in four distinct markets: the academics, fine arts and
athletics assistance markets currently being served by the Company, as well
as a vocational studies assistance market.
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MARKETING AND SALES
The Company markets its services largely through seminars, corporate
sponsors and through an organization of full- and part-time regional directors
and sales representatives who live in the local area and who are familiar with
the high schools, students, teachers, and coaches in that area. Direct personal
sales are generally conducted at the student's home with the student's parents
and the student, targeting those students and athletes who meet minimum
standards of academic, fine arts, and athletic performance. Seminars are used to
present information about the Company's services to large groups and to enroll
students as new clients of the Company.
The Company derives its revenues from the following sources:
- - DIRECT SALE OF STUDENT PROFILES. These are sold directly to students
and parents via seminars and/or direct contact through the Company's
regional directors and sales representatives.
- - CORPORATE SPONSORSHIPS. National and local organizations cover the
students' fees for utilizing the Company's programs, primarily for
public relations and/or social responsibility objectives. These
sponsorships are allocated according to the donor's wishes where
specified.
- - EMPLOYEE BENEFIT PROGRAMS. Organizations cover the student fees for the
Company's services as an addition to their current employee benefits
package. The Company's services are treated as an expanded tuition
reimbursement program to help attract and retain employees.
- - ADDITIONAL REVENUE SOURCES. Additional programs, such as student
highlights videos, student camps, SAT and ACT preparation programs,
course tutoring, selection evaluations, and college- major interest
tests are also available for additional fees.
- - CORPORATE ADVERTISING AND PROMOTION. The Company plans to increase
corporate participation by having Corporations pay an annual fee to
gain exclusive product category rights to promote their branded
products in/on Company vehicles, through Internet advertising, with
logo placement on student profiles, through BLUE CHIP ILLUSTRATED
ads, and through branded communications in mailings.
FRANCHISES
Through the license obtained from NCRA, the Company previously
offered for sale and sold franchises for NCRA business activities. For an
initial franchise fee of $10,000 to $40,000 (depending on territory size) and
ongoing royalties for each profile subscription sold, the Company granted the
franchisee an exclusive geographic area from which to solicit or promote
subscriptions to high school students, using the "NCRA" name, marketing
materials, and distribution network. The Company also provided training to
the franchisee, ongoing consulting and assistance, as well as subscriber
services. Upon receipt from a franchisee of a completed student profile, the
Company prepared and distributed the profile to a range from 220 colleges to
1,000 colleges (depending on the student client's needs and interests),
responded to inquiries from colleges and subscribers, and updated the
subscriber's profile.
Currently, there are less than 10 franchises active in the Company's
program and the Company has discontinued selling new franchises.
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TRADEMARKS
In June 1999, the Company filed service mark applications with U.S.
Patent and Trademark Office to register the following marks: College Bound
Alliance, CBSA, and College Bound Student Alliance. These applications are
pending.
The Company acquired the design service mark registration for "CBSA",
registered on January 24, 1995 with the U.S. Patent and Trademark Office, from
CBS-Athletes.
NCRA has a design service mark for "NCRA-National College Recruiting
Association", which was registered March 9, 1999 with the U.S. Patent and
Trademark Office.
COMPETITION
Management believes that less than 1% of the profiling market is being
served by the Company and its competitors. There are two primary types of
student recruiting: (i) Internet companies where, for a fee, the student places
his/her own information on an Internet site, and (ii) companies with operations
similar to those of the Company.
Based on information informally gathered by the Company, management
believes that admissions directors, department heads, and coaches do not express
a great deal of interest in Internet profiles due to the biased, undocumented
and unverified nature of the information presented.
Management knows of two companies, College Prospects of America and
The National Scouting Report, which appear to offer services for Athletes
similar to those of the Company. Both of these companies are franchise or
license-based, are smaller than the Company, and are not believed by
management to be a competitive threat to its future growth.
There can be no assurance that the Company will be able to maintain its
position in the industry. Barriers to entry into Internet-based businesses are
low and the development by others of new, improved or modified programs and/or
services could make the Company's products and/or services obsolete. Therefore,
even if the Company develops new and innovative services or products that prove
to be commercially feasible, there is no assurance that a new development by a
competitor will not supersede any such services or products. The Company must,
therefore, continuously improve its services and develop new products in order
to be competitive. In this regard, the Company may not have sufficient resources
to undertake the research and development necessary to remain competitive.
GOVERNMENT APPROVALS AND REGULATION
Few regulations control the Company's business and operations, other
than regulations applicable to businesses generally. It is possible, however,
that future laws and regulations may be adopted with respect to college
financial aid covering such issues as privacy, pricing, quality of services, and
libel, among others. Any such new legislation or regulation could have an
adverse impact on the Company's business.
The Company is subject to state and federal laws regarding its past
sales of franchises to a small number of its regional directors and sales
representatives (less than 10% of the Company's regional directors and sales
representatives are franchisees). The last franchise was sold in January
1999. The Company, however, has discontinued offering franchises and has no
plans to offer franchises in the future.
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EMPLOYEES
As of February 29, 2000, the Company had a total of 18 employees (14
full-time and 4 part-time) in its Denver and Wisconsin offices. In addition,
the Company has approximately 200 independent regional directors and sales
representatives located throughout the country who are paid on a commission
basis.
The Company's future success depends in significant part upon the
service of its key senior management personnel and its ability to attract and
retain highly qualified technical and managerial personnel. The time that the
officers and directors devote to the business affairs of the Company and the
skill with which they discharge their responsibilities will substantially
impact the Company's success. To the extent the services of these individuals
would be unavailable to the Company for any reason, the Company would be
required to identify, hire, train and retain other highly qualified technical
and managerial personnel to manage and operate the Company. The Company's
business could be adversely affected to the extent such key individuals could
not be replaced.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
PLAN OF OPERATION
The Company was dormant until 1997 when it changed its name to
SportsStar Marketing, Inc. It concluded a $1,000,000 public offering in
January 1998 and acquired College Bound Student Athletes, Inc. (CBS Athletes)
in April 1999. Both companies had been experiencing operating losses through
the date of the combination, and have continued to experience losses after
they merged and restructured their combined businesses. The Company believes
the lack of liquid financial resources are primarily responsible for the
losses.
In August 1999 the Company hired a Chief Executive Officer and, in
late 1999, completed a revised business plan. In February 2000 the Company
completed a $1,000,000 public offering which it plans to use the proceeds
from to increase sales through development and/or acquisition of new
products, expanding and upgrading the number and quality of sales
representatives, augmenting the personal evaluation seminar program, and
designing an effective website. The Company has engaged an IT firm to further
develop its internet and ecommerce ability to market its services and
products as funds become available, including implementation of back office
solutions to automate (1) production functions of fulfillment and delivery
and (2) accounting and management information systems.
The Company believes cash expected to be generated from operations, the
recent $1 million financing, and a $500,000 Corporate Sponsorship received in
March 2000 will satisfy its cash requirements through at least August 2000.
The Company also plans to raise capital through equity or combined debt
and equity financing. The proceeds will be used to expand its product lines, to
further develop its Internet capabilities, to further develop the corporate
sponsorship program, for acquisitions, and for additional working capital,
however, there can be no assurance that it will raise any capital.
Employees are expected to increase from 14 to approximately 30 over the
next twelve months, excluding part-time and contract labor that the Company uses
from time-to-time.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Due to the acquisition of CBS-Athletes in April 1999, the results of
operations of CBS-Athletes have been included in the Company's financial
statements from April 15, 1999. The purchase price was allocated to the fair
value of identifiable assets and liabilities. The Company recorded three
intangible assets in connection with the acquisition: payment for a covenant not
to compete of $156,013, software of $73,300, and recruiting systems technology
of $1,057,108. These are reflected on the balance sheet as other assets.
The Company's fiscal year end is July 31. The following is a summary of
certain selected financial information based on the audited consolidated
financial statements as of and for the years ended July 31, 1999 and 1998, and
the unaudited consolidated financial statements as of and for the six months
ended January 31, 2000. Reference should be made to the financial statements
attached to this registration statement to put the following summary in context.
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
JANUARY 31, 2000 JANUARY 31, 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Working capital (deficiency).............................. $ (1,141,146) $ (2,442)
Long-term debt............................................ $ 751,592 $ 0
Total assets.............................................. $ 1,395,401 $ 295,504
Stockholders' equity (deficiency)......................... $ (546,627) $ 179,170
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
JULY 31, 1999 JULY 31, 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Working capital (deficiency).............................. $ (790,972) $ 190,536
Long-term debt............................................ $ 751,976 $ 0
Total assets.............................................. $ 1,557,226 $ 465,827
Stockholders' equity (deficiency)......................... $ (103,967) $ 404,351
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
5
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STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
JANUARY 31, 2000 JANUARY 31, 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues.................................................. $ 655,481 $ 259,537
Loss from operations...................................... $ (527,076) $ (291,392)
Net loss.................................................. $ (562,116) $ (291,549)
Net loss per share........................................ $ (0.03) $ (0.02)
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
JULY 31, 1999 JULY 31, 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues.................................................. $ 706,886 $ 194,672
Loss from operations...................................... $ (761,310) $ (648,223)
Net loss.................................................. $ (793,990) $ (657,427)
Net loss per share........................................ $ (0.05) $ (0.04)
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Except for the historical information contained herein, the previous
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed here. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in this section and elsewhere
herein.
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SIX MONTHS ENDING JANUARY 31, 2000 VERSUS JANUARY 31, 1999
GENERAL. Substantially all of the Company's revenue is derived from
profile fees. The Company's revenue in a particular period is directly
related to the number of profiles produced during the period. Management
believes that the Company's business is somewhat seasonal, with average
revenue dipping in the period beginning at Thanksgiving and ending at the New
Year's holiday. Profiling revenue represents revenue that is recognized from
contracts as services are performed. Deferred revenue is recorded for cash
received in advance for services the Company is obligated to perform. The
cost of profiling revenue is mainly comprised of the cost of commissions,
production salaries, facility rental, postage and other direct service cost.
Other revenue represents the Company's revenue associated with sales
representative training and corporate sponsorship.
REVENUE. For the six months ending January 31, 2000, total revenue
increased 150% to $655,000 as compared to $260,000 for the same period in 1999.
Profile revenue increased $534,000 or 450% for the first six months of
fiscal year 2000 to $652,000 from $118,000 for the comparable period in 1999,
primarily as a result of the acquisition of CBS-Athletes; $507,000 of the
increase was attributable to CBS-Athletes.
The Company has recently experienced substantial revenue growth,
however, there can be no assurance that the Company will continue to grow at
historical rates or at all. The Company's ability to generate increased revenue
and achieve profitability will depend upon its ability to increase sales through
development and/or acquisition of new products, expanding and upgrading the
number of sales representatives, expanding the seminar program and designing an
effective Internet ecommerce site. The Company's ability to expand and develop
these channels depends on a number of factors beyond the Company's control,
including general business and economic conditions. Expansion and development of
existing and additional marketing and distribution channels will also depend, in
part, upon the Company's ability to secure additional technology, expertise and
staff.
The Company's results have been affected by the interest expense and
amortization of intangibles related to the acquisition completed in the second
half of fiscal 1999. The Company's results have also been affected by the costs
associated with the integration of operational and administrative functions.
There can be no assurance that the Company will be able to successfully
integrate the business it has acquired in a timely manner and in accordance with
its strategic objectives. Failure to integrate acquired businesses effectively
and efficiently, could have a material adverse effect on the Company's business,
financial condition and results of operations.
Franchise and other revenue decreased $138,000 or (97%) to $4,000 for
the first six months of fiscal 2000 as compared to the same period in 1999 due
to a decrease of $142,000 in franchise fees. The Company has discontinued the
sale of franchises and anticipates no additional future revenue from sale of
franchise regions.
COST OF SERVICES. The cost of services for the first six months of
fiscal 2000 increased $272,000 or 170% to $435,000 from $163,000 for the
comparable period in 1999. The increase in cost of services is attributable to
the acquisition of CBS-Athletes.
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OPERATING EXPENSE. General and administrative expenses increased
$284,000 to $648,000 for the first six months of fiscal 2000, as compared to
$364,000 for the comparable period in fiscal 1999. The increase results from the
operating expenses of CBS-Athletes included in fiscal 1999, corporate and
additional management compensation for new staff. Because of increased
management staff and cost of new technology, the Company anticipates higher
general and administrative expenses to continue.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization
expenses increased $75,000 to $99,000 for the first six months of fiscal
2000, as compared to $24,000 for the comparable period in fiscal 1999. The
additional depreciation and amortization expense recorded during the period
is primarily due to the acquisition of CBS-Athletes.
OPERATING LOSS. The Company's operating loss for the first six
months of fiscal 2000 is $527,000 as compared to an operating loss of
$291,000 for the comparable period in 1999. The increase in operating loss is
primarily attributable to the increased general and administrative expenses
associated with the CBS-Athletes acquisition, costs of merging operations,
legal fees, and higher investor and public relations expenses. Of the
operating loss in fiscal 2000, $187,000 does not require an immediate outlay
of cash resources.
NON OPERATING INCOME (EXPENSE). Interest expense for the first six
months of fiscal 2000 increased $35,000 as compared to the same period in 1999.
The increase in interest expense relates to the financing of the acquisition
made by the Company in the second half of fiscal 1999. The Company's interest
expense is directly related to its level of borrowings.
NET LOSS AND NET LOSS PER SHARE. The net loss for the first six
months of fiscal 2000 was $562,000, as compared to $292,000 for the
comparable period in 1999. The basic and diluted net loss per share for the
first six months of fiscal 2000 was $0.03, as compared to net loss per share
of $0.02 for the comparable period in 1999. The Company has issued options to
purchase 1,611,233 shares of its common stock as of January 31, 2000, which
could potentially dilute basic earnings per share in the future.
FISCAL YEAR ENDED JULY 31, 1999 VERSUS JULY 31, 1998
REVENUE. For the fiscal year ending July 31, 1999, total revenue
increased $512,000 or 260% to $707,000 as compared to $195,000 for the fiscal
year ending July 31, 1998.
Profile revenue increased $391,000 or 360% for the fiscal year 1999 to
$499,000 from $108,000 for the fiscal year 1998, primarily as a result of the
acquisition of CBS-Athletes; $306,000 or 80% of the increase was attributable to
CBS-Athletes. Franchise fee revenue increased $92,000 or 140% for the fiscal
year 1999 to $157,000 from $65,000 for the fiscal year 1998.
Other revenue increased $29,000 or 130% to $51,000 for the fiscal year
1999 as compared to the same period in 1998 as a result of increased
miscellaneous income.
The Company has recently experienced substantial revenue growth,
however, there can be no assurance that the Company will continue to grow at
historical rates or at all. The Company's ability to generate increased revenue
and achieve profitability will depend upon its ability to increase sales through
development or acquisition of new products, expanding and upgrading the number
of sales representatives, expanding its seminar program and designing an
effective Internet ecommerce site. The Company's ability to expand and develop
these channels depends on a number of factors beyond the Company's control,
including general business and economic conditions. Expansion and
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development of existing and additional marketing and distribution channels will
also depend, in part, upon the Company's ability to secure additional
technology, expertise and staff.
The Company's results have been lowered by interest expense and
amortization of intangibles related to the acquisition completed in the second
half of fiscal 1999. The Company's results have also been affected by the costs
associated with the integration of operational and administrative functions.
There can be no assurance that the Company will be able to integrate the
business it has acquired successfully or in a timely manner in accordance with
its strategic objectives. Failure to integrate acquired businesses effectively
and efficiently, could have a material adverse effect on the Company's business,
financial condition and results of operations.
COST OF SERVICES. The cost of services for fiscal 1999 increased
$241,000 or 140% to $413,000 from $172,000 for fiscal 1998. The increase in
cost of services is due to the acquisition of CBS Athletes, developing
promotional materials and communication costs.
OPERATING EXPENSE. Selling, general and administrative expenses
increased $322,000 to $945,000 for fiscal 1999, as compared to $623,000 for
fiscal 1998. The increase results from the operating expenses of CBS-Athletes
included in fiscal 1999 and additional compensation for new management and
staff personnel. Because of increased management staff and cost of new
technology, the Company anticipates selling, general and administrative
expenses to increase in the future.
DEPRECIATION & AMORTIZATION. Depreciation and amortization increased
$62,000 to $110,000 for fiscal 1999, as compared to $48,000 for the comparable
period in fiscal 1998. The additional depreciation and amortization expense
recorded during the period is primarily attributable to the acquisition of
CBS-Athletes.
OPERATING LOSS. The Company's operating loss for fiscal 1999 is
$761,000 as compared to an operating loss of $648,000 for 1998. The increase
in operating loss is primarily attributable to the increased general and
administrative expenses associated with the CBS-Athletes acquisition, costs
of merging operations, legal fees, and higher investor and public relations
expenses.
NON OPERATING INCOME (EXPENSE). Interest expense for fiscal 1999
increased $23,000 to $33,000 from $9,000 as compared to the same period in 1998.
The increase in interest expense relates to the financing of the acquisition
made by the Company in the second half of fiscal 1999. The Company's interest
expense is directly related to its level of borrowings.
NET LOSS AND NET LOSS PER SHARE. The net loss for fiscal 1999 was
$794,000, as compared to a net loss of $657,000 for the comparable period in
1998. The basic and diluted loss per share for fiscal 1999 was $0.05, as
compared to net loss per share of $0.04 for the comparable period in 1998.
The Company has issued options to purchase 1,126,233 shares of its common
stock as of July 31, 1999, which could potentially dilute basic earnings per
share in the future. Comparing 1998 to 1997 is not meaningful as we had no
operations in 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity and capital resources
historically have been cash flows from operations, borrowings and issuances of
its equity securities. These sources of cash flows have been offset by cash used
for acquisitions and payment of operating costs.
In February 2000, the Company completed the sale of 2,000,000 shares of
common stock for $1,000,000 and in March received a $500,000 corporate
sponsorship. The Company repaid $210,000
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of acquisition and other debt, $76,000 of deferred compensation and $360,000 of
deferred vendor and accounts payable with the proceeds from these transactions.
Management of the Company believes the cash received from the sale of common
stock and sponsorship, plus cash expected to be generated by operations, will be
sufficient to allow the Company to meet its obligations as they come due through
at least August 1, 2000.
YEAR 2000 COMPLIANCE
The Company has determined that the Company's critical operating
systems, accounting systems, computer systems and business equipment are the
major resources that are affected by the Year 2000 issue. While certain of
these systems may need to be upgraded or replaced, the identified systems and
or programs are primarily "off the shelf" products with Year 2000 updates
available. The Company has determined these systems to be substantially
compliant. One proprietary software program requires updating to become
compliant. Actions are being taken to account for the issue and the
operational impact is minimal.
Management believes that it has an effective plan in place to
adequately address the Year 2000 issue in a timely manner. Nevertheless, failure
of third parties upon which the Company's business relies could result in
disruption of the Company's supply of equipment and other general problems
related to daily operations. In addition, disruptions in the economy generally
resulting from Year 2000 issues could adversely effect the Company. Although,
the Company believes its Year 2000 plan will adequately address the Company's
internal issues, the overall risks associated with the Year 2000 issue cannot be
fully identified until the Company receives more responses from significant
suppliers. Accordingly, the amount of potential liability and lost revenue, if
any, cannot be reasonably estimated at this time.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company leases approximately 4,080 square feet of office space from
Chartwell International, an affiliate, at 5275 DTC Parkway, Suite 110,
Englewood, Colorado, for monthly rent of $5,270. The lease expires July 31,
2000. See Part I - Item 7. Certain Relationships and Related Transactions.
CBS-Athletes leases approximately 4,700 square feet of office space
from a non-affiliated third party at N19 W6717 Commerce Court, Cedarburg,
Wisconsin, for monthly rent of $3,710. The lease expires August 31, 2000.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table provides certain information as to the officers and
directors individually and as a group, and the holders of more than 5% of the
Common Stock of the Company, as of February 29, 2000:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF OWNER NUMBER OF SHARES OWNED PERCENT OF CLASS(1)
<S> <C> <C>
Chartwell International, Inc. 7,330,369 35.65%
5275 DTC Parkway, Suite 110 (2)
Englewood, CO 80111
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<CAPTION>
NAME AND ADDRESS OF OWNER NUMBER OF SHARES OWNED PERCENT OF CLASS(1)
<S> <C> <C>
Janice A. Jones 1,783,000 8.67%
5275 DTC Parkway, Suite 110 (3)
Englewood, CO 80111
Kevin W. Gemas 1,350,000 6.41%
N19 W6717 Commerce Court (4)
Cedarburg, Wisconsin 53012
Jerome M. Lapin 250,000 1.20%
5275 DTC Parkway, Suite 110 (5)
Englewood, CO 80111
William R. Willard 120,000 0.58%
356 Playa Del Norte, No. 2 (6)
La Jolla, CA 92037
Rick N. Newton 115,000 0.56%
5275 DTC Parkway, Suite 110 (7)
Englewood, CO 80111
Arthur D. Harrison 60,686 0.30%
5275 DTC Parkway, Suite 110
Englewood, CO 80111
Serena V. Riedel 0 --
5275 DTC Parkway, Suite 110
Englewood, CO 80111
Officers and Directors as a group 11,009,055 51.51%
(7 persons) (2)(3)(4)(5)(6)(7)
</TABLE>
(1) This table is based on 20,561,585 shares of Common Stock outstanding on
February 29, 2000. Where the persons listed on this table have the
right to obtain additional shares of common stock within 60 days from
February 29, 2000, these additional shares are deemed to be outstanding
for the purpose of computing the percentage of class owned by such
persons, but are not deemed to be outstanding for the purpose of
computing the percentage of any other person.
(2) According to a Form 10-SB filed by Chartwell International, Inc., Dr.
Janice A. Jones is the beneficial owner of 48% of Chartwell's common
stock. Dr. Jones is an officer and director of Chartwell. William R.
Willard is a director of Chartwell. The officers and directors of the
Company may be deemed to have beneficial ownership of the shares owned
by record by Chartwell.
(3) Includes 219,000 shares owned of record by John J. Grace, the spouse of
Janice A. Jones, and 1,500,000 shares owned of record by Family Jewels
II Limited Partnership, an entity owned and controlled by Dr. Jones.
(4) These shares are owned of record by Kevin W. Gemas and Wayne O. Gemas
as joint tenants. Includes shares issuable upon exercise of an option
to purchase 500,000 shares. See Part I - Item 1. Description of
Business. Includes 350,000 shares held in escrow to secure payment of
certain notes.
11
<PAGE>
(5) Includes shares issuable upon exercise of an option to purchase 250,000
shares. See Part I, Item 6. Executive Compensation.
(6) Includes 80,000 shares owned of record by The Bridgestream Trust, an
entity owned and/or controlled by Mr. Willard.
(7) Includes shares issuable upon exercise of an option to purchase 60,000
shares. See Part I, Item 6. Executive Compensation.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Rick N. Newton 48 Chairman of the Board of Directors
Jerome M. Lapin 69 Chief Executive Officer and Director
Kevin Gemas 37 Chief Operating Officer - Profiles Division
Arthur D. Harrison 67 Chief Financial Officer and Treasurer
Janice A. Jones 51 Corporate Secretary and Director
William R. Willard 57 Director
Serena V. Riedel 30 Vice President - Administration
</TABLE>
The term of office of each director of the Company ends at the next
annual meeting of the Company's stockholders or when the director's successor is
elected and qualified. No date for the next annual meeting of stockholders is
specified in the Company's Bylaws, nor has a meeting been fixed by the Board of
Directors. The term of office of each officer of the Company ends at the next
annual meeting of the Company's Board of Directors, which is expected to take
place immediately after the next annual meeting of stockholders, or when such
officer's successor is elected and qualified.
RICK N. NEWTON has been the Chairman of the Board of Directors of the
Company since April 1999. From November 1996 to March,1999, he was Director of
Corporate Finance Services at American Express Co., Denver, Colorado. From April
1990 to October 1996, he was CEO of Systems Science Institute. Mr. Newton has
more than 28 years of multi-industry experience ranging from start-up to Fortune
500 companies, and is primarily responsible for the Company's recent acquisition
of CBS-Athletes. He graduated from the University of Colorado with a Degree in
Engineering. Mr. Newton devotes approximately 20% of his time to the business of
the Company.
JEROME M. LAPIN has been Chief Executive Officer and a Director of the
Company since August 1999. From January 1994 to July 1999, Mr. Lapin was
President, CEO and Chairman of the Board of Directors of American Coin
Merchandising Corporation, a publicly traded company, (symbol ACMI), based in
Boulder, Colorado. Mr. Lapin was a co-founder of International House of Pancakes
in 1958. In 1966, he retired to Australia where he pursued private business
interests including World Hosts Pty, Ltd. which owned Caprice Restaurant and
introduced Orange Julius to Australia. In 1978 Mr. Lapin returned to the United
States and became President and CEO of Topsy's International, Inc., Kansas
12
<PAGE>
City, Missouri, which acquired the Tastee Freez chain of 800 units. He was also
President of Sanwa Foods, Inc., a soup manufacturer in Los Angeles that was
subsequently acquired by Campbell Soups. Mr. Lapin devotes full time to the
business of the Company.
KEVIN GEMAS has been the Chief Operating Officer-Profiles Division of
the Company since April, 1999. From January 1991 to April 1999, he was President
of College Bound Student-Athletes, Inc., Cedarburg, Wisconsin, which he founded
in 1990. This company was acquired by the Company in April 1999. He graduated
from Clemson University in 1985 with a B.S. Degree in Business Administration.
Mr. Gemas devotes full-time to the business of the Company.
ARTHUR D. HARRISON has been the Chief Financial Officer of the Company
since February 1999. Since 1983, he has also been owner of Arthur Harrison &
Co., a financial services consulting firm in Englewood, Colorado. He has
represented companies in Colorado's manufacturing, construction, distribution
and service industries and has served a Vice Chairman of Colorado Venture
Centers and The Rockies Venture Club. In addition, he served on the Boards of
Jackson Sound Inc., Atmospheric Instrumentation Research, Inc. and Napro
Biotherapeutics, Inc., a publicly-traded pharmaceutical company. As co-editor of
a column for The Denver Post newspaper for 6 years, he provided business advice
to many high-tech and low-tech companies. He graduated from Bucknell University
in 1954 with a B.S. Degree in Commerce & Finance. Mr. Harrison devotes his time
as required to the business of the Company.
JANICE A. JONES, PH.D., is the founder of the Company, and has been a
director of the Company since 1997 and its corporate secretary since 1998. In
addition, she founded and has been a director of Chartwell since its inception
in 1984 and its Chief Executive Officer since 1990, as well as President and a
director of NCRA. In 1979 she formed The Chartwell Group, Inc., an investment
banking and financial relations firm serving emerging growth companies. Dr.
Jones was engaged in investor relations for several companies from 1973 to 1982
including Cameron & Associates from 1976 to 1980. Dr. Jones holds Ph.D., 1980,
and Masters, 1976, degrees in Social Sciences from Yeshiva University, and a
B.A., 1973, from Hunter College. She received the Hunter College Hall of Fame
Award in 1986. In June 1995, Dr. Jones consented to the entry of an Order of the
Commission relative to Cease and Desist Proceedings instituted by the SEC.
Without admitting or denying the matters set forth therein, Dr. Jones was found
to have failed for three years and two months to file a Schedule 13G or
amendments thereto or to timely file Forms 3, 4 and 5 with respect to a public
company of which she was an officer, director and greater than 5% shareholder.
Dr. Jones devotes full-time to the business of the Company and Chartwell.
WILLIAM R. WILLARD has been a Director of the Company since June
1997. Since 1997, he has also been a Director of Chartwell. Mr. Willard has
been actively involved with public offerings, private placements, mergers and
acquisitions and other corporate finance activities both domestically and
internationally at Bridgestream Partners, L.L.C. since May 1992, where he is
Managing Partner and owns 100% of the membership interest. Prior to forming
Willard Capital Group Ltd. in 1998, Mr. Willard was First Vice President in
Corporate Finance for Bateman Eichler, Hill Richards, Inc. Mr. Willard has
diverse experience at several other investment banks, consulting firms and an
advertising firm. Mr. Willard received his B.S. in Political Science and
International Relations from the University of Wisconsin in 1965 and an
M.B.A. in Finance and International Business from the University of Chicago,
Graduate School of Business in 1971. He also attended the Sorbonne (Paris,
France) where he received his Cour Practique certificate. He serves on the
boards of directors of: Trans-Leasing International, Inc. (a reporting
company under the Securities Exchange Act of 1934), IDAS Corporation, E-2000,
and Chick's Natural. Mr. Willard devotes his time as required to the business
of the Company.
SERENA V. RIEDEL has been the Vice President of Administration for
the Company since November 1999. She has been Director of Investor Relations
for the Company since November 1998. From March 1998 to
13
<PAGE>
November 1998, she was Vice President of Operations for Ryan Insurance
Strategies Corporation, an insurance consulting company in Denver, Colorado.
From May 1989 to March 1998, Ms. Riedel held various executive and senior
administrative assistant positions at four other companies. Ms. Riedel
devotes full-time to the business of the Company.
Dr. Jones may be deemed to be the "promoter" of the Company within the
meaning of the Rules and Regulations under federal securities laws.
ITEM 6. EXECUTIVE COMPENSATION.
The following table sets forth information for all persons who have
served as the chief executive officer of the Company during the last completed
fiscal year:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- ----------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
-----------------------------------------------------------------------------------
AWARDS PAYOUTS
-----------------------------------------
OTHER RESTRICTED SECURITIES
NAME ANNUAL STOCK UNDERLYING ALL
AND COMPENSA AWARD(S) OPTIONS/ LTIP OTHER
PRINCIPAL YEAR SALARY BONUS TION ($) SARS PAYOUTS COMPEN-
POSITION ($) ($) ($) (#) SATION ($)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William 1999 $62,000 $-0- $-0- $16,578 -0- -0- $-0-
Kroske
President
(1)
</TABLE>
- ---------------
(1) William Kroske was the President of the Company from June
1997 to April 1999. From April to August 1999, Kevin
Gemas served in an interim capacity.
No stock options or stock appreciation rights were granted to Mr.
Kroske.
Since April 1997, the Company has issued 8,000 restricted shares of
Common Stock quarterly to each of Janice Jones, William Willard, and John Grace
as compensation for their services to the Company.
In February 1999, the Company entered into a employment agreement with
Arthur D. Harrison, Chief Financial Officer, pursuant to which he is paid $15
per hour payable upon receipt of his billing invoice; $35 per hour payable upon
receipt of financing of at least $750,000; and $90 per hour in the form of a
warrant or stock option based on current offering valuation.
On March 29, 1999, in connection with the acquisition of CBS-Athletes,
the Company entered into an Employment Agreement with Kevin Gemas. Under the
terms of the Agreement, Mr. Gemas is to be employed by the Company for an
initial term of five years, with annual extensions thereafter by mutual consent
of the parties, at an annual salary of $90,000, subject to annual review. In
addition, Mr. Gemas receives a standard benefit package (health insurance,
vacation pay, sick pay, etc.) and an automobile allowance of $1,100 per month.
Beginning in April 2000, he is entitled to participate in the Company's
executive management bonus and stock option plans, when such plans are
instituted.
On March 29, 1999, in connection with the acquisition of
CBS-Athletes, the Company entered into a Consulting Agreement with Wayne O.
Gemas, father of Kevin Gemas. Pursuant to the terms of the Consulting
Agreement, Wayne Gemas
14
<PAGE>
will provide consulting services to the Company on all matters pertaining to the
business of the Company for a period of 5 years and will receive $1,500.00 per
month (including an allowance for business expenses) for such services. In
addition, Mr. Gemas is entitled to health insurance coverage, with the premium
for such policy to be paid by the Company.
In April 1999, the Company entered into an employment agreement with
Rick Newton, Chairman of the Board of Directors. Pursuant to the terms of the
agreement, Mr. Newton received 55,000 restricted shares of Common Stock upon
acceptance of his engagement and an option to purchase up to 1,000,000 shares of
Common Stock at $0.50 per share. The option is exercisable for a five-year
period and vests at the rate of 200,000 shares per year. Upon reaching operating
profitability of $100,000 per year, Mr. Newton will receive an annual salary of
$25,000. On August 10, 1999, the Board of Directors rescinded the five-year
option to purchase up to 1,000,000 shares, but granted Mr. Newton the option to
purchase up to 60,000 shares at $0.50 per share, the amount vested since the
beginning of his employment. This option expires April 16, 2004.
On August 9, 1999, the Company entered into an Employment and Stock
Option Agreement with Jerome M. Lapin, the Chief Executive Officer of the
Company. Mr. Lapin's employment agreement renews automatically for successive
one-year terms unless his employment is terminated. He is paid an annual salary
of $60,000 and was granted five-year options to purchase 500,000 shares of
Common Stock at $0.272 per share, half of which vested on August 9, 1999 and the
remainder of which will vest August 9, 2000. Mr. Lapin has agreed that during
his employment with the Company and for a period of three years from the
termination of his employment that he will not directly or indirectly, own,
manage, operate, control, be employed by, perform services for, consult with,
solicit business for, participate in, or be connected with the ownership,
management, operation, or control of (i) any business which is materially
similar to or competitive with the Company's business in the United States or
(ii) any of the Company's then existing vendors, affiliates, or customers in the
United States. Mr. Lapin has deferred payment of his salary. At January 31,
2000, $28,500 in salary had been accrued.
On September 1, 1999, the Company entered into a letter agreement with
John J. Grace, the spouse of Janice Jones, an officer, director, and principal
stockholder of the Company, with regard to his compensation for services
rendered July 1, 1999 through December 31, 1999. Mr. Grace billed the Company
for actual time worked at the rate of $100 as follows: $25 per hour payable upon
receipt of billings, $50 per hour payable upon receipt of financing of $500,000
or more, and $25 per hour in stock valued at $0.50 per share. For the fiscal
year ended July 31, 1999 and six months ended January 31, 2000, Mr. Grace earned
$-0- and $47,000, respectively, and received $22,000 in March 2000. Mr. Grace
has agreed to defer receipt of compensation until additional financing is
received by the Company. This contract has been extended to March 31, 2000.
Beginning March 2000, Dr. Jones is paid a annual salary of
$50,000.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In June 1997, the Company entered into an agreement with National
College Recruiting Association, Inc. ("NCRA"), a wholly-owned subsidiary of
Chartwell International, Inc. Chartwell International was at the time and still
is a principal stockholder of the Company. Dr. Janice A. Jones, an officer and
director of the Company, is and was at the time the Agreement was entered into,
an officer, director and principal stockholder of Chartwell. NCRA granted the
Company an exclusive license for the use, rights, and interests in and to all of
the assets constituting the business of NCRA, along with the rights to sell new
and service existing franchises of NCRA and to publish the BLUE CHIP ILLUSTRATED
magazine. The term of the Agreement is for five years, with unlimited five-year
renewals
15
<PAGE>
under the same terms and conditions. As consideration for the license, the
Company agreed to pay NCRA an initial payment of $150,000 and 2.5% of the gross
revenues realized from the business operations of NCRA. An additional license
fee of $100,000 is to be paid to NCRA upon receipt of additional financing for
the Company.
Since June 1997, the Company has been leasing office space from
Chartwell International, Inc. The lease expires July 31, 2000. Rental expense
was $37,545 and $39,775 for the years ended July 31, 1999 and 1998,
respectively.
On February 26, 1998, the Company entered into a Management Services
Agreement with Chartwell International, Inc. Chartwell agreed to raise capital
for the Company as required; provide accounting and financial services; provide
acquisition services; communicate with major investors, business partners and
legal counsel; assist in the utilization of trade credits; assist in the
preparation of business plans; and assist with external promotional
announcements. The Company agreed to pay Chartwell $7,500 per month beginning
February 1, 1998 until the Company's revenues exceed $4,000,000 per year. At
that time, Chartwell's fee would increase to 2-1/2% of total revenues. The
Company also agreed to reimburse Chartwell for its out-of-pocket expenses
incurred by Chartwell on behalf of the Company. Management fee expense was
$90,000 and $45,000 for the years ended July 31, 1999 and 1998, respectively.
This agreement was terminated February 29, 2000.
On June 15, 1999, the Company borrowed $5,000 from Arthur E. Harrison,
the Company's Chief Financial Officer. The related promissory note was due
December 15, 1999 with simple interest at the rate of 10% per annum. Rick N.
Newton and Janice A. Jones, officers and directors of the Company, personally
guaranteed the payment of the note. This note was paid in February 2000.
On June 15, 1999, the Company also borrowed $6,000 from Chartwell
International. The related promissory note was due December 15, 1999 with simple
interest at the rate of 10% per annum. This note was paid in February 2000.
On July 28, 1999, the Company borrowed $50,000 from Spring Sun
Holdings, Ltd., a non-affiliated third party. The related promissory note was
guaranteed by Chartwell International, Inc. and secured by 135,135 shares of the
Company's Common Stock owned by Chartwell. The note accrued interest at the rate
of 10% per annum and was due January 28, 2000. The Company tendered payment of
this note at maturity.
On January 28, 2000 and February 1, 2000, the Company borrowed $52,500
and $17,500, respectively, from Chartwell International, Inc., a principal
stockholder of the Company and a company of which Janice Jones is an officer,
director and principal stockholder. Janice Jones is also an officer, director,
and principal stockholder of the Company. The notes are unsecured and accrue
interest at the rate of 10% per annum. These loans are still outstanding and
Chartwell has agreed to extend the maturity date of these loans to March 1,
2001.
ITEM 8. DESCRIPTION OF SECURITIES.
The authorized capital stock of the Company consists of 40,000,000
shares of Common Stock, each with $0.001 par value per share, and 10,000,000
shares of Preferred Stock, each with $0.001 par value per share.
16
<PAGE>
COMMON STOCK
Each share of Common Stock has one vote with respect to all matters
voted upon by the stockholders. The shares of Common Stock do not have
cumulative voting rights.
Holders of Common Stock are entitled to receive dividends, when and if
declared by the Board of Directors, out of funds of the Company legally
available therefor. The Company has never declared a dividend on its Common
Stock and has no present intention of declaring any dividends in the future.
Holders of Common Stock do not have any preemptive rights or other
rights to subscribe for additional shares, or any conversion rights. Upon a
liquidation, dissolution, or winding up of the affairs of the Company, holders
of the Common Stock will be entitled to share ratably in the assets available
for distribution to such stockholders after the payment of all liabilities.
The outstanding shares of the Common Stock of the Company are fully
paid and non-assessable.
The registrar and transfer agent for the Company's Common Stock is
Corporate Stock Transfer, Inc., 3200 Cherry Creek Drive South, Suite 430,
Denver, Colorado 80209.
PREFERRED STOCK
The Articles of Incorporation permit the Board of Directors, without
further stockholder authorization, to issue Preferred Stock in one or more
series and to fix the price and the terms and provisions of each series,
including dividend rights and preferences, conversion rights, voting rights,
redemption rights, and rights on liquidation, including preferences over the
Common Stock, all of which could adversely affect the rights of the holders of
the Common Stock. The Board of Directors has not established or issued a series
of Preferred Stock.
17
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND OTHER SHAREHOLDER MATTERS.
The Company's Common Stock is not traded on a registered securities
exchange, or on NASDAQ. The Company's Common Stock has been quoted on the OTC
Bulletin Board since February 1998, and currently trades under the symbol
"GRAD". The following table sets forth the range of high and low bid quotations
for each fiscal quarter within the last two fiscal years, as well as the current
fiscal year. These quotations reflect inter-dealer prices without retail
mark-up, mark-down, or commissions and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED HIGH BID LOW BID
<S> <C> <C>
April 30, 1998............................................ $1.81 $0.75
July 31, 1998............................................. $1.44 $0.69
October 31, 1998.......................................... $0.75 $0.13
January 31, 1999.......................................... $0.36 $0.09
April 30, 1999............................................ $0.49 $0.20
July 31, 1999............................................. $0.60 $0.22
October 31, 1999.......................................... $0.52 $0.18
January 31, 2000.......................................... $0.35 $0.15
</TABLE>
On March 15, 2000, the closing price for the Common Stock was $0.90.
As of February 29, 2000, there were 156 record holders of the Company's
Common Stock. Based on reports from Investor Communication Services, the Company
believes that there are approximately 1,770 beneficial stockholders.
Since the Company's inception, no cash dividends have been declared on
the Company's Common Stock.
The Securities and Exchange Commission (SEC) has adopted rules that
regulate broker-dealer practices in connection with transactions in "penny
stocks". Generally, penny stocks are equity securities with a price of less than
$5.00 (other than securities registered on certain national exchanges or quoted
on the NASDAQ system). If the Company's shares are traded for less than $5 per
share, as they currently are, the shares will be subject to the SEC's penny
stock rules unless (1) the Company's net tangible assets exceed $5,000,000
during the Company's first three years of continuous operations or $2,000,000
after the Company's first three years of continuous operations; or (2) the
Company has had average revenue of at least $6,000,000 for the last three years.
The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document prescribed by the SEC that provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and monthly account statements showing the
market value of each penny stock held in the customer's account. In addition,
the penny stock rules require that prior to a transaction in a penny stock not
otherwise exempt from
18
<PAGE>
those rules, the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These requirements may have
the effect of reducing the level of trading activity in the secondary market for
a stock that becomes subject to the penny stock rules. As long as the Company's
Common Stock is subject to the penny stock rules, the holders of the Common
Stock may find it difficult to sell the Common Stock of the Company.
ITEM 2. LEGAL PROCEEDINGS.
None.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
In January 2000, the Company engaged KPMG LLP to audit its financial
statements for the fiscal year ended July 31, 1999. The decision to engage KPMG
LLP was approved by the Board of Directors of the Company. The Company did not
consult KPMG LLP prior to its engagement.
Grant Thornton LLP audited the Company's financial statements for the
fiscal year ended July 31, 1998. The report of Grant Thornton LLP on those
financial statements did not contain an adverse opinion or a disclaimer of an
opinion. That report made reference to a going concern qualification. There were
no disagreements with Grant Thornton LLP on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure
during the term of its engagement by the Company. No reportable events occurred
during the term of the engagement.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the Company has sold shares of Common
Stock which were not registered under the Securities Act of 1933, as amended, as
follows:
On June 16, 1997, 400,000 shares of Common Stock were authorized for
issuance to officers, directors, and other founders of the Company, for a total
value of $500.
On June 27, 1997, the Company issued 11,646,000 shares of Common Stock
to Chartwell International, Inc. for cash and other assets valued at $69,000.
In July 1997, the Company sold 1,350,000 shares of Common Stock to 19
investors for cash of $118,000, net of offering costs, pursuant to the exemption
from registration contained in Rule 504 promulgated under the Securities Act of
1933.
In August and September 1997, 750,000 shares of Common Stock were
issued to the principals of Corporate Relations Group for cash and services
valued at $75,000.
In September 1997, 100,000 shares of Common Stock were issued to 2
investors, Olympus Capital, Inc. and Pow Wow, Inc., in consideration for making
bridge loans to the Company. The shares were valued at $10,000.
From August 1997 through May 1998, 75,632 shares of Common Stock were
issued to officers and directors of the Company for services valued at $15,816.
19
<PAGE>
In September 1997, the Company sold 1,540,000 shares of Common Stock to
40 investors for cash of $745,000, net of offering costs, pursuant to the
exemption from registration contained in Rule 504 promulgated under the
Securities Act of 1933.
In October 1997, 23,500 shares of Common Stock were issued to 10
individuals to buy back franchises. The shares were valued at $6,150.
In July 1998, the Company accrued 101,668 shares of issuance to
employees. The shares were valued at $53,624 and were actually issued in
December 1998.
From December 1998 to May 1999, the Company issued 236,001 shares of
Common Stock to directors of the Company (William Willard, Janice Jones, and
William Kroske) and an advisor to the Company (John Grace) for services valued
at $21,274.
From December 1998 to March 1999, the Company issued 173,656 shares of
Common Stock to employees for compensation in the amount of $15,758.
From December 1998 to March 1999, the Company issued 471,795 shares of
Common Stock to certain parties for services valued at $41,770 and to secure the
payment of certain amounts owed by the Company. The shares issued for security
(450,100) are held in escrow.
In February 1999, the Company issued 42,000 shares of Common Stock to 4
persons for cash, net of offering costs, of $12,311, pursuant to the exemption
from registration contained in Rule 504.
In April 1999, the Company issued 500,000 shares of Common Stock to
Wayne Gemas as part of the purchase price for CBS-Athletes, and 22,500 shares of
Common Stock to 6 employees and consultants of CBS-Athletes. The shares were
valued at $133,028. In addition, options to purchase 500,000 shares of Common
Stock at $0.50 per share, and additional options to purchase 500,000 shares of
Common Stock contingent upon attaining certain performance thresholds were
issued to Wayne Gemas. The options issued at $0.50 were valued at $61,531. An
additional 25,000 shares, valued at $5,528, were issued to one of the
CBS-Athletes consultants in August 1999.
In May 1999, 351,996 shares of Common Stock were issued and held in
escrow to secure the payment of a note in the amount of $176,000. These
shares were not valued since they are held in escrow. These shares were
cancelled in January 2000 and 352,000 shares were reissued in the names of
Kevin and Wayne Gemas. The shares are still held in escrow.
In August 1999, the Company issued 42,990 shares of Common Stock to
officers, directors, and an advisor of the Company (Art Harrison, Janice Jones,
William Willard, and John Grace) for compensation of $9,505.
In August 1999, the Company issued 1,347 shares of Common Stock to
Marcus McCarty for compensation of $298.
In August 1999, the Company issued 55,000 shares of Common
Stock to The Taxin Network for services valued at $6,683.
In October 1999, the Company issued 125,000 shares of Common Stock to
Patrick Darrel Hackman for investor relation services valued at $20,100.
In November 1999, the Company issued 360,000 shares of Common Stock to
Johnson & Associates for investor/public relations services valued at $52,704.
20
<PAGE>
In January 2000, the Company issued 140,000 shares of Common Stock to
Charlie Jarvis for website creation services valued at $37,520.
In February 2000, the Company issued 145,033 shares of Common Stock to
officers, directors and advisors of the Company (Arthur Harrison, Janice Jones,
William Willard, and John Grace) for compensation $133,126.
In February 2000, the Company issued 3,278 shares of Common Stock to
Daniel J. Miske in lieu of legal fees of $1,639.
In February 2000, the Company offered and sold 2,000,000 shares of
Common Stock at $.50 per share for a total of $1,000,000 pursuant to Rule 504 of
Regulation D to 8 persons in the State of Nevada and one accredited investor in
the State of Colorado. The offering was registered by qualification in the State
of Nevada. No underwriters were used in connection with the offering.
In February 2000, the Company issued 8,000 shares of Common Stock to
Serena Riedel, an employee of the Company, for compensation of $4,342.
No underwriters were used in connection with any of the stock
transactions described above. Except for those transactions for which the
Company has relied upon the exemption from registration contained in Rule 504,
the Company has relied upon Section 4(2) of the Securities Act of 1933. All of
the purchasers were deemed to be sophisticated with respect to an investment in
securities of the Company by virtue of their financial condition and/or
relationship to members of management of the Company. The Company affixed
appropriate legends to the stock certificates issued in the transactions
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 7-109-101 ET SEQ. of the Colorado Business Corporation Act and
Article 8 of the Company's Articles of Incorporation permit the Company to
indemnify its officers and directors and certain other persons against expenses
in defense of a suit to which they are parties by reason of such office, so long
as the persons conducted themselves in good faith and the persons reasonably
believed that their conduct was in the Company's best interests or not opposed
to the Company's best interests, and with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful.
Indemnification is not permitted in connection with a proceeding by or in the
right of the corporation in which the officer or director was adjudged liable to
the corporation or in connection with any other proceeding charging that the
officer or director derived an improper personal benefit, whether or not
involving action in an official capacity.
PART F/S
21
<PAGE>
College Bound Student Alliance, Inc.
Condensed Consolidated Balance Sheets
as of January 31,
(unaudited)
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Current assets
Cash $ 11,624 $ 17,576
Accounts receivable, net 21,692 4,625
Notes receivable, current portion -- 44,402
Other 15,974 47,289
----------- -----------
Total current assets 49,290 113,892
Equipment, net 73,391 33,774
Recruiting systems technology, net 1,144,314 1,198
Trademarks and licensing, net 108,223 141,540
Other assets 20,183 5,100
----------- -----------
TOTAL ASSETS $ 1,395,401 $ 295,504
=========== ===========
Current liabilities
Accounts payable $ 692,964 $ 63,798
Accrued expenses 200,253 52,536
Current portion of notes payable 261,011 --
Deferred revenue 36,208 --
----------- -----------
Total 1,190,436 116,334
Long term notes payable to former owner of CBSA,
less current portion 751,592 --
----------- -----------
Total liabilities 1,942,028 116,334
Stockholders' equity (deficit)
Common stock 18,562 16,991
Additional paid in capital 1,479,657 1,338,357
Treasury stock -- (196,396)
Accumulated deficit (2,044,846) (979,782)
----------- -----------
Total stockholders' equity (deficit) (546,627) 179,170
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 1,395,401 $ 295,504
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
22
<PAGE>
College Bound Student Alliance, Inc.
Condensed Consolidated Statement of Operations
for the six month period ending January 31,
(unaudited)
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Revenue
Profiles $ 651,904 $ 117,587
Franchises -- 141,950
Other 3,577 --
------------ ------------
Total revenue 655,481 259,537
Cost of services 435,003 162,881
General and administrative 648,254 363,808
Depreciation and amortization 99,299 24,240
------------ ------------
Operating loss (527,076) (291,392)
Interest expense, net 35,041 156
------------ ------------
NET LOSS $ (562,116) $ (291,549)
============ ============
Net loss per share - basic and diluted $ (0.03) $ (0.02)
============ ============
Weighted average number of common shares outstanding 18,128,788 16,131,847
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
23
<PAGE>
College Bound Student Alliance, Inc.
Consolidated Condensed Statement of Cash Flows
for the six month period ending January 31, 2000
<TABLE>
<S> <C>
Net Loss $(562,116)
Adjustments to reconcile net loss
Depreciation and amortization 99,299
Stock issuances 119,792
---------
Adjusted net loss (343,025)
Net cash provided by operating activities 279,649
Net cash provided by investment activities (7,382)
Net cash provided by financing activities --
---------
Net cash decrease for period (70,758)
Cash at beginning of period 82,383
---------
Cash at end of period $ 11,624
=========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
24
<PAGE>
COLLEGE BOUND STUDENT ALLIANCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR SIX MONTHS ENDING JANUARY 31, 2000
unaudited
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
College Bound Student Alliance, Inc., (the "Company") was incorporated in the
State of Colorado on July 15, 1993 under the name Winter Park Ventures. The
Company was inactive until 1997. On April 22, 1997, the Company amended it
articles of incorporation and changed its name to SportsStar Marketing, Inc. On
July 13, 1999, the Company changed to its current name after the acquisition of
College Bound Student Athletes, Inc.
The Company's business objective is to expand the choices of colleges of
qualified students and to assist parents and students who have the opportunity
to access financial aid opportunities. This is the Company's only business
segment. The company is transitioning from a franchise based sales force to a
direct sales force and other marketing channels. The Company uses a central
production and distribution facility to prepare the finished product and
distribute to the appropriate colleges. The Company's main product lines include
profiling, higher education aids and learning programs, financial aid and merit
award searches and academic and personal development programs. The Company also
owns the rights to publish the magazine "BlueChip Illustrated".
Beginning in April 1999, the consolidated financial statements include the
financial statements of the Company and its wholly owned subsidiary, College
Bound Student-Athletes, Inc. All inter-company balances and transactions have
been eliminated in consolidation.
The accompanying condensed consolidated financial statements have been prepared,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. Although the Company believes that the disclosures are adequate to
make the information presented not misleading, it is suggested that these
condensed consolidated financial statements be read in connection with the
financial statements and notes thereto included herein for the year ended July
31, 1999 included elsewhere herein.
In the opinion of the Company, the accompanying condensed consolidated financial
statements include all adjustments (consisting of normal recurring accruals and
adjustments) required to present fairly the Company's financial position at
January 31, 2000 and January 31, 1999, and the results of their operations for
each of the six month periods ended January 31, 2000 and 1999.
25
<PAGE>
The operating results for the six months ended January 31, 2000 are not
necessarily indicative of the results that may be expected for the year ended
July 31, 2000.
2. NET LOSS PER SHARE
Basic loss and diluted loss per share are computed by dividing loss available to
common stockholders by the weighted average number of common shares outstanding
during the period and by all dilutive potential common shares outstanding during
the period, respectively. The weighted average number of shares used in the
computation of basic loss per share were 18,128,788 and 16,131,847 for the six
months ended January 31, 2000 and 1999, respectively. Basic loss per common
share and loss per common share assuming dilution are the same for the periods
ending January 31, 2000 and 1999 because of the anti-dilutive effect of stock
options and awards when there is a net loss. The Company has issued options to
purchase 1,611,233 shares of its common stock as of January 31, 2000, which
could potentially dilute basic earnings per share in the future.
3. 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 revenue and expenses during the reporting period. Actual
results could differ significantly from those amounts.
4. INCOME TAXES
Income taxes are computed using the anticipated effective tax rate for the year.
5. LIQUIDITY
In February 2000, the Company completed the sale of 2,000,000 shares of
common stock for $1,000,000 and in March 2000 received a $500,000 corporate
sponsorship. The Company repaid $210,000 of acquisition and other debt,
$76,000 of deferred compensation and $360,000 of deferred vendor and accounts
payable with the proceeds from these transactions.
Management of the Company believes the cash received from the sale of common
stock and sponsorship, plus cash generated from operations, will be
sufficient to allow the Company to meet its obligations as they come due
through at least August 2000.
The Company's internal sources of liquidity include the continuing commitment of
certain management personnel to defer a portion or all of their compensation
until cash flow improves, the commitment of certain major
stockholders/noteholders to defer
26
<PAGE>
payments on their notes until cash flow improves and the ability of a
significant stockholder to contribute funding if needed.
6. BUSINESS COMBINATION
On April 15, 1999, the Company acquired College Bound Student Athletes, Inc.
(CBS Athletes), for $1,307,000, consisting of $1,040,000 debt, 545,000 shares of
the Company's stock, and options to purchase 500,000 shares of the company's
common stock at $0.50 per share. Additional payments of up to $1.1 million and
options to purchase 500,000 shares of the Company's common stock could be made
upon CBS Athletes achieving certain performance thresholds. It is presently not
probable that such performance thresholds will be met. Additional consideration,
if any, would be recognized at the point that meeting the thresholds becomes
probable.
The acquisition has been accounted for by the purchase method and the results of
operation of have been included in the Company's financial statements from April
15, 1999. The purchase price was allocated to the fair value of identifiable
assets and liabilities. In connection with the purchase, the Company recorded
three intangible assets: payment for a covenant not to compete of $156,013 which
is being amortized over the covenant period of three years on a straight-line
basis; software of $73,300 which is being amortized on a straight line basis
over five years; and recruiting systems technology of $1,057,108 which is being
amortized on a straight line basis over ten years.
7. NOTES PAYABLE TO RELATED PARTIES
Notes payable to related parties include notes payable to stockholders and
employees. Interest is accrued at rates ranging from 8% to 10% per annum and the
notes payable, including accrued interest, are due upon the Company obtaining
defined additional financing.
8. STOCKHOLDERS' EQUITY (DEFICIT)
The Company has 10,000,000 shares of authorized preferred stock, par value
$0.001, issuable from time to time in different series with rights and
privileges to be determined by the Board of Directors. No preferred stock has
yet been issued.
27
<PAGE>
9. STOCK OPTIONS
Stock option activity during the six months ending January 31, 2000 was as
follows:
<TABLE>
<CAPTION>
Number of shares Range of exercise prices
---------------- ------------------------
<S> <C> <C>
Balance at July 31, 1999 1,126,233 $0.50 to $1.00
Granted 485,000 $0.27 to $0.50
Canceled or exercised 0
---------
Balance at January 31, 2000 1,611,233 $0.27 to $1.00
=========
Number of options exercisable at January 31, 2000 1,326,233 $0.27 to $1.00
=========
</TABLE>
The Company has agreements to grant additional options to certain employees. The
Chairman of the Board is granted an additional 200,000 options for each year of
service which vests after the year such service is completed. The CEO is to
receive 250,000 options on the anniversary date of employment and the Corporate
Controller is to receive 20,000 per year for the next four years on the
anniversary date of employment, which vest after the year such service is
completed.
28
<PAGE>
Independent Auditors' Report
Board of Directors
College Bound Student Alliance, Inc. and subsidiary:
We have audited the accompanying consolidated balance sheet of College Bound
Student Alliance, Inc. and subsidiary (Company) as of July 31, 1999, and the
related consolidated statement of operations, stockholders' equity (deficit) and
cash flows for the year then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit. The
financial statements of College Bound Student Alliance, Inc. as of and for the
year ended July 31, 1998, were audited by other auditors, whose report dated
December 7, 1998 on those statements included an explanatory paragraph due to
uncertainty relating to the Company's ability to continue as a going concern.
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 1999 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of College
Bound Student Alliance, Inc. and subsidiary as of July 31, 1999, and the results
of their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.
Denver, Colorado
January 19, 2000, except as to
note 2, which is as of
March 9, 2000
29
<PAGE>
COLLEGE BOUND STUDENT ALLIANCE, INC.
AND SUBSIDIARY
Consolidated Financial Statements
July 31, 1999 and 1998
(With Independent Auditors' Report Thereon)
30
<PAGE>
COLLEGE BOUND STUDENT ALLIANCE, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
July 31, 1999 and 1998
<TABLE>
<CAPTION>
ASSETS 1999 1998
----------- ----------
<S> <C> <C>
Current assets:
Cash $ 82,383 173,832
Trade credits -- 49,513
Accounts receivable, net of allowance for doubtful accounts of
$28,000 in 1999 21,052 --
Other current assets 14,810 11,917
Current portion of notes receivable -- 16,090
Receivable from related party -- 660
----------- ----------
Total current assets 118,245 252,012
Notes receivable less current portion -- 7,963
Property and equipment, net 83,286 36,624
Licensing rights, net of accumulated amortization of $91,000 and
$47,250 in 1999 and 1998, respectively 119,000 162,750
Organization costs -- 1,378
Other assets, net of accumulated amortization of $54,826 in 1999 1,236,695 5,100
----------- ----------
Total assets $ 1,557,226 465,827
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable $ 50,000 --
Current portion of capital lease obligation 3,372 --
Current portion of long-term debt payable to stockholder 132,348 --
Accounts payable 374,252 37,910
Accrued liabilities 128,697 23,566
Notes payable to related parties 86,000 --
Due to related parties 98,340 --
Deferred revenue 36,208 --
----------- ----------
Total current liabilities 909,217 61,476
----------- ----------
Long-term liabilities -
long-term debt payable to stockholder, less current portion 751,976 --
----------- ----------
Total liabilities 1,661,193 61,476
Stockholders' equity (deficit):
Preferred stock, $.001 par value, 10,000,000 shares authorized,
none issued or outstanding -- --
Common stock, $.001 par value, 40,000,000 shares authorized;
17,784,748 and 15,986,800 shares issued and outstanding at
July 31, 1999 and 1998, respectively 17,785 15,987
Additional paid in capital 1,360,977 1,077,103
Accumulated deficit (1,482,729) (688,739)
----------- ----------
Total stockholders' equity (deficit) (103,967) 404,351
----------- ----------
Commitments and contingent liabilities (notes 3, 6, 7, 8 and 11)
Total liabilities and stockholders' equity (deficit) $ 1,557,226 465,827
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE>
COLLEGE BOUND STUDENT ALLIANCE, INC.
AND SUBSIDIARY
Consolidated Statements of Operations
Years ended July 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
Revenue:
Profile fees $ 499,154 107,543
Franchise fees 156,627 64,682
Other 51,105 22,447
------------ -----------
706,886 194,672
Costs and expenses:
Cost of services 413,015 --
Selling, general and administrative expenses 945,077 794,839
Depreciation and amortization 110,104 48,056
------------ -----------
1,468,196 842,895
------------ -----------
Loss from operations (761,310) (648,223)
Interest expense (41,014) (9,204)
Other income, net 8,334 --
------------ -----------
Loss before income taxes (793,990) (657,427)
Provision for income taxes -- --
------------ -----------
Net loss $ (793,990) (657,427)
============ ===========
Net loss per share - basic and diluted $ (0.05) (0.04)
============ ===========
Weighted average number of common shares outstanding 16,711,127 15,607,360
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
32
<PAGE>
COLLEGE BOUND STUDENT ALLIANCE, INC.
AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
Years ended July 31, 1999 and 1998
<TABLE>
<CAPTION>
Additional Total
paid in Accumulated stockholders'
Shares Amount capital deficit equity (deficit)
---------- ------- ---------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Balance at July 31, 1997 13,396,000 $13,396 174,104 (31,312) 156,188
Common stock issued for services 750,000 750 74,250 -- 75,000
Common stock issued to investors for bridge loan 100,000 100 9,900 -- 10,000
Common stock issued to officers and directors for services 75,632 76 15,740 -- 15,816
Common stock issued to repurchase franchises 23,500 23 6,127 -- 6,150
Common stock issued for cash, net of offering costs 1,540,000 1,540 743,460 -- 745,000
Common stock accrued but not issued 101,668 102 53,522 -- 53,624
Net loss -- -- -- (657,427) (657,427)
---------- ------- ---------- ---------- --------
Balance at July 31, 1998 15,986,800 15,987 1,077,103 (688,739) 404,351
Common stock issued for cash 42,000 42 12,269 -- 12,311
Common stock issued to directors for services 236,001 236 21,038 -- 21,274
Common stock issued to employees for compensation 173,656 174 15,584 -- 15,758
Common stock issued for services 471,795 472 41,298 -- 41,770
Common stock issued for acquisition 522,500 522 132,506 -- 133,028
Common stock options issued for acquisition -- -- 61,531 -- 61,531
Common stock held in escrow 351,996 352 (352) -- --
Net loss -- -- -- (793,990) (793,990)
---------- ------- ---------- ---------- --------
Balance at July 31, 1999 17,784,748 $17,785 1,360,977 (1,482,729) (103,967)
========== ======= ========== ========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
33
<PAGE>
COLLEGE BOUND STUDENT ALLIANCE, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended July 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (793,990) (657,427)
Adjustments to reconcile net loss to net cash used in
operating activities:
Provision for doubtful accounts 18,000 --
Depreciation and amortization 112,069 48,056
Issuance of common stock for director services 21,274 --
Issuance of common stock for employee compensation 15,758 --
Issuance of common stock for services 13,581 95,975
Trade credits exchanged for services -- 27,182
Notes receivable exchanged for franchises -- (24,713)
Changes in operating assets and liabilities:
Accounts receivable 6,225 --
Other current assets (4,858) (6,197)
Accrued liabilities (46,113) 23,566
Accounts payable 341,854 22,993
----------- --------
Net cash used in operating activities (316,200) (470,565)
----------- --------
Cash flows from investing activities:
Purchase of property and equipment (2,000) (28,124)
Purchase of CBSA 24,446 --
Other assets (29,970) --
----------- --------
Net cash used in investing activities (7,524) (28,124)
----------- --------
Cash flows from financing activities:
Payments on capital leases (1,291) --
Proceeds from notes payable 50,000 778,225
Proceeds from notes payable to related parties 11,000 --
Collections on notes receivable 24,713 390
Decrease (increase) in related party payable 147,853 (144,043)
----------- --------
Net cash provided by financing activities 232,275 634,572
----------- --------
Net increase (decrease) in cash (91,449) 135,883
Cash at beginning of year 173,832 37,949
----------- --------
Cash at end of year $ 82,383 173,832
=========== ========
Supplemental disclosure of cash flow information:
Cash paid for interest for the years ended July 31, 1999
and 1998 was $2,340 and $6,583, respectively
Schedule of non-cash investing and financing activities:
The Company purchased all the outstanding stock of
College Bound Student-Athletes, Inc. Assets were
acquired and liabilities assumed were as follows:
Fair value of assets acquired $ 1,519,006 --
Long-term debt assumed (964,901) --
Common stock and fair value of stock options issued (194,559) --
----------- --------
Other liabilities assumed $ 359,546 --
=========== ========
The Company received $31,000 in trade credits in settlement of a note
receivable during the year ended July 31, 1998
</TABLE>
See accompanying notes to consolidated financial statements.
34
<PAGE>
COLLEGE BOUND STUDENT ALLIANCE, INC.
and subsidiary
Notes to Consolidated Financial Statements
July 31, 1999 and 1998
(1) ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) HISTORY AND BUSINESS ACTIVITY
College Bound Student Alliance, Inc. (Company) was incorporated in the
State of Colorado on July 15, 1993 under the name Winter Park Ventures. The
Company was inactive until 1997. On April 22, 1997, the Company amended its
articles of incorporation and changed its name to SportStar Marketing, Inc.
On July 13, 1999, the Company changed to its current name after the
acquisition of College Bound Student Athletes, Inc.
The Company's business objective is to expand the choices of qualified
colleges for qualified students and assists parents and students who have
the opportunity to qualify for the financial aid opportunities available to
them. This is the Company's only business segment. The Company is
transitioning from a franchise based sales force to a direct sales force
and other marketing channels. The Company uses a central production and
distribution facility to prepare the finished product and distribute to the
appropriate colleges. The Company's main product line includes profiling,
higher education aids and learning programs, financial aid and merit award
searches and academic and personal development programs. The Company also
holds the rights to publish the magazine "BlueChip Illustrated".
During fiscal 1999, the consolidated financial statements include the
financial statements of the Company and its wholly owned subsidiary,
College Bound Student-Athletes Inc. All intercompany balances and
transactions have been eliminated in consolidation.
(b) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less as cash equivalents.
(c) TRADE CREDITS
The Company accounts for trade credits according to Financial Accounting
Standards Board Emerging Issues Task Force abstract No. 93-11. Trade
credits are recorded at cost, and represent purchasing value for goods and
services in established barter markets. The Company considers these credits
as the equivalent of cash for purchase of certain goods and services, but
reviews its trade credits periodically to assess their carrying amounts.
(d) LICENSING RIGHTS
Licensing rights are recorded at cost and are amortized on a straight-line
basis over the term of the agreement, which is five years.
(e) NET LOSS PER SHARE
The Company computes earnings (loss) per share in accordance with the
requirements of Statement of Financial Accounting Standards No. 128,
EARNINGS PER SHARE, (SFAS No. 128). SFAS No. 128 requires the disclosure of
basic earnings per share and diluted earnings per
35
<PAGE>
COLLEGE BOUND STUDENT ALLIANCE, INC.
and subsidiary
Notes to Consolidated Financial Statements
July 31, 1999 and 1998
share. Basic earnings per share is computed by dividing income available to
common stockholders by the weighted average number of common shares
outstanding. Diluted earnings per share is computed by dividing income
available to common stockholders by the weighted average number of common
shares outstanding increased for potentially dilutive common shares
outstanding during the period. The dilutive effect of stock options,
warrants, and their equivalents is calculated using the treasury stock
method.
Net loss per common share - basic and diluted is computed based on the
weighted average number of shares of common stock outstanding during the
year. Basic loss per common share and loss per common share - assuming
dilution, are the same for the years ended July 31, 1999 and 1998 because
of the antidilutive effect of stock options and awards when there is a net
loss. The Company has issued options to purchase 1,126,233 and 311,233
shares of its common stock as of July 31, 1999 and 1998, respectively,
which could potentially dilute basic earnings per share in the future.
(f) PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciation is recorded
using the straight-line method over the estimated lives of the assets
ranging from five to seven years for furniture and equipment and three
years for vehicles.
(g) REVENUE RECOGNITION
The Company recognizes profile fee revenue from students as the services
are performed. Deferred revenue is recorded for cash received in advance
for services the Company is obligated to perform. The Company recognizes
franchise fee revenue from an individual franchise sale when all the
initial services of the Company, as required by the franchise agreement,
have been performed.
(h) INCOME TAXES
The Company has accounted for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS No. 109), ACCOUNTING FOR
INCOME TAXES. Under SFAS No. 109, income taxes are accounted for under the
asset and liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates
is recognized in operations in the period that includes the enactment date.
(i) STOCK OPTION PLAN AND STOCK OPTION AGREEMENTS
The Company accounts for stock options issued to employees in accordance
with the provisions of Accounting Principles Board (APB) Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED
36
<PAGE>
COLLEGE BOUND STUDENT ALLIANCE, INC.
and subsidiary
Notes to Consolidated Financial Statements
July 31, 1999 and 1998
TO EMPLOYEES, and related interpretations. As such, compensation expense is
recorded on the date of grant only if the current market price of the
underlying stock exceeds the exercise price. The Company has adopted
Statement of Financial Accounting Standards No. 123 (SFAS No. 123),
ACCOUNTING FOR STOCK-BASED COMPENSATION, which permits entities to
recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123 also
allows entities to continue to apply the provisions of APB Opinion No. 25
and provide pro forma net income (loss) disclosures for employee stock
option grants as if the fair-value-based method defined in SFAS No. 123 had
been applied. The Company has elected to continue to apply the provisions
of APB Opinion No. 25 and provide the pro forma disclosures required by
SFAS No. 123 for stock options issued to employees. All stock options
issued to non-employees are accounted for using the provisions of SFAS No.
123.
(j) 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 revenue and expenses
during the reporting period. Actual results could differ significantly from
those estimates.
(k) RECLASSIFICATION
Certain financial statement reclassifications have been made to 1998
amounts to conform to the presentation used in 1999.
(2) LIQUIDITY
In February of 2000, the Company completed a sale of 2,000,000 shares of
common stock for $1,000,000 and received in March of 2000, $500,000 of
corporate sponsorship. Management of the Company believes the cash received
from the sale of common stock and sponsorship, plus any cash generated from
operations, will be sufficient to allow the Company to meet its obligations
as they come due through at least August 1, 2000.
(3) BUSINESS COMBINATION
On April 15, 1999, the Company acquired College Bound Student Athletes,
Inc. (CBS Athletes), for $1,307,146, consisting of $1,039,900 debt, 545,000
shares of the Company's common stock, and options to purchase 500,000
shares of the Company's common stock at $0.50 per share. Additional
payments of up to $1.1 million and options to purchase 500,000 shares of
the Company's common stock could be made upon CBS Athletes achieving
certain performance thresholds. It is presently not probable that such
performance thresholds will be met. Additional consideration, if any, would
be recognized at the point that meeting the thresholds becomes probable.
The acquisition has been accounted for by the purchase method and the
results of operations of CBS Athletes have been included in the Company's
financial statements from April 15, 1999. The
37
<PAGE>
COLLEGE BOUND STUDENT ALLIANCE, INC.
and subsidiary
Notes to Consolidated Financial Statements
July 31, 1999 and 1998
purchase price was allocated to the fair value of identifiable assets and
liabilities. In connection with the purchase, the Company recorded three
intangible assets: payment for a covenant not to compete of $156,013 which
is being amortized over the covenant period of three years on a
straight-line basis; software of $73,300 which is being amortized on a
straight line basis over five years; and recruiting systems technology of
$1,057,108 which is being amortized on a straight line basis over ten
years. These intangible assets have been recorded as other assets.
The following unaudited pro forma financial information presents the
combined results of operations of the Company and CBS Athletes as if the
acquisition had occurred at the beginning of fiscal 1999 and 1998, after
giving effect to certain adjustments including amortization of intangibles,
additional depreciation expense and increased interest expense on debt
related to the acquisition. The pro forma financial information does not
necessarily reflect the results of operations that would have occurred had
the Company and CBSA constituted a single entity during such periods.
<TABLE>
<CAPTION>
Year ended Year ended
July 31, 1999 July 31, 1998
------------- -------------
<S> <C> <C>
Net sales $ 1,357,630 1,913,838
=========== ==========
Net loss $ 753,045 (602,382)
=========== ==========
Net loss per share - basic and diluted $ (.05) (.04)
============ ==========
</TABLE>
(4) PROPERTY AND EQUIPMENT
Property and equipment at July 31, 1999 and 1998 consisted of the
following:
<TABLE>
<CAPTION>
1999 1998
--------- -------
<S> <C> <C>
Furniture and equipment $ 89,659 46,923
Vehicle 14,076 --
--------- -------
103,735 46,923
Less accumulated depreciation (20,449) (10,299)
--------- -------
$ 83,286 36,624
========= =======
</TABLE>
Depreciation expense for the years ended July 31, 1999 and 1998, was
$11,719 and $5,689, respectively.
38
<PAGE>
COLLEGE BOUND STUDENT ALLIANCE, INC.
and subsidiary
Notes to Consolidated Financial Statements
July 31, 1999 and 1998
(5) NOTES RECEIVABLE
Notes receivable consist of the following at July 31:
<TABLE>
<CAPTION>
1998
-------
<S> <C>
Promissory note, balance due on or before November 1, 2000;
interest at an annual rate of 8%, secured by franchise $ 4,553
Promissory note, monthly installments of $250, balance due
December 30, 1999; interest at an annual rate of 5%,
secured by franchise 5,750
Promissory note, $8,000 due December 1998 plus 6% interest,
$5,750 due June 1, 1999 plus 6% interest, secured by franchise 13,750
-------
24,053
Less current portion 16,090
-------
$ 7,963
=======
</TABLE>
(6) NOTE PAYABLE AND NOTES PAYABLE TO RELATED PARTIES
On July 28, 1999, the Company borrowed $50,000 from a third party with an
interest rate of 10% per annum, the principal and accrued interest of which
is payable on January 28, 2000.
Notes payable to related parties include notes payable to stockholders and
employees. Interest is accrued at rates ranging from 8% to 10% per annum
and the notes payable, including accrued interest, are due upon the
Company's obtaining defined additional financing.
(7) LONG-TERM DEBT PAYABLE TO STOCKHOLDER
Notes payable to related parties as of July 31, 1999 consisted of the
following:
<TABLE>
<S> <C>
Note payable to stockholder for acquisition of CBS Athletes $527,951
Note payable to stockholder assumed in connection with acquisition
of CBS Athletes 208,888
Note payable to stockholder for agreement not to compete
in connection with acquisition of CBS Athletes 147,485
--------
884,324
Less: current portion 132,348
--------
$751,976
========
</TABLE>
39
<PAGE>
COLLEGE BOUND STUDENT ALLIANCE, INC.
and subsidiary
Notes to Consolidated Financial Statements
July 31, 1999 and 1998
In December 1999 and March 2000, the former owner of CBS Athletes and the
Company entered into an amendment to require payments on debt acquired or
issued in connection with the acquisition of CBS Athletes as follows:
1. $600,000 non-interest bearing note and $75,000 other note: $160,000 is
due upon obtaining $1 million in financing (payment was made in March
2000) and the remainder of the unpaid balance upon receiving an
additional $3,500,000 in financing or $20,000 on July 1, 2000; $20,000
on October 1, 2000; $20,000 on January 1, 2001; $20,000 on March 1,
2001, and the balance on March 15, 2001.
2. $176,000 covenant not to compete: 36 equal monthly installments of
$4,889 beginning December 15, 1999.
3. $208,888, 8% note final payment due November 15, 2004: 60 equal
monthly installments of interest and principal of $4,446 beginning
December 15, 1999.
In March 2000, payments of $160,000 were made on the $675,000
above-mentioned notes.
Aggregate maturities of notes payable as of July 31, 1999 assuming the
Company does not obtain additional financing which causes acceleration of
the payment of this debt follows:
<TABLE>
<S> <C>
July 31:
2000 $ 132,348
2001 532,494
2002 95,381
2003 61,877
2004 47,568
Thereafter 14,656
---------
$ 884,324
=========
</TABLE>
(8) RELATED PARTY TRANSACTIONS
The Company entered into a consulting agreement with the former owner of
CBSA for $1,500 per month for five years beginning as of the date when the
first $100,000 payment is made on the Acquisition Note. No payments were
made on the Acquisition Note and no amounts have been expensed or are
payable as of July 31, 1999 related to this consulting agreement.
The Company leases office space on a month-to-month basis from Chartwell
International, Inc. (Chartwell). Rental expense was $37,545 and $39,775 for
the years ended July 31, 1999 and 1998, respectively.
40
<PAGE>
COLLEGE BOUND STUDENT ALLIANCE, INC.
and subsidiary
Notes to Consolidated Financial Statements
July 31, 1999 and 1998
Beginning February 1, 1998, the Company entered into a three-year agreement
with Chartwell whereby Chartwell's management performs certain management
functions for the Company in exchange for $7,500 per month. Management fee
expense was $90,000 and $45,000 for the years ended July 31, 1999 and 1998,
respectively. Included in due to related parties is $98,340 and $0 payable
to Chartwell at July 31, 1999 and 1998, respectively.
The Company has acquired licensing rights through an agreement with
National College Recruiting Association, Inc. (NCRA), which is a wholly
owned subsidiary of Chartwell. The license provides the Company with
exclusive use, rights and interest in the NCRA name, franchise program,
operating franchisees, franchise fees, operating systems and technology,
the "Blue Chip Illustrated" magazine and the 900 Sports line, for a
five-year period renewable for an unspecified number of five year terms.
The fee for the license includes a payment of $210,000 to NCRA, plus 2.5%
of gross revenue from licensed operations and an additional payment of
$100,000 upon the Company raising an additional $500,000 in capital.
The Company, through the NCRA license, offered for sale and sold franchises
whereby the purchaser may, for a fee and royalties, secure the use of
NCRA's name, distribution network and marketing materials. Under the terms
of the franchise agreement, prior to the opening of the franchise, the
Company makes available to the franchisee, training at a NCRA facility,
sales and start up consulting, and the right to operate a NCRA franchise
using the NCRA name and trademark. During the operation of the franchise,
the Company is required to provide, among other things, ongoing training
and consulting, subscriber services and access to advertising materials and
supplies generally for an additional fee.
The Company has recorded its licensing rights at cost, $210,000, and is
amortizing the asset over a five-year period using the straight-line
method.
(9) INCOME TAXES
Income tax benefit differed from the amounts computed by applying the U.S.
Federal income tax rate of 34% for fiscal 1999 and 1998 as a result of the
following:
<TABLE>
<CAPTION>
1999 1998
--------- --------
<S> <C> <C>
Computed "expected" tax benefit $ 269,957 223,525
Increase (decrease) in tax benefit resulting
from:
State income taxes, net of federal benefit 26,009 21,695
Increase in valuation allowance (295,966) (245,220)
--------- --------
Income tax expense (benefit) $ -- --
========= ========
</TABLE>
The Company has a net operating loss carryforward of approximately $1.4
million available to offset future U.S. tax liabilities, which expires
beginning in 2018 and is the Company's only significant
41
<PAGE>
deferred tax asset. Due to historical operating losses, the Company has
provided a valuation allowance against this asset. Accordingly, no deferred
tax asset has been included in the accompanying balance sheets.
(10) STOCKHOLDERS' EQUITY (DEFICIT)
The Company has 10,000,000 shares of authorized preferred stock, par value
$.001, issuable from time to time in different series with rights and
privileges to be determined by the Board of Directors. No specific series
of preferred stock have yet been established.
At July 31, 1998, the Company had an obligation to issue 101,668 shares of
common stock to employees and directors of the Company. Consideration had
been exchanged but the shares had not been issued at year end. These shares
are considered issued and outstanding at July 31, 1998.
(11) EMPLOYMENT AGREEMENT
In August 1997, the Chairman of the Board entered into an agreement which
gives the Chairman a five-year option to purchase 1,000,000 shares of the
Company's common stock at $.50 per share which was the fair value of the
common stock on the grant date. The shares vest at the rate of 200,000
shares per year.
(12) STOCK OPTIONS
The per share weighted average fair value of stock options granted during
1999 and 1998 was $.30 and $.34, respectively, on the date of grant using
the Black Scholes option pricing model with the following assumptions: no
expected dividend yield, risk free interest rate of 6%, volatility of 175%,
and expected option lives ranging from 3 to 5 years.
The Company applies APB Opinion No. 25 in accounting for its stock options
issued to employees and, accordingly, no compensation cost has been
recognized in the accompanying financial statements. Had the Company
determined compensation cost based on the fair value at the grant date for
its stock options under SFAS No. 123, the Company's net loss would have
increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1999 1998
---------- --------
<S> <C> <C>
Net loss as reported $ (793,990) (657,427)
========== ========
Net loss, pro forma $ (850,285) (657,427)
========== ========
Net loss per share - basic and diluted
pro forma $ (.05) (0.04)
========== ========
</TABLE>
The above pro forma disclosures are not necessarily representative of the
effect on the reported net loss for future periods because options vest
over several years and additional awards are generally made each year.
42
<PAGE>
COLLEGE BOUND STUDENT ALLIANCE, INC.
and subsidiary
Notes to Consolidated Financial Statements
July 31, 1999 and 1998
Stock option activity during the years indicated was as follows:
<TABLE>
<CAPTION>
Number of Range of
shares exercise prices
---------- ---------------
<S> <C> <C>
Balance at July 31, 1997 10,000 $ .50
Granted 311,233
Canceled (10,000)
-----------
Balance at July 28, 1998 311,233 .50
Granted 815,000 .50 - 1.00
-----------
Balance at July 31, 1999 1,126,233 .50 - 1.00
===========
Number of options exercisable at July 31, 1999 321,233 .50 - 1.00
===========
</TABLE>
Canceled options are a result of employee terminations or forfeitures.
<TABLE>
<CAPTION>
Weighted
average
remaining Number
Number contractual life exercisable at
Exercise price outstanding (years) July 31, 1999
-------------- ----------- ---------------- --------------
<S> <C> <C> <C>
$ .50 1,116,233 3.8 311,233
1.00 10,000 1.6 10,000
--------- --------
1,126,233 321,233
========= ========
</TABLE>
(13) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash, accounts receivable, notes payable, accounts
payable, accrued liabilities, notes payable to related parties and due to
related parties approximates fair value because of the short maturity or
duration of these instruments. The carrying amount of long-term debt
approximates fair value as the interest rates are considered market rates.
43
<PAGE>
PART III
The following exhibits are included with this registration statement:
REGULATION
S-B DOCUMENT
NUMBER
2.1 Stock Purchase Agreement with Wayne O. Gemas
3.1 Amended and Restated Articles of Incorporation
3.2 Bylaws
10.1 Agreement with National College Recruiting Association
10.2 Management Services Agreement with Chartwell
International, Inc.
10.3 Office Lease with Chartwell International, Inc.
10.4 Office Lease with The Intrepid Company
10.5 Consulting Agreement with Wayne O. Gemas
10.6 Executive Employment Agreement with Kevin Gemas
10.7 Employment Agreement with Arthur D. Harrison
10.8 Employment Agreement with Rick N. Newton
10.9 Promissory Note to Arthur D. Harrison dated June 15, 1999
10.10 Employment and Stock Option Agreement with Jerome M.
Lapin dated August 9, 1999
10.11 Promissory Note to Chartwell International, Inc. dated
January 28, 2000, as amended
10.12 Promissory Note to Chartwell International, Inc. dated
February 1, 2000, as amended
21 Subsidiaries of the Registrant
27 Financial Data Schedule
99 Consent of KPMG LLP
44
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
COLLEGE BOUND STUDENT ALLIANCE, INC.
Date: April 12, 2000 By: /s/ Jerome M. Lapin
---------------------------------
Jerome M. Lapin
Chief Executive Officer
45
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is entered into as of March 29,
1999, by and among SportsStar Marketing, Inc., a Colorado corporation
("Purchaser") and Wayne 0. Gemas ("Seller").
RECITALS
A. Seller is the sole stockholder of College Bound Student-Athletes,
Inc., a Wisconsin corporation ("Company") that operates a business which offers
athletic/resume services to college bound high school student-athletes.
B. Seller owns of record and beneficially Five Hundred (500) shares of
the $1.00 par value common stock (the "Common Stock") of the Company, which
shares constitute all of the issued and outstanding Common Stock of the Company
("Seller's Shares").
C. Seller desires to sell, assign, transfer and deliver to the
Purchaser, and the Purchaser desires to purchase, all, but not less than all, of
the Seller's Shares on the terms and subject to the conditions hereinafter
contained.
D. As a material inducement for purchasing Seller's Shares, Purchaser
desires that Seller enters into a covenant not to compete with Purchaser, and
Seller agrees to enter into such a covenant with Purchaser.
AGREEMENT
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree,
represent and warrant as follows:
1. PURCHASE AND SALE OF THE SELLER'S SHARES.
(a) BASIC TRANSACTION. On and subject to the terms and conditions of
this Agreement, the Purchaser agrees to purchase from the Seller,
and the Seller agrees to sell to the Purchaser, all of the Seller's
Shares.
(b) PURCHASE PRICE; COVENANT AGAINST COMPETITION; TRANSFER OF
SECURITIES; ADDITIONAL COMPENSATION. The purchase price that shall
be paid by the Purchaser to the Seller ("Purchase Price") for the
Seller's Shares shall be:
<PAGE>
(i) Six Hundred Thousand Dollars ($600,000.00), payable as
follows:
(A) the lesser of $100,000 or 13% of the bridge loan amount,
payable at the earlier of: the receipt by Purchaser of $750,000 or
more of bridge financing; or September 15, 1999;
(B) $100,000, payable at the earlier of: the receipt by
Purchaser of an additional $250,000 in bridge financing; or March
15, 2000; and
(C) the lesser of the balance due (from the $600,000), or
17% of the Capital Financing (as defined below) up to $500,000 (if
the additional bridge financing described in (B) above is not
completed), payable at the earlier of: the receipt by the Purchaser
of Capital Financing; or March 15, 2001. For purposes of this
provision, "Capital Financing" means the receipt of funding by
Purchaser in the amount of $3,000,000.
(D) The Purchaser will remit payment to the Seller within
five (5) days of the Purchaser's receipt of the bridge loan(s) or
Capital Financing, or the due date, whichever is applicable In the
event that the Purchaser fails to timely make the payment due under
Section 1(b)(i)(A), the Purchaser shall be automatically granted an
additional sixty (60) day period in which to submit the payment. In
the event that the Purchaser fails to timely make the payments under
either Section 1(b)(i)(B) or (C), the Purchaser shall be
automatically granted an additional thirty (30) day period in which
to submit the payment(s).
(ii) Five Hundred Thousand (500,000) shares of the common stock of
Purchaser (the "SportsStar Shares").
(iii) Additionally, Purchaser shall pay One Hundred Seventy-Six
Thousand Dollars ($176,000.00) to Seller in consideration of the
covenant against competition given to the Purchaser by Seller
pursuant to Section 4 of this Agreement, payable in thirty-six (36)
equal monthly installments beginning the first complete month after
the receipt of the $750,000 or more of bridge financing. The payment
of the entire amount of One Hundred Seventy-Six Thousand Dollars
($176,000.00) for the covenant against competition shall be secured
by SportsStar Shares in an amount to be determined prior to Closing,
or alternative collateral selected by mutual agreement of both
parties.
(iv) The parties acknowledge that the total consideration for the
Seller's Shares and the covenant against competition shall be Seven
Hundred Seventy Six Thousand Dollars ($776,000.00), the issuance of
500,000 SportsStar Shares and the additional consideration described
in Section 1(b)(ix) below.
2
<PAGE>
(v) The payment for the entire amount of $600,000 shall be secured
by:
(A) The conditional assignment of $800,000 of media credits
to be obtained by Purchaser under an agreement with Media Fund dated
December 27, 1998, and as appraised by the FDIC approved media asset
appraiser. Upon payment to Seller of the amounts set forth in
Section 1(b)(i)(A)(B) and (C) above, the amount of media credits
will be reduced on a pro rata basis; or
(B) In the event that the Purchaser is, for any reason,
unable to obtain the media credits described in Section 1(b)(v)(A)
above, the Seller's security for such payment shall be his security
interest in the CBSA service mark and the Interactive Profile
Software, as described in the Security Agreement to be provided at
the Closing.
(vi) The Seller shall deliver to the Purchaser at the Closing on
the Closing Date, concurrently with the payment of the Purchase
Price, stock certificate number 3 of the Company, representing the
Seller's Shares owned of record and beneficially by the Seller, duly
endorsed in blank, or accompanied by an assignment separate from the
certificate duly endorsed in blank.
(vii) At Closing, Purchaser will issue to Seller an option to
purchase Five Hundred Thousand (500,000) additional SportsStar
Shares, which option shall be exercisable beginning eighteen (18)
months from the Closing Date and expire thirty-six (36) months from
the Closing Date. The option price will be the average of the daily
bid and ask prices during the fourteen day period prior to the
Closing. Such terms and conditions are further described in the
Option Agreement attached to this Agreement as EXHIBIT A-1.
(viii) At Closing, Purchaser will issue to Seller an additional
option to purchase Five Hundred Thousand (500,000) SportsStar
Shares. If the SportsStar Shares trade on or above $10.00 per share
for a minimum of thirty (30) days or if the Company earns in excess
of $5,000,000 in net income for any fiscal year during the five year
period following March 3, 1999, such option will be exercisable by
Seller upon the occurrence of either such event and shall expire
thirty-six (36) months after the date upon which such option first
becomes exercisable. If neither of such events shall occur before
March 3, 2004, such option shall expire on March 3, 2004. The option
price will be the average of the daily bid and ask prices during the
fourteen day period prior to the Closing. Such terms
3
<PAGE>
and conditions are further described in the Option Agreement
attached to this Agreement as EXHIBIT A-2.
(ix) In the event that the Company achieves all or some of the
objectives set forth on the attached EXHIBIT B during the one year
period after the Closing, then Purchaser shall pay Seller up to a
maximum of One Million One Hundred Thousand Dollars ($1,100,000)
provided that such payment may be paid all or part in cash or
SportsStar Shares at Purchasers Board of Directors' sole option.
(c) ADJUSTMENT TO PURCHASE PRICE. It is understood that Purchaser
is acquiring all assets and assuming all liabilities (collectively "net
assets") disclosed in the February 28, 1999 financial statements of Seller.
To the extent that such net assets increase or decrease (using consistently
applied accounting principles) as of the Closing Date, other than in the
ordinary course of business, from the February 28,1999 balance sheet, such
adjustment will be made to the SportsStar Shares portion of the Purchase
Price described in Section 1(b)(ii) above.
(d) FURTHER ADJUSTMENT TO PURCHASE PRICE. In the event that a
significant adverse difference is found in the pre-tax earnings of the
Company (after adjusting for unusual non-recurring items) in either the
fiscal 1997/1998 average, or the run rate for fiscal 1999, then an
adjustment in the purchase price will be made, the amount of such
adjustment to be mutually agreed to by the parties.
(e) THE CLOSING. The closing of the purchase and sale of the
Seller's Shares contemplated by this Agreement (the "Closing") shall take
place at a mutually agreed upon time and place on April 16, 1999, or such
later date as Purchaser may determine in its discretion if the Purchaser
has not completed its due diligence review of the Company and its business,
legal, financial and accounting affairs and prospects (the date of the
Closing is hereinafter referred to as the "Closing Date").
(f) DELIVERIES AT THE CLOSING. At the Closing, Seller will deliver
to the Purchaser a stock certificate representing the Seller's Shares,
endorsed in blank or accompanied a duly executed assignment document.
Purchaser will deliver to Seller a promissory note in the amount of
$176,000 to be paid in consideration of the covenant not to compete, and a
letter to Corporate Stock Transfer instructing them to deliver to Seller,
stock certificates for Five Hundred Thousand (500,000) SportsStar Shares.
2. REPRESENTATIONS AND WARRANTIES OF SELLER. The Seller represents and
warrants to the Purchaser that:
(a) OWNERSHIP OF SELLER'S SHARES. Seller is the sole and exclusive
record and beneficial owner of all of the issued and outstanding Common
Stock of the Company. The Seller possesses good and merchantable title to
the Seller's Shares, and owns the Seller's Shares free and clear of any and
all security interests, agreements, restrictions,
4
<PAGE>
claims, liens, pledges and encumbrances of any nature or kind. Seller has
the absolute and unconditional right to sell, assign, transfer and deliver
the Seller's Shares to the Purchaser in accordance with the terms of this
Agreement.
(b) DUE ORGANIZATION; GOOD STANDING; AUTHORITY OF COMPANY. The
Company is a corporation duly organized, validly existing as a stock
corporation, and in good standing under the laws of the State of Wisconsin.
The Company has full right, power, and authority to own its properties and
assets, and to carry on its business. The Company is duly licensed,
qualified and authorized to do business as a foreign corporation, and is in
good standing, in each jurisdiction in which the properties and assets
owned by it or the nature of the business conducted by it makes such
licensing, qualification and authorization legally necessary. A complete
and correct copy of each of the Company's Articles of Incorporation, as
amended to the date of this Agreement, (the "Articles") certified by the
Secretary of State of the State of Wisconsin and Bylaws, as amended to the
date of this Agreement, (the "Bylaws"), is attached to this Agreement as
EXHIBITS C AND D respectively, and is incorporated by reference herein. The
Articles and the Bylaws are in full force and effect, and the Company is
not in breach or violation of any of the provisions thereof. The minute
books of the Company containing the minutes of the meetings of the
stockholders of the Company and the board of directors of the Company,
which were heretofore made available to the Purchaser for examination, are
complete and correct and accurately reflect all proceedings of the
stockholders of the Company and the board of directors of the Company.
(c) VALIDITY OF AGREEMENT. The Seller has the legal capacity and
authority to enter into this Agreement. This Agreement is a valid and
legally binding obligation of the Seller and is fully enforceable against
the Seller in accordance with its terms, except as such enforceability may
be limited by general principles of equity, bankruptcy, insolvency,
moratorium and similar laws relating to creditors' rights generally.
(d) CAPITALIZATION; THE COMPANY'S STOCK; RELATED MATTERS. The
Company's authorized stock consists of 10,000 Shares of Common Stock, 500
of which Shares, are issued and outstanding and owned of record and
beneficially by the Seller. The Seller's Shares have been duly, legally and
validly issued, and are fully-paid and non-assessable. Delivery of the
Seller's Shares by the Seller to the Purchaser at the Closing on the
Closing Date pursuant to this Agreement will transfer to the Purchaser full
and entire legal and equitable title to one hundred percent (100%) of the
issued and outstanding Capital Stock of the Company.
(e) OPTIONS, WARRANTS AND OTHER RIGHTS AND AGREEMENTS AFFECTING
THE COMPANY'S CAPITAL STOCK. Except as set forth in EXHIBIT E, the Company
has no authorized or outstanding options, warrants, calls, subscriptions,
rights, convertible securities or other securities, as defined in the
Securities Act of 1933 (hereinafter "Securities") or any commitments,
agreements, arrangements or understandings of any kind or nature obligating
the Company, in any such case, to issue Shares of the Company's Capital
Stock or other Securities or securities convertible into or evidencing
5
<PAGE>
the right to purchase Shares of the Company's Capital Stock or other
Securities. Neither the Seller nor the Company is a party to any agreement,
understanding, arrangement or commitment, or bound by any Articles of
Incorporation or Bylaws provision which creates any rights in any person
with respect to the authorization, issuance, voting, sale or transfer of
any Shares of the Company's Capital Stock or other Securities.
(f) NO SUBSIDIARIES. The Company does not have any subsidiaries
and does not, directly or indirectly, own any interest in or control any
corporation, partnership, joint venture, or other business entity.
(g) AGREEMENT NOT IN CONFLICT WITH OTHER INSTRUMENTS; REQUIRED
APPROVALS OBTAINED. The execution, delivery, and performance of this
Agreement by the Seller and the consummation of the transactions
contemplated by this Agreement will not (i) violate or require any
registration, qualification, consent, approval, or filing under, any law,
statute, ordinance, rule or regulation (hereinafter collectively referred
to as "Laws") of any federal, state or local government (hereinafter
collectively referred to as "Governments") or any agency, bureau,
commission or instrumentality of any Governments (hereinafter collectively
referred to as "Governmental Agencies"), or any judgment, injunction,
order, writ or decree of any court, arbitrator, Government or Governmental
Agency by which the Company or any of its assets or Properties is bound; or
(ii) conflict with, require any consent, approval, or filing under, result
in the breach or termination of any provision of, constitute a default
under, result in the acceleration of the performance of the Company's
obligations under, or result in the creation of any claim, security
interest, lien, charge, or encumbrance upon any of the Company's
properties, assets, or businesses pursuant to, the Company's Articles or
Bylaws, any indenture, mortgage, deed of trust, license, permit, approval,
consent, franchise, lease, contract, or other instrument or agreement to
which the Company is a party or by which the Company or any of the
Company's assets or properties is bound; or any judgment, injunction,
order, writ or decree of any court, arbitrator, Government or Governmental
Agency by which the Company or any of its assets or properties is bound.
(h) CONDUCT OF BUSINESS IN COMPLIANCE WITH REGULATORY AND
CONTRACTUAL REQUIREMENTS. The Company has conducted and is conducting the
Company's business in compliance with all applicable laws of all
governments and governmental agencies. Neither the real or personal
properties owned, leased, operated or occupied by the Company, nor the use,
operation or maintenance thereof, (i) violates any Laws of any Government
or Governmental Agency, or (ii) violates any restrictive or similar
covenant, agreement, commitment, understanding or arrangement.
(i) LICENSES; PERMITS; RELATED APPROVALS. The Company possesses
all licenses, permits, consents, approvals, authorizations, qualifications,
and orders (hereinafter collectively referred to as "Permits") of all
Governments and Governmental Agencies lawfully required to enable the
Company to conduct the Company's business in all jurisdictions. All of the
Permits are in full force and effect, and no suspension,
6
<PAGE>
modification or cancellation of any of the Permits is pending or
threatened. A list of the Permits is attached hereto as EXHIBIT F and
incorporated by reference herein.
(j) LEGAL PROCEEDINGS. Except as set forth in EXHIBIT G, there is
no action, suit, proceeding, arbitration, or to the best of Seller's
knowledge, any claim or investigation by any Government, Governmental
Agency or other person (i) pending to which the Company is a party, (ii) or
to the best of Seller's knowledge threatened against or relating to the
Company or any of the Company's assets or businesses, (iii) challenging the
Company's right to execute, acknowledge, seal, deliver, perform under or
consummate the transactions contemplated by this Agreement, or (iv) to the
best of Seller's knowledge asserting any right with respect to any of the
Seller's Shares, and to the best of Seller's knowledge there is no basis
for any such action, suit, proceeding, claim, arbitration or investigation.
(k) FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. Attached hereto
as EXHIBIT H and incorporated by reference herein are copies of the
Company's financial statements for the periods ended September 30, 1997,
September 30, 1998 and February 28, 1999 (hereinafter collectively referred
to as the "Financial Statements"). The Financial Statements are in
accordance with the book and records of the Company, are true, correct and
complete and accurately present the Company's financial position as of the
dates set forth therein and the results of the Company's operations and
changes in the Company's financial position for the periods then ended.
Except (i) as disclosed in the Financial Statements, and (ii) as disclosed
in this Agreement, the Company has no liabilities or obligations of any
nature or kind known or unknown, whether accrued, absolute, contingent, or
otherwise. There is no basis for assertion against the Company of any
claim, liability or obligation not fully disclosed in the Financial
Statements. All prepaid items set forth in the Company's Financial
Statements have been properly accrued.
(l) TAX MATTERS. The Company has duly and timely filed with all
appropriate Governmental Agencies, all tax returns, information returns,
and reports required to be filed by the Company. Except for accruals for
payroll taxes payable, income taxes payable, and deferred taxes as set
forth in the Company's balance sheet as of February 28, 1999 (collectively,
the "Accrued Taxes"), the Company has paid in full all taxes (including
taxes withheld from employees' salaries and other withholding taxes and
obligations), interest, penalties, assessments and deficiencies owed by the
Company to all taxing authorities. Complete and correct copies of (i) the
income tax returns of the Company for the Company's three fiscal years
ending September 30 of 1996, 1997 and 1998, as filed by the Company with
the Internal Revenue Service (the "IRS") and all state taxing authorities
(collectively, the "Returns"), (ii) all audit reports received by the
Company during the last five years and issued by the IRS or any state
taxing authorities, and (iii) all consents and agreements entered into by
the Company during the last five years with the IRS or any state taxing
authorities (collectively, the "Tax Agreements") are collectively attached
hereto as EXHIBIT I and incorporated by reference herein. All information
reported on the Returns is true, accurate, and complete. All claims by the
IRS or any state taxing authorities for taxes due and payable by the
Company have been
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paid by the Company. The provisions for the Accrued Taxes are adequate for
the payment of all of the Company's liabilities for unpaid taxes (whether
or not disputed). All claims by the IRS or any state taxing authorities for
taxes due and payable by the Company have been paid by the Company. The
provisions for the Accrued Taxes are adequate for the payment of all of the
Company's liabilities for unpaid taxes (whether or not disputed). All
federal income tax returns required to be filed by the Company have either
been examined by the IRS, or the period during which any assessments may be
made by the IRS has expired without waiver or extension for all years
through the Company's fiscal year ended September 30, 1996, and any
deficiencies or assessments claimed or made have been paid, settled, or
fully provided for in the Financial Statements. The Company has not adopted
a plan of complete liquidation under the Internal Revenue Code of 1954, as
amended (the "Code"), or filed a consent pursuant to Section 341(f) of the
Code. The Company is not a party to, and is not aware of, any pending or
threatened action, suit, proceeding, or assessment against it for the
collection of taxes by any Governmental Agency.
(m) ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE. The Company's accounts
receivable reflected on the Company's Balance Sheet as of February 28, 1999
(the "Balance Sheet") and all accounts receivable arising after the date of
the Balance Sheet (collectively, the "Accounts Receivable") are bona fide
accounts receivable, the full amount of which is actually owing to the
Company. Except as to those accounts receivable extended in the ordinary
course of their terms, the Accounts Receivable will be fully collectible by
the Purchaser within 60 days of the Closing Date or, if subject to the new
financing program, will be fully collectible within thirty (30) days of the
stated due date, without offset, recoupment, counterclaim, claim or
diminution. The Accounts Receivable will be collectible according to their
terms, subject to the normal write-down applied on an annual basis by the
Company's independent accountant during his compilation. The Company's
accounts payable reflected on the Balance Sheet and all accounts payable
arising after the date of the Balance Sheet arose from bona fide
transactions in the ordinary course of the Company's business. This
includes a Demand Note dated November 4, 1991 payable to Wayne 0. Gemas in
the original principal amount of Two Hundred Ninety Thousand Dollars
($290,000.00) which will be converted at Closing to a Promissory Note in
the principal amount of approximately $211,887 and in the form attached as
EXHIBIT J.
(n) REAL PROPERTY. Except as set forth on EXHIBIT K attached
hereto and incorporated by reference herein, the Company does not own or
have any interest in any real estate. EXHIBIT K contains an accurate
description of the terms of all real estate leases to which the Company is
a party. All such leases are valid and in full force and effect, and,
except as set forth on EXHIBIT K with respect to the approximately Eight
Thousand Dollar default under the principal real estate lease, the Company
is not in default under such leases.
(o) CONDITION OF PERSONAL PROPERTY. Attached hereto as EXHIBIT L-1
and incorporated by reference herein is a true, correct and complete list
of all personal
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property owned by the Company or used by the Company in the conduct of its
business, including but not limited to, all equipment and fixtures
(collectively, the "Personal Property"). The Company has sole and
exclusive, good and merchantable title to all of the Personal Property
owned by it, free and clear of all pledges, claims, liens, restrictions,
security interests, charges and other encumbrances. All of the Personal
Property is in good repair and good operating condition, subject to
ordinary wear and tear, fit for its intended purposes, and is adequate for
the continuation of the Company's business. The parties acknowledge and
agree that EXHIBIT L-2, attached hereto, lists the items of personal
property owned by Seller which shall not be transferred to Purchaser under
this Agreement.
(p) CONTRACTS, LICENSES, AND OTHER AGREEMENTS. Attached hereto as
EXHIBIT M and incorporated by reference herein is a true, correct and
complete list and copy (or where they are oral, true, correct and complete
written summaries) of all contracts by which the Company is bound.
(collectively, the "Contracts"). Each of the Contracts is in full force and
effect, is valid and binding upon each of the parties thereto and is fully
enforceable by the Company against the other party thereto in accordance
with its terms. Neither Seller nor the Company has any notice of, or any
reason to believe that there is or has been any actual, threatened or
contemplated termination or modification of any of the Contracts. No party
to any of the Contracts is in breach of or in default thereunder, nor has
any event occurred which, with the lapse of time, notice or election, may
become a breach or default by the Company or any other party to or under
any of the Contracts. The execution, delivery and performance of this
Agreement by the Seller and the consummation of the transactions
contemplated by this Agreement (i) will not result in the breach or
termination of or constitute a default under any Contract, (ii) does not
require the consent of any party to a Contract, or any other Person for
whose benefit a Contract was executed, and (iii) will not give any such
party or Person the right to terminate any Contract. All payments required
to be made pursuant to the Contracts by parties to the Contracts, and other
Persons for whose benefit the Contracts were executed, have been paid in
full through the Closing Date. The Contracts are in compliance with all
applicable laws of all Governments and Governmental Agencies.
(q) INSURANCE. Attached hereto as EXHIBIT N and incorporated by
reference herein is a list of all insurance policies of the Company,
setting forth with respect to each policy the name of the insurer, a
description of the policy, the dollar amount of coverages, the amount of
the premium, the date through which all premiums have been paid, and the
expiration date. Each insurance policy relating to the insurance referred
to in EXHIBIT N is in full force and effect, is valid and enforceable, and
the Company is not in breach of or in default under any such policy.
Neither Seller nor the Company has any notice of or any reason to believe
that there is or has been any actual, threatened or contemplated
termination or cancellation of any insurance policy relating to the
insurance referred to in EXHIBIT N. A true, correct and complete list and
summary of all claims which have been made under each insurance policy
relating to the insurance within the last five (5) years is set forth in
EXHIBIT N. The Company has not failed to give any notice or to present any
claim under any insurance policy in a due and timely fashion. If any
insurance policy of
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the Company has been canceled within the last five (5) years, a description
of the reasons for and terms of such cancellation is included on EXHIBIT N.
For purposes of this provision, the term "cancellation" means the
termination of insurance coverage or the contract by the insurer.
(r) BENEFIT PLANS. Except as set forth on EXHIBIT O, the Company
has no employee benefit plans, including, without limitation, bonus,
deferred compensation, pension, profit-sharing, retirement or other plans.
(s) EMPLOYEE RELATIONS AND EMPLOYMENT AGREEMENTS.
(i) The Company is not in violation of applicable equal
employment opportunity laws, wages and hour laws, occupational safety and
health laws, federal labor laws, or any other laws of any Government or
Governmental Agency relating to employment. Seller has disclosed to the
Purchaser the status of all investigations, claims, charges, and
employment-related suits or controversies which have occurred with respect
to the Company which are presently pending or threatened with respect to
the Company under any employment-related law of any Government or
Governmental Agency (including common law). The Company has satisfied and
performed fully all judgments, decrees, conciliation agreements, or
settlement agreements by which it is bound or to which it is subject
concerning employment-related matters and each such judgment, decree, or
agreement is disclosed on EXHIBIT P.
(ii) The Company has not entered into any employment
agreement and all employees can be terminated at will. The Company has no
contractual obligation or special termination or severance arrangement in
respect of any employee.
(iii) The Company has paid all wages due (including all
required taxes, insurance, and withholding thereon) through the Closing
Date. EXHIBIT Q attached hereto and incorporated by reference herein sets
forth all accrued vacation, accrued sick leave, and accrued bonuses
(including pro rata accruals for a period of a year) and any other amounts
due to employees of the Company as of the Closing Date.
(iv) EXHIBIT Q, attached hereto and incorporated by
reference herein sets forth each employee's date of hire, position, present
salary, amount of bonus paid in the past year, and announced termination
date (if any). The Seller has provided to the Purchaser access to the
personnel files and employment records of all the Company's employees.
(t) PATENTS; TRADEMARKS; RELATED CONTRACTS. Attached hereto as
EXHIBIT R and incorporated by reference herein, is a true, correct and
complete list of all of the Company's patents, trademarks, trade names, or
trademark or trade name registrations, service marks, and copyrights or
copyright registrations (the "Proprietary Rights"). All of the Company's
Proprietary Rights are valid, enforceable, in full force and effect and
free and clear of any and all security interests, liens, pledges and
encumbrances of any nature
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or kind. The Company has not licensed, leased or otherwise assigned,
transferred or granted any right to use any of its Proprietary Rights to
any other Person, and no Person is infringing upon the Company's
Proprietary Rights. The Company has not infringed and is not infringing
upon any patent, trademark, tradename, or trademark or tradename
registration, service mark, copyright, or copyright registration of any
other Person.
(u) BOOKS AND RECORDS; FISCAL YEAR; METHOD OF ACCOUNTING. The
Company has made available to the Purchaser all of its tax, accounting,
corporate and financial books and records. The books and records pertaining
to the Company's business made available to the Purchaser are true, correct
and complete, have been maintained on a current basis, and fairly reflect
the basis for the Company's financial condition and results of operations
as set forth in the Financial Statements. The Company has consistently used
the fiscal year end September 30, as its taxable year, and has consistently
used the cash method as its method of accounting for tax purposes.
(v) BANK ACCOUNTS AND SAFE DEPOSIT ARRANGEMENTS. Attached hereto
as EXHIBIT S and incorporated by reference herein is a true, correct and
complete list of each checking account, savings account and other bank
account and safe deposit box maintained by the Company, and the names of
all persons authorized to withdraw funds or other property from, or
otherwise deal with, such accounts and safe deposit boxes.
(w) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since February 28, 1999,
except as set forth in EXHIBIT T attached hereto and incorporated by this
reference, the Company has not:
(i) Incurred any indebtedness, obligation or liability
(contingent or otherwise), except normal trade or business obligations
incurred in the ordinary course of its business, none of which was entered
into for inadequate consideration and none of which exceeds $1000.00 in
amount.
(ii) Discharged or satisfied any security interest, lien or
encumbrance or paid any indebtedness, obligation or liability (contingent
or otherwise), except (A) current liabilities and (B) scheduled payments
pursuant to obligations under contracts, agreements, or leases listed in
EXHIBITS K and M.
(iii) Mortgaged, pledged, or subjected to lien, charge,
security interest, or other encumbrance any of its assets or properties.
(iv) Sold, assigned, transferred, leased, disposed of, or
agreed to sell, assign, transfer, lease, or dispose of, any of its assets
or properties.
(v) Acquired or leased any assets or property of any other
Person.
(vi) Cancelled or compromised any debt or claim.
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(vii) Waived or released any rights.
(viii) Transferred or granted any rights with respect to
know-how or any rights existing under any leases, licenses, agreements,
inventions, or any of the Proprietary Rights.
(ix) Granted or made any contract, agreement, promise or
commitment to grant any wage, salary or employee benefit increase to, or
entered into any employment contract, bonus, stock option, profit sharing,
pension, incentive, retirement or other similar arrangement or plan with,
any officer, employee or other Person.
(x) Experienced any material difficulty with any employee or
learned of any threat or potential threat by any employee of the assertion
of any employment-related claim against the Company or any officer or
employee of the Company.
(xi) Made any capital expenditure in excess of $1000.00 or
entered into any commitment therefor.
(xii) Suffered any casualty loss or damage, whether or not
such loss or damage is or was covered by insurance.
(xiii) Suffered any adverse change in its operations,
earnings, assets, liabilities, properties, or business or in its condition
(financial or otherwise).
(xiv) Changed the nature of its business or its method of
accounting.
(xv) Other than in the ordinary course of business, entered
into any transaction, contract, or commitment.
(xvi) Terminated or modified, or agreed to the termination or
modification of, any Contract.
(xvii) Suffered a loss of any supplier or suppliers, which
loss (individually or in the aggregate) has had, or may have, an adverse
effect on its financial condition, results of operations, business, or
prospects.
(xviii) Suffered any material adverse change in its assets or
liabilities, in its condition, financial or otherwise, or in its business,
properties, earnings or net worth.
(x) INSIDER TRANSACTIONS. Attached hereto as EXHIBIT U and
incorporated by reference herein is a true, correct and complete list of
the following:
(i) The amounts and other essential terms of indebtedness or
other obligations, agreements, undertakings, liabilities or commitments
(contingent or otherwise) of the Company to or from any past or present
officer, director, member, stockholder or any Person related to,
controlling, controlled by or under common control with any of the
foregoing (collectively, "Control Persons").
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(ii) All transactions between each Control Person and the
Company since the Company's date of incorporation, and all proposed or
contemplated transactions with each Control Person, together with the
essential terms thereof.
(y) ADVERSE CONDITIONS. Seller has no knowledge of any present or
future condition, state of facts or circumstances which has affected or may
affect adversely the business of the Company or prevent the Company from
carrying on its business.
(z) FULL DISCLOSURE. This Agreement (including the Exhibits
hereto) does not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements contained herein
not misleading. There is no fact known to Seller or the Company which is
not disclosed in this Agreement which materially adversely affects the
accuracy of the representations and warranties contained in this Agreement
or the Company's financial condition, results of operations, business, or
prospects.
(aa) NO BROKERAGE. Seller has not incurred any obligation or
liability, contingent or otherwise, for brokerage fees, finder's fees,
agent's commissions, or the like in connection with this Agreement or the
transactions contemplated hereby.
(bb) SECURITIES LAW MATTERS. Seller is acquiring the SportsStar
Shares for his account, and not with a view to any sale, distribution or
disposition in violation of any federal or state securities laws. Seller
has been given the opportunity to obtain any information or documents, and
to ask questions and receive answers about such documents or about
Purchaser which Seller deems necessary to evaluate the merits and risks
related to his investment in the SportsStar Shares and Seller understands
and has taken cognizance of all risk factors related to such transactions.
Seller can afford to bear the economic risk of holding the unregistered
SportsStar Shares for an indefinite period of time, can afford to suffer a
complete loss of his investment in the SportsStar Shares, and Seller has
adequate means for providing for his needs and contingencies. Seller
acknowledges that the SportsStar Shares will be characterized as
"restricted securities" under the federal securities laws since as they are
being acquired directly from Purchaser in a transaction not involving a
public offering and that all certificates and instruments evidencing the
SportsStar Shares will bear a restrictive legend substantially similar to
the following:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED OR QUALIFIED UNDER SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES OR BLUE SKY LAWS OF ANY STATE AND MAY BE OFFERED AND
SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT
PROVISIONS OF FEDERAL AND STATE SECURITIES OR BLUE SKY LAWS OR IF AN
EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS APPLICABLE.
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3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants to Seller that:
(a) DUE ORGANIZATION; GOOD STANDING; POWER. The Purchaser is a
corporation duly organized, validly existing, and in good standing under
the laws of the State of Colorado. The Purchaser has all requisite
corporate power to enter into this Agreement and to perform its
obligations hereunder.
(b) AUTHORIZATION AND VALIDITY OF DOCUMENTS. The execution,
delivery, and performance of this Agreement by the Purchaser, and the
consummation by the Purchaser of the transactions contemplated hereby,
have been duly and validly authorized by the Purchaser. This Agreement
has been duly executed and delivered by the Purchaser and is a legal,
valid, and binding obligation of the Purchaser, enforceable against the
Purchaser in accordance with its terms, except as such enforceability
may be limited by general principles of equity, bankruptcy, insolvency,
moratorium and similar laws relating to creditors' rights generally.
4. COVENANTS AGAINST COMPETITION
(a) AGREEMENT NOT TO COMPETE. The parties acknowledge that
following the consummation of the purchase and sale of the Seller's
Shares contemplated by this Agreement, Purchaser will employ Kevin W.
Gemas and Wayne O. Gemas as the Company's Chief Operating Officer of
the Profile Division and Consultant, respectively. The Purchaser and
Seller acknowledge and agree that such services will be of a special
and unusual character which have a unique value to Purchaser and
Company, the loss of which cannot be adequately compensated by damages
in an action at law and, if used in competition with the Purchaser or
the Company, could cause serious harm to the Purchaser and the Company.
Accordingly, Seller agrees the neither he, nor Kevin W. Gemas, shall,
during the time period that he is employed by Purchaser and for a period
of five (5) years from the date of termination of such employment for
cause by Purchaser or voluntarily by either Gemas, do any of the
following: (i) directly or indirectly, solicit or otherwise contact any
Person, who is a customer or prospective customer of the Company
("Customer") for the purpose of seeking to obtain any such Customer as
a customer or beneficiary of a similar business conducted by any Person
other than the Company; (ii) directly or indirectly employ, hire, or
otherwise engage the services of or associate in any business with any
Person who is or has been employed by or associated with either the
Purchaser or the Company, unless such Person shall have ceased to be
employed by or associated with the Purchaser or the Company (as the case
may be), for at least one (1) year, or (iii) engage, directly or
indirectly, as a proprietor, stockholder, partner, director, officer,
employee, independent contractor or otherwise in any business in
competition with the Purchaser or the Company in any state in which the
Purchaser or the Company provides its services on the date that his
employment with the Company is terminated for any reason. Provided
however, that the above provision shall not be construed to prohibit
the Seller from associating in a business with Kevin W. Gemas, so long as
such business is not, directly or indirectly, in competition with the
Company or the Purchaser's business.
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(b) ENFORCEABILITY. The parties agree that to the extent that any
provision or portion of Section 4(a) of this Agreement shall be held,
found or deemed to be unreasonable, unlawful, or unenforceable by a
court of competent jurisdiction, then any such provision or portion
thereof shall be deemed to be modified to the extent necessary in order
that any such provision or portion thereof shall be legally enforceable
to the fullest extent permitted by applicable law. The parties further
agree that any court of competent jurisdiction shall, and the parties
hereby authorize, request and empower, any court of competent
jurisdiction to, enforce any such provision or portion thereof or to
modify any such provision or portion thereof in order that any such
provision shall be enforced by such court to the fullest extent permitted
by law.
(c) RIGHT TO ENJOIN. As the violation by Seller of the provisions
of Section 4(a) of this Agreement would cause irreparable harm to the
Purchaser and the Company, and there is no adequate remedy at law for
such violation, the Purchaser and Company shall have the right, in
addition to all other available remedies, to enjoin Seller from violating
such provision.
5. ADDITIONAL COVENANTS OF THE PARTIES. At the Closing on the Closing
Date:
(a) CERTIFICATE OF GOOD STANDING. Seller shall deliver to
Purchaser a certificate of good standing with respect to the Company,
certified as of a date no earlier than ten (10) days prior to the Closing
Date by the Wisconsin Secretary of State.
(b) KEVIN GEMAS' EMPLOYMENT AGREEMENT. Kevin Gemas will enter
into a five year employment agreement with the Company containing a
covenant not to compete such as the one described in Section 4 above,
and on the terms and conditions contained in the Employment Agreement
which is attached hereto as EXHIBIT V. In connection with such employment,
Kevin Gemas shall, at Closing, divest himself of any ownership interest,
direct or indirect, in All American Campus Tours, Inc., and shall
immediately upon Closing cease all participation in such business, in any
manner whatsoever.
(c) WAYNE GEMAS' CONSULTING AGREEMENT. Wayne Gemas will enter
into a Consulting Agreement with the Company for a term of up to five
years, with health insurance coverage until May 1, 2003, whereby he will
be available a minimum of two days per month, on the terms and conditions
contained in the Consulting Agreement which is attached hereto as
EXHIBIT W.
(d) KEY PERSONNEL EMPLOYMENT AGREEMENTS. Melanie Weber, Chris
Krause, Steve Potter, Dave Carl and Brian Bert will be offered employment
with the Company on the terms and conditions contained in the Employment
Agreement which is attached hereto as EXHIBIT X.
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(e) JOHN BRODIE CONSULTING AGREEMENT. John Brodie will enter into
a Consulting Agreement with the Company on the terms and conditions
contained in the Consulting Agreement which is attached hereto as
EXHIBIT Y.
(f) RESIGNATIONS OF OFFICERS AND DIRECTORS OF THE COMPANY. The
resignation of each of the officers and directors of the Company,
effective at the Closing on the Closing Date shall have been executed
and delivered to Purchaser by each such officer and director.
(g) AUDIT. The Purchaser shall immediately have an audit of the
Company's financial statements conducted by an independent certified
public accountant. Such audited financial statements shall consist of a
balance sheet as of the Closing Date and statements of income for each
of the two years then ended. The Seller shall reimburse the Purchaser
for 50% of the cost of the audit at such time that the Seller receives
the first $100,000 payment pursuant to Section 1(b)(i)(A) hereunder.
(h) CONDITIONAL ASSIGNMENT OF MEDIA CREDITS. Purchaser shall
deliver to the Seller a Conditional Assignment of Media Credits on the
terms and conditions contained in the Conditional Assignment of Media
Credits which is attached hereto as EXHIBIT Z.
(i) SECURITY AGREEMENT. Purchaser shall deliver to Seller a
Security Agreement for the CBSA service mark and Interactive Profile
Software. Such security interest shall be considered to be substitute
collateral only, as described in Section 1(b)(v) above.
6. INDEMNIFICATION; SURVIVAL; RIGHT OF SET-OFF.
(a) INDEMNIFICATION BY SELLER. Notwithstanding the Closing, the
Seller indemnifies and saves Purchaser harmless, from and against any
and all out-of-pocket and actual losses, claims, damages, liabilities,
costs, expenses or deficiencies (but specifically excluding punitive,
consequential or indirect damages or any assorted or established claim
for any damage which provides for recovery based upon multiple of
losses, multiple of lost profits or multiple of lost anticipated
profits) (all of which shall be referred to in the aggregate as "Losses"
and individually as "Indemnifiable Damages"), incurred by or asserted
against Purchaser or Company due to or resulting from any of the
following:
(i) Any misrepresentation, omission or breach by Seller of
any representation or warranty contained in this Agreement (including
the Exhibit herein); or
(ii) Any nonfulfillment, failure to comply or breach by
Seller of or with any covenant, promise or agreement of the Seller
contained in this Agreement (including the Exhibits hereto).
(b) INDEMNIFICATION BY PURCHASER. Notwithstanding the Closing, the
Purchaser, indemnifies and saves the Seller harmless from and against
any and all out-of-
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pocket and actual losses, claims, damages, liabilities, costs, expenses or
deficiencies (but specifically excluding punitive, consequential, or
indirect damages or any asserted or established claim for any damage which
provides for recovery based upon any multiple of losses, multiple of lost
profits or multiple of lost anticipated profits) (All of which shall be
referred to in the aggregate as "Losses" and individually as "Indemnifiable
Damages"), incurred by or asserted against Seller due to or resulting from
any of the following:
(i) Any misrepresentation, omission or breach by Purchaser
of any representation or warranty contained in this Agreement (including
the Exhibits hereto); or
(ii) Any nonfulfillment, failure to comply or breach by the
Purchaser of or with any covenant, promise or agreement of the Purchaser
contained in this Agreement (including the Exhibits hereto).
(c) PROCEDURE FOR MAKING CLAIMS. If and when a party (the
"Indemnitee") desires to assert a claim for Indemnifiable Damages against
the other party (the "Indemnitor") pursuant to the provisions of this
Section, the Indemnitee shall deliver a written notice of claim to the
Indemnitor reasonably promptly after the Indemnitee's receipt of a claim
or specific and affirmative awareness of a potential claim. If the
Indemnitor shall object to such notice of claim, the Indemnitor shall
deliver a written notice of objection to the Indemnitee within fifteen (15)
days after the Indemnitee's delivery of the notice of claim. If the notice
of objection shall not have been so delivered within such fifteen (15) day
period, the Indemnitor shall conclusively be deemed to have acknowledged
the correctness of the claim or claims specified in the notice of claim for
the full amount thereof, and the Indemnifiable Damages set forth in the
notice of claim shall be promptly paid to the Indemnitee as set forth in
this Section. If the Indemnitor shall make timely objection to a claim or
claims set forth in a notice of claim, and if such claim or claims have not
been resolved or compromised within sixty (60) days from the date of
delivery of the notice of objection, then such claim shall be settled by
arbitration pursuant to Section 12(m) below. If, by arbitration, it shall
be determined that the Indemnitee shall be entitled to any Indemnifiable
Damages by reason of its claim or claims, the Indemnifiable Damages so
determined shall be paid to the Indemnitee by the Indemnitor in the same
manner as if the Indemnitee had not delivered a notice of objection.
(d) PARTICIPATION IN DEFENSE OF THIRD PARTY CLAIMS. If any third
party shall assert a claim against the Indemnitee which, if successful,
might result in an obligation of the Indemnitor to pay Indemnifiable
Damages and which can be remedied by the reasonable satisfaction of the
Indemnitee by the payment of money damages without further adverse
consequences to the Indemnitee, the Indemnitor, at the sole expense of the
Indemnitor, may assume the primary defense thereof with counsel reasonably
acceptable to the Indemnitee, but only if and so long as the Indemnitor
diligently pursues the defense of such claim. If the Indemnitor fails or is
unable to so elect to assume the primary defense of any such claim, the
Indemnitee may elect to do so.
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(e) RIGHT OF SET-OFF. Notwithstanding any provision of this
Agreement to the contrary, the parties acknowledge and agree that Purchaser
shall have the right to set-off the amount of any Indemnifiable Damages or
Losses to the extent the Seller shall be liable therefor against any sums
of money at any time or from time to time payable to the Seller pursuant to
this Agreement.
(f) SURVIVAL OF INDEMNIFICATION. The representations and
warranties contained in this Agreement, and the Indemnitor's obligation to
pay Indemnifiable Damages, shall survive the Closing, as follows:
(i) FRAUDULENT BREACH OF REPRESENTATIONS; TAXES. In the case
of a claim based upon the inaccuracy or breach of a representation or
warranty which was made fraudulently, or for the inaccuracy or breach of a
representation or warranty pertaining to taxes, for a period equal to the
applicable statute of limitations.
(ii) ALL OTHER CLAIMS. In the case of all other claims, for a
period of two (2) years after the Closing.
(g) LIMITATIONS ON INDEMNIFIABLE DAMAGES.
(i) MINIMUM AND MAXIMUM AMOUNT. Notwithstanding the
foregoing and subject to the following provisions, the maximum amount of
Indemnifiable Damages payable by either party arising under this Section 6
in no event shall exceed the market value of the SportsStar Shares and
Stock Options transferred under Section 1(b)(ii) and 1(b)(vi) of this
Agreement in the absence of fraud on behalf of either party. Moreover,
neither party shall be entitled to recover Indemnifiable Damages for any
matter unless and until the aggregate of all claims for Indemnifiable
Damages asserted exceeds Ten Thousand Dollars ($10,000) and then only to
the extent of such excess.
(ii) TAX PROVISION. In computing the amount of Indemnifiable
Damages, there shall be deducted therefrom an amount equal to the income
tax savings, if any, to which either party becomes entitled from the income
tax deduction or deferral, if any, to which either party shall become
entitled to as a consequence of any Loss, claim, damage, liability, cost,
expense or deficiency giving rise to the Indemnifiable Damages.
(iii) INSURANCE PROCEEDS; CLAIMS AGAINST THIRD PARTIES. In
computing the amount of Indemnifiable Damages, there shall be deducted
therefrom an amount equal to the sum of (A) insurance proceeds to which the
Purchaser becomes entitled as a consequence of any loss, claim, damage,
liability, cost, expense or deficiency giving rise to Indemnifiable
Damages, or (B) all claims against third parties which would reduce the
amount of Indemnifiable Damages. The Purchaser
18
<PAGE>
shall in good faith attempt to collect all insurance proceeds and all
claims against third parties which would reduce Indemnifiable Damages.
(iv) ASSIGNMENT OF UNCOLLECTED RECEIVABLES. In the event that
Indemnifiable Damages are payable to the Purchaser because all or a portion
of the Receivables are not collected by the Purchaser, after Purchaser
makes all reasonable efforts to obtain payment of such Receivables, the
Purchaser shall cause such Receivables to be assigned (without recourse) to
the extent uncollected to the Seller promptly after payment by the Seller
of the Indemnifiable Damages becoming due, if any, as a result of such
noncollection.
(h) SOLE REMEDY. The sole remedy of either party for any claim for
monetary relief or damages resulting or arising in any manner from or with
respect to this Agreement or the transactions contemplated hereby, whether such
claims arise out of contract, tort or violation of law, shall be a claim for
Indemnifiable Damages made pursuant to, and subject to the limitations of this
Section. Notwithstanding the foregoing, this provision shall not apply to any
claims of the Purchaser related to the noncompetition covenants set forth in
Section 4 above, or to any claims arising from a determination of tax or other
liability which is in any way related to the Representative Agreements which are
set forth in Exhibit M to this Agreement.
7. GENERAL COVENANTS. Purchaser and Seller agree that from and after the
date of this Agreement that:
(a) DUTY TO KEEP ADVISED. Each party will keep the other closely
advised of any material developments relevant to the Company's business and
to the consummation of this Agreement.
(b) CONFIDENTIALITY. Both parties agrees that, until the Closing
has been consummated, they will hold in strict confidence all data and
information obtained in connection with this transaction or Agreement with
respect to the other party's business.
(c) INVESTIGATION OF SELLER'S BUSINESS. Purchaser may, prior to
the Closing, make or cause to make such investigation of the Company, and
of the financial and legal condition of the Company as Purchaser deems
reasonably necessary or advisable for the purpose of consummating the
transaction described herein. Seller will permit Purchaser and its
authorized agents or representatives, including its independent
accountants, to have full access to the properties, books, and records of
the Company's business at reasonable hours to review the books, records and
other documents of the business for the sole purpose of consummating the
transaction described herein.
8. SELLER'S COVENANTS.
(a) NEGATIVE COVENANTS AS TO FUTURE OPERATIONS. Between the date
hereof and Closing, except as contemplated by this Agreement, without the
prior written consent of Purchaser, Seller will not: (i) agree to or
implement any change increasing the
19
<PAGE>
compensation or benefits payable to or to become payable to any person or
entity employed or engaged by Company in connection with the conduct of
Company; (ii) out of the ordinary course of business, create or suffer any
(A) adverse change in the condition of the Company, or the operation or
conduct thereof or (B) damage, destruction or loss (whether or not covered
by insurance) adversely affecting Company or the operation or conduct
thereof; (iii) sell, assign or otherwise transfer or dispose of the assets
of Company except in the ordinary course of business; or (iv) issue any
public reports, statements or releases pertaining to this Agreement unless
and until Purchaser and Seller jointly agree on the text thereof and
Purchaser has designated the timing of the release of the same.
(b) AFFIRMATIVE COVENANTS AS TO FUTURE OPERATIONS. Between the
date hereof and Closing, Seller will: (i) to the best of his ability,
operate Company diligently, prudently and in the ordinary course of
business and use best efforts to preserve and expand the Company,
including, but not limited to, not reducing its existing marketing or sales
efforts, and to preserve the goodwill of its customers, suppliers and
others having business relations with Company; (ii) maintain in effect all
insurance as set forth on the SCHEDULE OF INSURANCE; (iii) comply with
applicable laws, rules, and regulations and pertinent provisions of all
contracts and other agreements to which it is a party, which affect or may
affect Company's business; (iv) furnish Purchaser such other information as
Purchaser may reasonably request; (v) pay any taxes accrued or incurred
from and after the date hereof to Closing, and prepare and file or submit
any returns and documents with respect thereto in the manner provided by
and in compliance with all applicable law; (vi) so long as Purchaser is
reasonably pursuing the completion of the transactions contemplated by this
Agreement, not afford a similar right of access and discussion to anyone
other than Purchaser and its representatives; (vii) give to Purchaser and
its counsel, accountants and other representatives full access during
ordinary business hours to all of Company's properties, books, records and
papers relating to the Company; and (viii) immediately notify Purchaser of
any material change in circumstances or facts affecting the Company, or of
any damage, destruction or loss of any of the assets, or loss or change in
the relationship between Company and any of Company's customers, clients or
suppliers;
9. GENERAL CONDITIONS TO CLOSING. All obligations of each party under
this Agreement are subject to fulfillment by the other party at or before the
Closing of each of the following conditions to be performed by each party,
subject, however, to the right of a party to waive, in writing, one or more of
such conditions to be performed by the other party:
(a) REPRESENTATIONS TRUE. The representations and warranties of
each party contained in this Agreement and in the certificates and papers
to be delivered pursuant hereto and in connection herewith shall be true to
the best of each party's knowledge (i) at the time made, and (ii) except as
affected by the taking of any action contemplated hereby, as of the
Closing, as though such representations and warranties were made at and as
of the Closing.
20
<PAGE>
(b) COVENANTS PERFORMED. All covenants to be performed by the
other party shall have been performed.
(c) NO MATERIAL ADVERSE CHANGE. Since the date of this Agreement
there shall not have been any material adverse change in the financial
condition or results of operation of the Company except for such changes as
may be contemplated by this Agreement.
10. CONDITIONS TO PURCHASER'S OBLIGATIONS. Unless previously waived in
writing by Purchaser, the obligations of Purchaser under this Agreement are
subject to the fulfillment of the following conditions at or prior to the
Closing:
(a) PURCHASER SATISFACTION WITH DUE DILIGENCE REVIEW. As of the
Closing Date, Purchaser shall have finalized, and in its sole and absolute
discretion be satisfied in all respects with, its review of the information
regarding the Company, the Financial Statements provided to Purchaser by
Seller and with the Company's business and prospects.
11. MISCELLANEOUS.
(a) SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND AGREEMENTS. All
of the representations, warranties, covenants, promises and agreements of
the parties contained in this Agreement (or in any document delivered or to
be delivered pursuant to this Agreement or in connection with the Closing)
shall survive the execution, acknowledgment, sealing and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(b) CERTAIN DEFINITIONS. As used throughout this Agreement, the
following terms have the following meanings:
(i) "Affiliate" has the meaning ascribed to such term in
Rule 405 promulgated under the Securities Act, as such rule is in
effect on the date hereof.
(ii) "Bankruptcy Code" means the United States Bankruptcy
Code, 11 U.S.C. Section 101 ET SEQ., and all future acts supplemental
thereto or amendatory thereof.
(iii) "Material" means a change involving Ten Thousand Dollars
($10,000) or more.
(iv) "Person" means an individual, partnership, corporation,
trust, unincorporated organization, government, or agency or political
subdivision of a government.
21
<PAGE>
(v) "SEC" means the Securities and Exchange Commission, or
any other Federal agency at the time administering the Securities Act
or the Exchange Act.
(vi) "Securities Act" means the Securities Act of 1933, or
any similar Federal statute, and the rules and regulations of the SEC
promulgated thereunder, all as the same shall be in effect at the
relevant time.
(c) NOTICES. All notices, requests, demands, consents, and other
communications which are required or may be given under this Agreement
(collectively, the "Notices") shall be in writing and shall be given either
(a) by personal delivery against a receipted copy, (b) by certified U.S.
mail, return receipt requested, postage prepaid, or by (c) facsimile
against a confirmed receipt, to the following addresses:
(i) If to Seller, to:
Wayne 0. Gemas
P.O. Box 156
Elkhart Lake, Wisconsin 53020-0156
with a copy to:
Richard D. Riebel, Esquire
Godfrey, Braun & Frazier
700 North Water Street
700 First Financial Centre
Milwaukee, Wisconsin 53202-4278
Facsimile 414-278-0421
(ii) If to Purchaser, to:
SportsStar Marketing, Inc.
Attn: William Kroske, President
5275 DTC Parkway
Suite 110
Englewood, CO 80111
Facsimile 303-804-0315
with a copy to:
Jean M. Christman, Esquire
Hall & Evans, L.L.C.
1200 17th Street, Suite 1700
Denver, Colorado 80202
Facsimile 303-628-3421
22
<PAGE>
or to such other address of which written notice in accordance with this
Section shall have been provided by such party. Notices may only be given
in the manner hereinabove described in this Section 11(c) and shall be
deemed received when given in such manner.
(d) ENTIRE AGREEMENT. This Agreement (including the Exhibits
hereto) constitutes the full, entire and integrated agreement between the
parties hereto with respect to the subject matter hereof, and supersedes
all prior negotiations, correspondence, understandings and agreements among
the parties hereto respecting the subject matter hereof.
(e) ASSIGNABILITY. This Agreement shall not be assignable by any
party without the prior written consent of the other party; provided,
however, that the Purchaser may without the prior written consent of any
other party, assign its interest in this Agreement to any Affiliate of the
Purchaser if such Affiliate undertakes to perform the Purchaser's
obligations hereunder that shall have been so assigned, and upon, from and
after such assignment the Purchaser shall have no further liabilities,
obligations or duties in respect of the rights, obligations and duties so
assigned.
(f) BINDING EFFECT; BENEFIT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, each other Person who is
indemnified under any provision of this Agreement, and their respective
heirs, personal and legal representatives, guardians, successors and, in
the case of Purchaser, its permitted assigns. Nothing in this Agreement,
express or implied, is intended to confer upon any other Person any rights,
remedies, obligations, or liabilities.
(g) SEVERABILITY. Any provision of this Agreement which is held by
a court of competent jurisdiction to be prohibited or unenforceable shall
be ineffective to the extent of such prohibition or unenforceability,
without invalidating or rendering unenforceable the remaining provisions of
this Agreement.
(h) AMENDMENT; WAIVER. No provision of this Agreement may be
amended, waived, or otherwise modified without the prior written consent of
all of the parties hereto. No action taken pursuant to this Agreement,
including any investigation by or on behalf of any party, shall be deemed
to constitute a waiver by the party taking such action of compliance with
any representation, warranty, covenant or agreement herein contained. The
waiver by any party hereto of a breach of any provision or condition
contained in this Agreement shall not operate or be construed as a waiver
of any subsequent breach or of any other conditions hereof.
(i) SECTION HEADINGS. This section and other headings contained in
this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
23
<PAGE>
(j) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument.
(k) APPLICABLE LAW. This Agreement is made and entered into, and
shall be governed by and construed in accordance with, the laws of the
State of Colorado.
(l) REMEDIES. The parties hereto acknowledge that the Seller's
Shares are unique; that any claim for monetary damages may not constitute
an adequate remedy; and that it may therefore be necessary for the
protection of the parties and to carry out the terms of this Agreement to
apply for the specific performance of the provisions hereof. Either party
may proceed to protect and enforce their respective rights hereunder by a
suit in equity, or other appropriate proceeding, whether for specific
performance or for an injunction against a violation of the terms hereof or
in aid of the exercise of any right, power or remedy granted hereunder or
by law, equity or statute or otherwise. No course of dealing and no delay
on the part of any party hereto in exercising any right, power or remedy
shall operate as a waiver thereof or otherwise prejudice its rights, powers
or remedies, and no right, power or remedy conferred hereby shall be
exclusive of any other right, power or remedy referred to herein or now or
hereafter available at law, in equity, by statute or otherwise.
(m) ARBITRATION. All controversies, disputes or claims arising out
of or resulting from this Agreement shall be submitted for arbitration to
the Milwaukee, Wisconsin office of the American Arbitration Association on
the demand of either party. Such arbitration proceedings shall be conducted
in Milwaukee, Wisconsin and shall be heard by one (1) arbitrator in
accordance with the then-current commercial arbitration rules of the
American Arbitration Association. The prevailing party in any arbitration
proceeding shall be entitled to an award of all costs incurred in
connection with such proceedings, including reasonable attorneys' fees.
(n) EXPENSES OF TRANSACTION. Each of the parties shall pay its own
expenses incurred in connection with authorization, preparation, execution
and performance of this Agreement and obtaining any necessary regulatory or
contract approvals, including, without limitation, all fees and expenses of
such party's counsel, accountants, agents and representatives.
Notwithstanding the foregoing, upon Closing, the Purchaser agrees to
advance the funds to the Seller to pay all legal fees incurred by the
Seller in connection with this transaction. Upon receipt of the first
payment by the Seller under Section 1(b)(I)(A), the Seller shall reimburse
the Purchaser for such advance. In the event that this Agreement is
terminated prior to Closing, the Seller will be responsible for the payment
of his own legal fees and the Purchaser will have no obligation whatsoever
to pay them on behalf of the Seller.
(o) FURTHER ASSURANCES. Seller agrees to execute, acknowledge, and
deliver, after the date hereof, without additional consideration, such
further assurances, instruments and documents, and to take such further
actions, as the Purchaser may
24
<PAGE>
request in order to fulfill the intent of this Agreement and the transactions
contemplated hereby.
(p) TERMINATION. In the event of termination of this Agreement prior to
Closing, upon the mutual agreement of the parties to this Agreement, or
termination by the Purchaser pursuant to Section 10 above, this Agreement
shall become void and of no further force and effect, without any liability
on the part of any party to the other party. In such event, each party will
pay their own costs and expenses incurred in connection with the negotiation
and preparation of this Agreement, and the terms of the Nondisclosure and
Confidentiality Agreement entered into between the parties shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement on the date first above written.
SPORTSSTAR MARKETING, INC.
By: /s/ William Kroske
------------------------
William Kroske, President
Date: 3/29/99
-----------------------
/s/ Wayne O. Gemas
----------------------------
Wayne O. Gemas
Date: 3/29/99
-----------------------
25
<PAGE>
The undersigned spouse of Wayne O. Gemas, who is not a party to this
Agreement, but is a Wisconsin resident, has read this Agreement and consents
to, and agrees that she will be bound by all of its provisions.
Dated: 3/29/99 /s/ Shirley A. Gemas
------------- ------------------------------
Print Name: Shirley A. Gemas
-----------------
26
<PAGE>
Mail to: Secretary of State For office use only
Corporations Section
1560 Broadway, Suite 200
CHANGE OF NAME Denver, CO 80202 [STAMP]
(303) 894-2251
MUST BE TYPED Fax (303) 894-2242
FILING FEE: $25.00
MUST SUBMIT TWO COPIES
ARTICLES OF AMENDMENT [STAMP]
Please include a typed TO THE
self-addressed envelope ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is SportsStar Marketing, Inc.
SECOND: The following amendment to the Articles of Incorporation was adopted
on July 7 1999, as prescribed by the Colorado Business Corporation Act, in
the manner marked with an X below:
No shares have been issued or Directors Elected - Action by Incorporators
- -----
X No shares have been issued but Directors Elected - Action by Directors
- -----
Such amendment was adopted by the board of directors where shares have
- ----- been issued and shareholder action was not required.
Such amendment was adopted by a vote of the shareholders. The number of
- ----- shares voted for the amendment was sufficient for approval.
THIRD: If changing corporate name, the new name of the corporation is College
Bound Student Alliance, Inc.
FOURTH: The manner, if not set forth in such amendment, in which any
exchange, reclassification, or cancellation of issued shares provided for in
the amendment shall be effected, is as follows:
NONE
If these amendments are to have a delayed effective date, please list that
date: ________________________________________ (Not to exceed ninety (90)
days from the date of filing)
----------------------------------------
Signature /s/ Janice A. Jones
----------------------------------------
Title Corporate Secretary
----------------------------------------
Revised 7/95
<PAGE>
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
WINTER PARK VENTURES, INC.
Winter Park Ventures, Inc. (the "Corporation"), a corporation organized
under the Colorado Corporation Code and existing under the Colorado Business
Corporation Act (the "Act"), does hereby certify, in accordance with the
provisions of Sections 7-110-103 and 7-110-107 of the Act, as follows:
FIRST: The name of the Corporation is "Winter Park Ventures, Inc." The
Corporation was incorporated by the filing of an original Articles of
Incorporation on July 15, 1993. The Corporation desires to amend and restate its
Articles of Incorporation as currently in effect as hereinafter provided.
SECOND: The Board of Directors of the Corporation, pursuant to a unanimous
written consent dated as of April 21, 1997, duly resolved, pursuant to Section
7-108-202 of the Act, to change the name of the Corporation to "SportsStar
Marketing, Inc." which resolution was approved unanimously by written consent,
pursuant to Section 7-107-104 of the Act, by all holders of capital stock of the
Corporation entitled to vote thereon.
THIRD: The provisions set forth in these Amended and Restated Articles of
Incorporation supersede the Corporation's current Articles of Incorporation and
all amendments thereto. These Amended and Restated Articles of Incorporation
correctly set forth the provisions of the Articles of Incorporation, as amended,
of the Corporation.
FOURTH: The Board of Directors of the Corporation, pursuant to a unanimous
written consent dated as of April 21, 1997, duly adopted the following
resolution pursuant to Section 7-108-202 of the Act, which resolution was
approved unanimously by written consent, pursuant to Section 7-107-104 of the
Act, by all holders of capital stock of the Corporation entitled to vote
thereon:
RESOLVED, that the Articles of Incorporation of the Corporation be, and
hereby are, amended by deleting such Articles in their entirety and by
substituting in lieu thereof the following:
<PAGE>
ARTICLE I
NAME
The name of the corporation shall be SPORTSSTAR MARKETING, INC. (the
"Corporation").
ARTICLE II
PERIOD OF DURATION
The Corporation shall exist in perpetuity unless dissolved according to
law.
ARTICLE III
PURPOSES
The purpose for which this Corporation is organized is to engage in any
lawful acts and activities for which corporations may be organized under the
laws of the State of Colorado and to exercise any powers permitted to
corporations under the laws of the State of Colorado.
ARTICLE IV
The total number of shares of capital stock which the Corporation is
authorized to issue shall be sixteen million (16,000,000) shares, consisting of
six million (6,000,000) shares of common stock, par value $0.01 per share
("Common Stock"), and ten million (10,000,000) shares of preferred stock, par
value $0.01 per share ("Preferred Stock").
The relative powers, preferences and rights together with the
qualifications and limitations and restrictions of the Common Stock and the
Preferred Stock are as follows:
1. COMMON STOCK
(a) DIVIDENDS AND DISTRIBUTIONS. Subject to the preferences and other
rights of the Preferred Stock, the holders of Common Stock shall be entitled to
receive their pro rata shares, based upon the number of shares of Common Stock
held by them, of such dividends or other distributions as may be declared by the
board of directors from time to time, when and as declared by the board of
directors, out of funds legally available therefor.
-2-
<PAGE>
(b) LIQUIDATION. In the event of any liquidation, dissolution or winding up
of the affairs of the Corporation, voluntary or involuntary, after payment or
provision for payment to the holders of Preferred Stock of the amounts to which
they may be entitled, the remaining assets of the Corporation available to
stockholders shall be distributed equally per share to the holders of Common
Stock.
(c) VOTING RIGHTS. Each holder of Common Stock shall be entitled to one
vote in respect of each share of Common Stock held of record on all matters
submitted to a vote of stockholders. Holders of Common Stock shall not be
entitled to cumulate their votes in the election of directors and shall not be
entitled to any preemptive rights to acquire shares of any class or series of
capital stock of the Corporation.
2. UNDESIGNATED PREFERRED STOCK
The board of directors of the Corporation is hereby authorized to provide,
by resolution or resolutions adopted by such board, for the issuance of
Preferred Stock from time to time in one or more classes and/or series, to
establish the number of shares of each such class or series, and to fix the
powers, designations, preferences and relative, participating, optional or other
rights, if any, and the qualifications, limitations or restrictions thereof, if
any, of the shares of each such class or series, all to the full extent
permitted by Article 7 of the Act, or any successor provisions. Without limiting
the generality of the foregoing, the board of directors is authorized to provide
that shares of a class or series of Preferred Stock:
(1) are entitled to cumulative, partially cumulative or
noncumulative dividends or other distributions payable in cash,
capital stock or indebtedness of the Corporation or other property,
at such times and in such amounts as are set forth in the board
resolutions establishing such class or series or as are determined
in a manner specified in such resolutions;
(2) are entitled to a preference with respect to payment of
dividends over one or more other classes and/or series of capital
stock of the Corporation;
(3) are entitled to a preference with respect to any
distribution of assets of the Corporation upon its liquidation,
dissolution or winding up over one or more other classes and/or
series of capital stock of the Corporation in such amount as is set
forth in the board resolutions establishing such class or series or
as is determined in a manner specified in such resolutions;
-3-
<PAGE>
(4) are redeemable or exchangeable at the option of the
Corporation and/or on a mandatory basis for cash, capital stock or
indebtedness of the Corporation or other property, at such times or
upon the occurrence of such events, and at such prices, as are set
forth in the board resolutions establishing such class or series or
as are determined in a manner specified in such resolutions;
(5) are entitled to the benefits of such sinking fund, if any,
as is required to be established by the Corporation for the
redemption and/or purchase of such shares by the board resolutions
establishing such class or series;
(6) are convertible at the option of the holders thereof into
shares of any other class or series of capital stock of the
Corporation, at such times or upon the occurrence of such events,
and upon such terms, as are set forth in the board resolutions
establishing such class or series or as are determined in a manner
specified in such resolutions;
(7) are exchangeable at the option of the holders thereof for
cash, capital stock or indebtedness of the Corporation or other
property, at such times or upon the occurrence of such events, and
at such prices, as are set forth in the board resolutions
establishing such class or series or as are determined in a manner
specified in such resolutions;
(8) are entitled to such voting rights, if any, as are
specified in the board resolutions establishing such class or series
(including, without limiting the generality of the foregoing, the
right to elect one or more directors voting alone as a single class
or series or together with one or more other classes and/or series
of Preferred Stock, if so specified by such board resolutions) at
all times or upon the occurrence of specified events; and
(9) are subject to restrictions on the issuance of additional
shares of Preferred Stock of such class or series or of any other
class or series, or on the reissuance of shares of Preferred Stock
of such class or series or of any other class or series, or on
increases or decreases in the number of authorized shares of
Preferred Stock of such class or series or of any other class or
series.
Without limiting the generality of the foregoing authorizations, any of
the voting powers, designations, preferences, rights and qualifications,
limitations or restrictions of a class or series of Preferred Stock may be made
dependent upon facts
-4-
<PAGE>
ascertainable outside the board resolutions establishing such class or
series, all to the full extent permitted by the Act. Unless otherwise
specified in the board resolutions establishing a class or series of
Preferred Stock, holders of a class or series of Preferred Stock shall not be
entitled to cumulate their votes in any election of directors in which they
are entitled to vote and shall not be entitled to any preemptive rights to
acquire shares of any class or series of capital stock of the Corporation.
ARTICLE V
VOTING BY SHAREHOLDERS
1. VOTING RIGHTS: NO CUMULATIVE VOTING. Each holder of shares of Common
Stock of the Corporation shall have one vote on all matters submitted to the
shareholders for each share of the Common Stock outstanding in the name of such
holder on the books of the Corporation. Cumulative voting shall not be allowed
in the election of directors of the Corporation.
2. MAJORITY VOTE. A quorum for the purpose of shareholder meetings shall
consist of a majority of the shares issued and outstanding and entitled to vote
at the meeting.
If a quorum exists, action on a matter other than the election of directors
is approved if the votes cast favoring the action exceed the votes opposing the
action, except as otherwise required by the Act with respect to action on
amendment to these Articles of Incorporation, on a plan of merger or share
exchange, on the disposition of substantially all of the property of the
Corporation, on the granting of consent to the disposition of property by an
entity controlled by the Corporation, and on the dissolution of the Corporation.
ARTICLE VI
BOARD OF DIRECTORS
The corporate powers shall be exercised by or under the authority of, and
the business and affairs of the Corporation shall be managed under the direction
of, a Board of Directors. The initial Board of Directors shall consist of four
(4) directors, whose names and addresses are stated below, and who shall serve
as directors until the first annual meeting of the shareholders or until their
successors are elected and qualified:
-5-
<PAGE>
<TABLE>
<CAPTION>
Name Mailing Address
---- ---------------
<S> <C>
Janice A. Jones 5445 DTC Parkway, Suite 735
Englewood, Colorado 80111
William H. Kroske 5445 DTC Parkway, Suite 735
Englewood, Colorado 80111
Alice M. Gluckman 5445 DTC Parkway, Suite 735
Englewood, Colorado 80111
Donald W. Prosser 5445 DTC Parkway, Suite 735
Englewood, Colorado 80111
</TABLE>
ARTICLE VII
CORPORATE OPPORTUNITY
The officers, directors and other members of management of this Corporation
shall be subject to the doctrine of "corporate opportunities" only insofar as it
applies to business opportunities in which this Corporation has expressed an
interest as determined from time to time by this Corporation's Board of
Directors. Once such areas of interest are delineated, all such business
opportunities within such areas of interest which come to the attention of the
officers, directors and other members of management of this Corporation shall be
offered first to the Corporation. In the event the Corporation declines to
pursue any or all such business opportunities, the officers, directors and other
members of management of this Corporation shall be free to engage in such areas
of interest on their own, and this doctrine shall not limit the right of any
officer, director or other member of management of this Corporation to continue
a business existing prior to the time that such area of interest is designated
by the Corporation. This provision shall not be construed to release any
employee of this Corporation (other than an officer, director or member of
management) from any duties which he or she may have to this Corporation.
ARTICLE VIII
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
1. To the fullest extent permitted by the Act, as the same exists or may
hereafter be amended, the Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed
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<PAGE>
action, suit or proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal (other than an action by or in the
right of the Corporation) by reason of the fact that he or she is or was
director, officer, employee, fiduciary or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee,
fiduciary or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such action, suit or
proceeding, if he or she conducted himself or herself in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, or conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the Corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his or
her conduct was unlawful.
2. The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he or she is or was a director, officer, employee,
fiduciary or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection with the defense or settlement of such
action or suit if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
such court shall deem proper.
3. To the extent that a director, officer, employee, fiduciary or agent of
a corporation has been wholly successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in paragraphs 1 and 2 of this
Article, or in defense of any claim, issue or matter therein, he or she shall be
indemnified against
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<PAGE>
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection therewith.
4. Any indemnification under paragraphs 1 and 2 of this section (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee, fiduciary or agent is proper in the circumstances because he
or she has met the applicable standard of conduct set forth in paragraphs 1 and
2. Such determination shall be made (1) by the Board of Directors by a majority
vote of a quorum consisting of Directors who were not parties to such action,
suit or proceeding, or (2) if such quorum is not obtainable, or, even if
obtainable a quorum of disinterested Directors so directs, by independent legal
counsel in a written opinion or (3) by the shareholders of the Corporation.
5. Expenses (including attorneys' fees) incurred in defending a civil or
criminal action, suit or proceeding may be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding as authorized in the
manner provided in paragraph 4 of this Article upon receipt of an undertaking by
or on behalf of the director, officer, employee, fiduciary or agent to repay
such amount unless it shall ultimately be determined that he or she is entitled
to be indemnified by the Corporation as authorized in this Article.
6. The Corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was director, officer, employee, fiduciary or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity or arising out of his or her status as such, whether or not the
Corporation would have the power to indemnify him or her against such liability
under the provisions of this section.
7. In addition to the foregoing, the Corporation shall have the power to
indemnify current or former directors, officer, employees and agents to the
fullest extent provided by law.
ARTICLE IX
DIRECTOR LIABILITY
To the fullest extent permitted by the Act, as the same exists or may
hereafter be amended, a director of this Corporation shall not be liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director.
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<PAGE>
ARTICLE X
REGISTERED AND PRINCIPAL OFFICE; REGISTERED AGENT
The address of the initial registered office of the Corporation is 5445 DTC
Parkway, Suite 735, Englewood, Colorado 80111, and the name of the initial
registered agent at such address is Janice A. Jones. The written consent of the
initial registered agent to the appointment as such is stated below. Either the
registered office or the registered agent may be changed in the manner permitted
by law. The address of the Corporation's initial principal office is 5445 DTC
Parkway, Suite 735, Englewood, Colorado 80111.
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<PAGE>
IN WITNESS WHEREOF, Winter Park Ventures, Inc. has caused these Amended
and Restated Articles of Incorporation to be executed in its name and on its
behalf by William H. Kroske, its President, as of this 21st day of April
1997, and the undersigned acknowledges that these Amended and Restated
Articles of Incorporation are the act and deed of Winter Park Ventures, Inc.,
and, under penalties of perjury, that the matters and facts set forth herein
with respect to authorization and approval are true in all material respects.
WINTER PARK VENTURES, INC.
By /s/ William H. Kroske
--------------------------------------
Name: William H. Kroske
Title: President
The undersigned hereby consents to the appointment as the initial registered
agent of Winter Park Ventures, Inc..
/s/ Janice A. Jones
--------------------------------------
Janice A. Jones
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<PAGE>
ARTICLES OF AMENDMENT
FOR
SPORTSSTAR MARKETING, INC.
SPORTSSTAR MARKETING, INC. (the "Corporation") organized and existing
under the Colorado Business Corporation Act (the "Act") does hereby certify,
in accordance with the provisions of Sections 7-110-103 of the Act, as
follows:
FIRST: The name of the Corporation is "SportsStar Marketing, Inc."
SECOND: The amendments set forth in these Articles of Amendment
supersede any conflicting provisions of the original Articles of
Incorporation and all amendments thereto.
THIRD: The Shareholder of the Corporation, pursuant to a unanimous
written consent dated as of June 26, 1997, pursuant to Section 7-107-104 of
the Act, duly resolved to adopt the amendment to the Corporation's Amended
and Restated Articles of Incorporation as set forth herein, which amendment
was approved by unanimous written consent of the Board of Directors of the
Corporation dated as of June 26, 1997, pursuant to Section 7-108-202 of the
Act.
FOURTH: Pursuant to Section 7-108-202 and 7-107-104 of the Act, the
Corporation hereby amends the first paragraph of Article IV of the
Corporation's Amended and restated Articles of Incorporation, filed with the
Secretary of State on April 22, 1997, be deleting it in its entirety and
replacing it with the following:
ARTICLE IV
The total number of shares of capital stock which the Corporation is
authorized to issue shall be fifty million (50,000,000) shares consisting of
forty million (40,000,000) shares of common stock, par value $0.001 per share
("Common Stock"), and ten million (10,000,000) shares of preferred stock,
par value $0.001 per share ("Preferred Stock").
The relative powers, preferences and rights together with the
qualifications and limitations and restrictions of the Common Stock and the
Preferred Stock are as follows:
1. COMMON STOCK
(a) DIVIDENDS AND DISTRIBUTIONS. Subject to the preferences and
other rights of the Preferred Stock, the holders of Common
Stock shall be entitled to receive their pro rata shares, based
upon the number of shares of Common Stock held by them, of such
dividends or other distributions as may be declared by
<PAGE>
the board of directors from time to time, when and as declared
by the board of directors out of funds legally available therefor.
(b) LIQUIDATION. In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation, voluntary or
involuntary, after payment or provision for payment to the
holders of Preferred Stock of the amounts to which they may be
entitled, the remaining assets of the Corporation available to
stockholders shall be distributed equally per share to the
holders of Common Stock.
(c) VOTING RIGHTS. Each holder of Common Stock shall be entitled to
one vote in respect to each share of Common Stock held of
record on all matters submitted to a vote of stockholders.
Holders of Common Stock shall not be entitled to cumulate their
votes in the election of directors and shall not be entitled to
any preemptive rights to acquire shares of any class or series
of capital stock of the Corporation.
2. UNDESIGNATED PREFERRED STOCK
The board of directors of the Corporation is hereby authorized to
provide, by resolution or resolutions adopted by such board, for the
issuance of Preferred Stock from time to time in one or more classes
and/or series, to establish the number of shares of each such class or
series, and to fix the powers, designations, preferences and relative,
participating, optional or other rights, if any, and the qualifications,
limitations or restrictions thereof, if any, of the shares of each such
class or series, all to the full extent permitted by Article 7 of the
Act, or any successor provisions. Without limiting the generality of the
foregoing, the board of directors is authorized to provide the shares of
a class or series of Preferred Stock:
(1) are entitled to cumulative, partially cumulative or
noncumulative dividends or other distributions payable in cash,
capital stock or indebtedness of the Corporation or other
property, at such times and in such amounts as are set forth in
the board resolutions establishing such class or series or as
are determined in a manner specified in such resolutions;
(2) are entitled to a preference with respect to payment of
dividends over one or more other classes and/or series of
capital stock of the Corporation;
<PAGE>
(3) are entitled to a preference with respect to any distribution
of assets of the Corporation upon its liquidation, dissolution
or winding up over one or more other classes and/or series of
capital stock of the Corporation in such amount as is set forth
in the board resolutions establishing such class or series or as
is determined in a manner specified in such resolutions;
(4) are redeemable or exchangeable at the option of the Corporation
and/or on a mandatory basis for cash, capital stock or
indebtedness of the Corporation or other property, at such
times or upon the occurrence of such events, and at such
prices, as are set forth in the board resolutions establishing
such class or series or as are determined in a manner specified
in such resolutions;
(5) are entitled to the benefits of such sinking fund, if any, as
is required to be established by the corporation for the
redemption and/or purchase of such shares by the board
resolutions establishing such class or series;
(6) are convertible at the option of the holders thereof into
shares of any other class or series of capital stock of the
Corporation, at such times or upon the occurrence of such
events, and upon such terms, as are set forth in the board
resolutions establishing such class or series or as are
determined in an manner specified in such resolutions;
(7) are exchangeable at the option of the holders thereof for cash,
capital stock or indebtedness of the Corporation or other
property, at such times or upon the occurrence of such events,
and at such prices, as are set forth in the board resolutions
establishing such class or series or as are determined in a
manner specified in such resolutions;
(8) are entitled to such voting rights, if any, as are specified in
the board resolutions establishing such class or series
(including, without limiting the generality of the foregoing,
the right to elect one or more directors voting alone as a
single class or series or together with one or more other
classes and/or series of Preferred Stock, if so specified by
such board resolutions) at all times or upon the occurrence of
specified events; and
<PAGE>
(9) are subject to restrictions on the issuance of additional
shares of Preferred Stock of such class or series of any other
class or series, or on the reissuance of shares of Preferred
Stock of such class or series or of any other class or series.
Without limiting the generality of the foregoing authorizations, any of
the voting powers, designations, preferences, rights and qualifications,
limitations or restrictions of a class or series of Preferred Stock may be
made dependent upon facts ascertainable outside the board resolutions
establishing such class or series, all to the full extent permitted by the
Act. Unless otherwise specified in the board resolutions establishing a class
or series of Preferred Stock, holders of a class or series of Preferred Stock
shall not be entitled to cumulate their votes in any election of directors in
which they are entitled to vote and shall not be entitled to any preemptive
rights to acquire shares of any class or series of capital stock of the
Corporation."
FIFTH: The amendments of the Articles of Incorporation of the
Corporation set forth in these Articles of Amendment have been duly adopted
by the Corporation in accordance with the provisions of Sections 7-108-202
and 7-107-104 of the Act.
SIXTH: These Articles of Amendment do not exchange, reclassify or cancel
any issued shares of capital stock of the Corporation.
SEVENTH: These Articles of Amendment do not change the amount of stated
capital of the Corporation.
IN WITNESS WHEREOF, SportsStar Marketing, Inc. has caused these Articles of
Amendment to be executed in its name by William H. Kroske, its resident, this
26th day of June, 1997, and its President acknowledges that these Articles of
Amendment are the act and deed of SportsStar Marketing, Inc. and, under
penalties of perjury, that the matters and facts set forth herein with
respect to authorization and approval are true in all material respects.
SPORTSSTAR MARKETING, INC.
By /s/ William H. Kroske
--------------------------------
Name: William H. Kroske
Title: President
<PAGE>
BYLAWS
OF
SPORTSSTAR MARKETING, INC.
ARTICLE I
PRINCIPAL OFFICE AND CORPORATE SEAL
SECTION 1.1 - OFFICES. The initial principal office and place of
business of SPORTSSTAR MARKETING, INC. (the "Corporation") shall be 5445 DTC
Parkway, Suite 735, Englewood, CO 80111. Other offices and places of business
either within or outside Colorado may be established from time to time by
resolution of the Board of Directors or as the business of the Corporation may
require. The registered office of the Corporation required by the Colorado
Business Corporation Act to be maintained in Colorado may be changed from time
to time by the Board of Directors.
SECTION 1.2 - SEAL. The Corporation shall no corporate seal.
ARTICLE II
SHARES AND TRANSFER THEREOF
SECTION 2.1 - REGULATION. The Board of Directors may make such rules
and regulations consistent with Colorado law as it may deem appropriate
concerning the issuance, transfer and registration of shares of the Corporation.
SECTION 2.2 - SHARES WITHOUT CERTIFICATES. Unless otherwise provided by
the Articles of Incorporation of the Corporation, the Board of Directors may
authorize the issuance of any classes or series of the Corporation capital stock
without certificates. Such authorization shall not affect shares already
represented by certificates until they are surrendered to the Corporation.
Within a reasonable time following the issuance or transfer to a Shareholder of
shares without certificates, the Corporation shall send to the Shareholder a
complete written statement of the information required on certificates by the
Colorado Business Corporation Act.
SECTION 2.3 - CERTIFICATES. If shares of the Corporation are
represented by certificates, such shares shall be represented by consecutively
numbered certificates signed by the President or a Vice President and the
Secretary or an Assistant
<PAGE>
Secretary of the Corporation, and may be, but are not required to be, sealed
with the Seal of the Corporation or a facsimile thereof. The signatures of
the President or Vice President and the Secretary or Assistant Secretary,
upon a certificate, may be facsimiles if the certificate is countersigned by
a transfer agent, or registered by a registrar, other than the Corporation
itself or an employee of the Corporation. In case any officer who has signed
a certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the Corporation with the same effect as if he
were such officer at the date of its issue. Every certificate representing
shares issued by the Corporation which is authorized to issue shares of more
than one class or more than one series of any class shall set forth on the
face or back of the certificate or shall state that the Corporation will
furnish to any Shareholder upon request and without charge a full statement
of the designations, preferences, limitations and relative rights of the
shares of each class to be issued and if the Corporation is authorized to
issue any preferred or special class in series, the variations in the
relative rights and preferences between the shares of each such series, so
far as the same have been fixed and determined, and the authority of the
Board of Directors to fix and determine the relative rights and preferences
of subsequent series.
Each certificate representing shares shall state the following upon the
face thereof: the name of the state of the Corporation's organization; the name
of the person to whom issued; the number and class of shares and the designation
of the series, if any, which such certificate represents; the par value of each
share, if any, represented by such certificate or a statement that the shares
are without par value. Certificates of stock shall be in such form consistent
with law as shall be prescribed by the Board of Directors. No certificate shall
be issued until the shares represented thereby are fully paid.
SECTION 2.4 - RECORD. A record shall be kept of the name of each person
or other entity holding the capital stock of the Corporation, including the
number of shares issued to each Shareholder, the number of shares represented by
each certificate, if any, the date thereof and, in the case of cancellation, the
date of cancellation. The person or other entity in whose name shares of stock
stand on the books of the Corporation shall be deemed the owner thereof, and
thus a holder of record of such shares of stock, for all purposes related to the
Corporation.
SECTION 2.5 - CONSIDERATION FOR SHARES. Shares shall be issued for such
consideration, expressed in dollars (but not less than the par value, if any,
thereof) as shall be fixed from time to time by the Board of Directors. That
part of the surplus of the Corporation which is transferred to stated capital
upon the issuance of shares as a share dividend shall be deemed the
consideration for the issuance of such dividend shares. Such consideration may
consist, in whole or in part, of money, other property, tangible or intangible,
or in labor or services actually performed for
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<PAGE>
the Corporation, but neither promissory notes nor future services shall
constitute payment or part payment for shares.
SECTION 2.6 - CANCELLATION OF CERTIFICATES. No new certificates
evidencing shares shall be issued unless and until the old certificate or
certificates, in lieu of which the new certificate is issued, shall be
surrendered for cancellation, except as modified in Section 2.7 of this Article
II.
SECTION 2.7 - LOST CERTIFICATES. In case of loss or destruction of any
certificate of shares, another certificate may be issued in its place upon
satisfactory proof of such loss or destruction and, at the discretion of the
Corporation, upon giving to the Corporation a satisfactory bond of indemnity
issued by a corporate surety in an amount and for a period satisfactory to the
Board of Directors.
SECTION 2.8 - CLOSING OF TRANSFER BOOKS - RECORD DATE. For the purpose
of determining Shareholders entitled to notice of or to vote at any meeting of
Shareholders, or any adjournment thereof, or entitled to receive payment of any
dividend, or in order to make a determination of Shareholders for any other
proper purpose, the Board of Directors may provide that the stock transfer books
shall be closed for a stated period, but not to exceed in any case seventy (70)
days (or such shorter period as may be required by law). If the stock transfer
books shall be closed for the purpose of determining Shareholders entitled to
notice of, or to vote at a meeting of Shareholders, such books shall be closed
for at least ten (10) days immediately preceding such meeting. In lieu of
closing the stock transfer books, the Board of Directors may fix in advance a
date as the record date for any such determination of Shareholders, such date in
any case to be not more than seventy (70) days (or such shorter period as may be
required by law) prior to the date on which the particular action requiring such
determination of Shareholders is to be taken. If the Board of Directors does not
order the stock transfer books closed, or fix in advance a record date, as above
provided, then the record date for the determination of Shareholders entitled to
notice of, or to vote at any meeting of Shareholders, or any adjournment
thereof, or entitled to receive payment of any dividend or for the determination
of Shareholders for any proper purpose shall be thirty (30) days prior to the
date on which the particular action requiring such determination of Shareholders
is to be taken.
SECTION 2.9 - TRANSFER OF SHARES. If shares are represented by
certificates, transfers of such shares shall be deemed to occur upon surrender
to the Corporation or to a transfer agent of the Corporation of a certificate of
stock duly endorsed or accompanied by proper evidence of succession, assignment
or authority to transfer, and such documentary stamps as may be required by law,
and the issuance by the Corporation of a new certificate to the person entitled
thereto. Surrendered certificates shall be canceled. If shares are not
represented by certificates, transfers of such shares shall be deemed to occur
upon presentment to the Corporation or to a
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<PAGE>
transfer agent of the Corporation of proper evidence of succession, assignment
or authority to transfer, and the notation in the stock books of the Corporation
that such transfer has been made. Every such transfer of stock (whether of
certificated or uncertificated shares) shall be entered on the stock book of the
Corporation which shall be kept at its principal office or by its registrar duly
appointed.
The Corporation shall be entitled to treat the holder of record of any
share of stock as the holder in fact thereof, and accordingly shall not be bound
to recognize any equitable or other claim to or interest in such share on the
part of any other person whether or not it shall be express or other notice
thereof, except as may be required by the laws of Colorado.
SECTION 2.10 - TRANSFER AGENTS. REGISTRARS AND PAYING AGENTS. The Board
may, at its discretion, appoint one or more transfer agents, registrars and
agents for making payment upon any class of stock, bond, debenture or other
security of the Corporation. Such agents and registrars may be located either
within or outside Colorado. They shall have such rights and duties and shall be
entitled to such compensation as may be agreed.
ARTICLE III
SHAREHOLDERS AND MEETINGS THEREOF
SECTION 3.1 - SHAREHOLDERS OF RECORD. Only Shareholders of record on
the books of the Corporation shall be entitled to be treated by the Corporation
as holders in fact of the shares standing in their respective names, and the
Corporation shall not be bound to recognize any equitable or other claim to, or
interest in, any shares on the part of any other person, firm or corporation,
whether or not it shall have express or other notice thereof, except as
expressly provided by the laws of Colorado.
SECTION 3.2 - PLACE OF MEETING. Meetings of Shareholders shall be held
at the principal office of the Corporation or at such other place, either within
or without Colorado, as shall be determined by the Board of Directors.
SECTION 3.3 - ANNUAL MEETING. The annual meeting of Shareholders of the
Corporation for the election of directors, and for the transaction of such other
business as may properly come before the meeting, shall be held as determined by
resolution of the Board of Directors. If a quorum be not present, the meeting
may be adjourned from time to time, but no single adjournment shall exceed sixty
(60) days. The first annual meeting of Shareholders shall be held on such date
as the Board of Directors shall determine. If the election of directors shall
not be held at the annual meeting of Shareholders, or at any adjournment
thereof, the Board of Directors
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<PAGE>
shall cause the election to beheld at a special meeting of Shareholders as soon
thereafter as convenient.
SECTION 3.4 - SPECIAL MEETING. Special meetings of Shareholders for any
purpose unless otherwise prescribed by statute may be called by the President
(or in his absence by a Vice President), the Board of Directors, or the holders
of not less than ten percent (10%) of all shares entitled to vote on the subject
matter for which the meeting is called. Any holder or holders of not less than
ten percent (10%) of all of the outstanding shares of the Corporation who desire
to call a special meeting pursuant to this Article III, Section 3.4 shall notify
the President in writing that a special meeting of the Shareholders shall be
called. Within thirty (30) days after notice to the President, the President
shall set the date, time and location of the Shareholders meeting.
SECTION 3.5 - NOTICE OF MEETING. Written notice stating the place, day
and hour of the Shareholders' meeting, and in case of a special meeting of
Shareholders, the purpose or purposes for which the meeting is called, shall be
delivered not less than ten (10) days nor more than sixty (60) days before the
date of the meeting by or at the direction of the President, the Secretary, the
Board of Directors, or the officer or persons calling the meeting, to each
shareholder of record entitled to vote at such meeting, except that if the
authorized shares are to be increased, at least thirty (30) days' notice shall
be given. Such notice shall be given (a) by deposit in the United States mail,
properly addressed to each Shareholder's address shown in the Corporation's
current record of Shareholders, first class postage prepaid, and, if so given,
shall be effective when mailed, or (b) by telegraph, teletype, electronically
transmitted facsimile, electronic mail, private carrier or personal delivery to
the Shareholder, and, if so given, shall be effective when actually received by
the Shareholder. Failure to deliver such notice or obtain a waiver thereof shall
not cause the meeting to be lost, but it shall be adjourned by the Shareholders
present for a period not to exceed sixty (60) days until any deficiency to
notice or waiver shall be supplied.
SECTION 3.6 - ADJOURNMENT. When a meeting is for any reason adjourned
to another time, notice will not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting any business may be transacted which might have
been transacted at the original meeting.
SECTION 3.7 - ORGANIZATION. The President or any Vice President shall
call meetings of Shareholders to order and act as chairman of such meetings. In
the absence of said officers, any Shareholder entitled to vote at that meeting,
or any proxy of any such Shareholder, may call the meeting to order and a
chairman shall be elected by a majority of the Shareholders entitled to vote at
that meeting. In the
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<PAGE>
absence of the Secretary or any Assistant Secretary of the Corporation, any
person appointed by the chairman shall act as Secretary of such meeting.
SECTION 3.8 - AGENDA AND PROCEDURE. The Board of Directors shall have
the responsibility for establishing an agenda for each meeting of Shareholders,
subject to the rights of Shareholders to raise matters for consideration which
may otherwise properly be brought before the meeting although not included
within the agenda. The chairman shall be charged with the orderly conduct of all
meetings of Shareholders; provided, however, that in the event of any difference
in opinion with respect to the proper course of action which cannot be resolved
by reference to statute, or to the Articles of Incorporation, or these Bylaws,
Robert's Rules of Order (as last revised) shall govern the disposition of the
matter.
SECTION 3.9 - VOTING RECORDS. The officer or agent having charge of the
stock transfer books for shares of this Corporation shall make, at least ten
(10) days before each meeting of Shareholders, a complete record of the
Shareholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each, which record, for a period of ten (10) days prior to such meeting,
shall be kept on file at the principal office of the Corporation, whether within
or without Colorado, and shall be subject to inspection by any Shareholder for
any purpose germane to the meeting at any time during the whole time of the
meeting. The original stock transfer books shall be prima facie evidence as to
who are the Shareholders entitled to examine such record or transfer books or to
vote at any meeting of Shareholders.
SECTION 3.10 - QUORUM. A quorum at any meeting of Shareholders shall
consist of a majority of the shares of the Corporation entitled to vote thereat
represented in person or by proxy. If a quorum is present, the affirmative vote
of a majority of the shares represented at the meeting and entitled to vote on
the subject matter shall be the act of the Shareholders. If fewer than a
majority of the outstanding shares are represented at a meeting, a majority of
the shares so represented may adjourn the meeting without further notice for a
period not to exceed sixty (60) days at any one adjournment. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. The Shareholders present at a duly organized meeting may continue to
transact business until adjourned, notwithstanding the withdrawal of
Shareholders so that less than a quorum remains.
SECTION 3.11 - PROXIES. A Shareholder may vote either in person or by
proxy executed in writing by the Shareholder or by his duly authorized attorney
in fact. No proxy shall be valid after eleven (11) months from the date of its
execution, unless otherwise provided in the proxy.
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<PAGE>
SECTION 3.12 - ACTION WITHOUT A MEETING. Unless the Articles of
Incorporation or these Bylaws specifically provide otherwise, action required or
permitted to be taken at a meeting of Shareholders may be taken without a
meeting if the action is evidenced by one or more written consents describing
the action taken, signed by each Shareholder entitled to vote and delivered to
the Secretary of the Corporation for inclusion in the minutes or for filing with
the corporate records. Action taken under this section is effective when all
Shareholders entitled to vote have signed the consent, unless the consent
specifies a different effective date. The record date for determining
Shareholders entitled to take action without a meeting shall be the date the
first Shareholder signs the consent.
SECTION 3.13 - VOTING OF SHARES. Each outstanding share shall have such
voting rights as are set forth with respect to such shares in the Corporation's
Articles of Incorporation. If the Articles of Incorporation provide for more or
less than one vote for any share on any matter, every reference in the Colorado
Business Corporation Act to a majority or other proportion or number of shares
shall refer to such a majority or other proportion or number of votes entitled
to be cast with respect to such matter. In the election of directors, each
record holder of stock entitled to vote at such election shall have the right to
vote in person or by proxy the number of shares owned by him, for as many
persons as there are directors to be elected, and for whose election he has the
right to vote unless the Articles of Incorporation otherwise provide. Cumulative
voting shall not be allowed.
ARTICLE IV
DIRECTORS: POWERS AND MEETINGS
SECTION 4.1 - GENERAL POWERS. The business and affairs of the
Corporation shall be managed by its Board of Directors, except as otherwise
provided in the Colorado Business Corporation Act or the Articles of
Incorporation.
SECTION 4.2 - PERFORMANCE OF DUTIES. A director of the Corporation
shall perform his duties as a director, including his duties as a member of any
committee of the Board upon which he may serve, in good faith, in a manner he
reasonably believes to be in the best interests of the Corporation, and with
such care as an ordinarily prudent person in a like position would use under
similar circumstances. In performing his duties, a director shall be entitled to
rely on information, opinions, reports, or statements, including financial
statements and other financial data, in each case prepared or presented by
persons and groups listed in paragraphs (a), (b), and (c) of this Section 4.2;
but he shall not be considered to be acting in good faith if he has knowledge
concerning the matter in question that would cause such reliance to be
unwarranted. A person who so performs his duties shall not have any liability by
reason of being or having been a director of the Corporation. Those
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persons and groups upon whose information, opinions, reports, and statements a
director is entitled to rely are:
(a) One or more officers or employees of the Corporation whom
the director reasonably believes to be reliable and competent in the
matters presented;
(b) Counsel, public accountants, or other persons as to
matters which the director reasonably believes, to be within such
person's professional or expert competence; or
(c) A committee of the Board upon which he does not serve,
duly designated in accordance with the provisions of the Articles of
Incorporation or the Bylaws, as to matters within its designated
authority, which committee the director reasonably believes to merit
confidence.
SECTION 4.3 - NUMBER; TENURE; QUALIFICATION; CHAIRMAN. The number of
directors of the Corporation shall be not less than two (2), who need not be
Shareholders of the Corporation or residents of the State of Colorado and who
shall be elected at the annual meeting of Shareholders or some adjournment
thereof, except that there need be only as many directors as there are
Shareholders in the event that the outstanding shares are held of record by
fewer than two (2) persons. Directors shall hold office until the next
succeeding annual meeting of Shareholders or until their successors shall have
been elected and shall qualify. No provision of this section shall be
restrictive upon the right of the Board of Directors to fill vacancies or upon
the right of Shareholders to remove Directors as is hereinafter provided. The
Board of Directors may designate one director as the Chairman of the Board of
Directors.
SECTION 4.4 - RESIGNATION. Any Director of the Corporation may resign
at any time by giving written notice of his resignation to the Board of
Directors, the President, any Vice President or the Secretary of the
Corporation. Such resignation shall take effect at the date of receipt of such
notice or at any later time specified therein and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective. When one or more directors shall resign from the Board, effective at
a future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective.
SECTION 4.5 - ANNUAL MEETING. The annual meeting of the Board of
Directors shall be held at the same place as, and immediately after, the annual
meeting of Shareholders, and no notice shall be required in connection
therewith.
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The annual meeting of the Board of Directors shall be for the purpose of
electing officers and the transaction of such other business as may come before
the meeting.
SECTION 4.6 - SPECIAL MEETING. Special meetings of the Board of
Directors may be called at any time by the President (or in his absence by a
Vice President), or by any director, and may be held within or outside the State
of Colorado at such time and place as the notice or waiver thereof may specify.
Notice of such meetings shall be mailed or telegraphed to the last known address
of each director at least five (5) days, or shall be given to a director in
person or by telephone at least forty-eight (48) hours prior to the date or time
fixed for the meeting. Special meetings of the Board of Directors may be held at
any time that all directors are present in person, and presence of any director
at a meeting shall constitute waiver of notice of such meeting, except as
otherwise provided by law. Unless specifically required by law, the Articles of
Incorporation or these Bylaws, neither the business to be transacted at, nor the
purpose of, any meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
SECTION 4.7 - MEETINGS BY TELEPHONE. Members of the Board of Directors
or any committee designated by the Board of Directors may participate in a
meeting of the Board or committee by means of telephone conference or similar
communications equipment by which all persons participating in the meeting can
hear each other at the same time. Such participation shall constitute presence
in person at the meeting.
SECTION 4.8 - QUORUM. A quorum at all meetings of the Board of
Directors shall consist of a majority of the number of directors then holding
office, but a smaller number may adjourn from time to time without further
notice, until a quorum be secured.
SECTION 4.9 - MANNER OF ACTING. The affirmative vote of all directors
is necessary to constitute an act of the Board of Directors. Any amendment to
the Bylaws to change the foregoing unanimous voting requirement shall require a
unanimous vote of the Board of Directors.
SECTION 4.10 - PRESUMPTION OF ASSENT. A director of the Corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action taken
unless his dissent is entered in the minutes of the meeting or unless he files
his written dissent to such action with the person acting as the Secretary of
the meeting before the adjournment thereof or forwards such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
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SECTION 4.11 - ACTION BY WRITTEN CONSENT. Unless the Articles of
Incorporation or these By-laws specifically provide otherwise, any action
required or permitted to be taken at a meeting of the Board of Directors or any
committee designated by such board may be taken without a meeting if the action
is evidenced by one or more written consents describing the action taken, signed
by each director or committee member, and delivered to the Secretary for
inclusion in the minutes or for filing with the corporate records. Action taken
under this section is effective when all directors or committee members have
signed the consent, unless the consent specifies a different effective date.
Such consents shall have the same force and effect as a unanimous vote of the
directors or committee members and may be stated as such in any document.
SECTION 4.12 - VACANCIES. Any vacancy occurring in the Board of
Directors may be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors. A director
elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office, and shall hold such office until his successor is fully
elected and shall qualify. Any directorship to be filled by reason of an
increase in the number of directors shall be filled by the affirmative vote of a
majority of the directors then in office or by an election at an annual meeting,
or at a special meeting of Shareholders called for that purpose. A director
chosen to fill a position resulting from an increase in the number of Directors
shall hold office until the next annual meeting of Shareholders and until his
successor shall have been elected and shall qualify.
SECTION 4.13 - COMPENSATION. Directors may receive such fees as may be
established by appropriate resolution of the Board of Directors for attendance
at meetings of the Board, and in addition thereto, shall receive reasonable
travel expenses, if any is required, for attendance at such meetings.
SECTION 4.14 - COMMITTEES. The Board of Directors may by resolution
designate one or more directors to constitute an executive committee or a
specialized committee which shall have and may exercise all authority in the
management of the Corporation as the Board of Directors to the extent provided
in such resolution; but no such committee shall have the authority of the Board
of Directors in reference to amending the Articles of Incorporation, adopting a
plan of merger or consolidation, recommending to the Shareholders the sale,
lease, exchange, or other disposition of all or substantially all of the
property and assets of the Corporation otherwise than in the usual and regular
course of its business, recommending to the Shareholders a voluntary dissolution
of the Corporation or a revocation thereof, or amending the Bylaws of the
Corporation. The designation of such committees and the delegation thereto of
authority shall not operate to relieve the Board of Directors, or any member
thereof, of any responsibility imposed by law.
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SECTION 4.15 - REMOVAL. The Shareholders may, at a meeting called for
the express purpose of removing directors, by a majority vote of the shares
entitled to vote at an election of directors, remove the entire Board of
Directors or any lesser number, with or without cause.
ARTICLE V
OFFICERS
SECTION 5.1 - GENERAL. The elective officers of the Corporation shall
be a President, a Secretary and a Treasurer, who shall be elected annually by
the Board of Directors at its first meeting after the annual meeting of
Shareholders. Unless removed in accordance with the procedures established by
law and these Bylaws, the said officers shall serve until the next succeeding
annual meeting of the Board of Directors and until their respective successors
are elected and shall qualify.
SECTION 5.2 - ELECTION AND TERM OF OFFICE. The Board may elect or
appoint such other officers and agents as it may deem advisable, who shall hold
office during the pleasure of the Board, and shall be paid such compensation as
may be directed by the Board.
SECTION 5.3 - POWERS AND DUTIES. The officers of the Corporation shall
respectively exercise and perform the respective powers, duties and functions as
are stated below, and as may be assigned to them by the Board of Directors, not
inconsistent with these Bylaws.
(a) The President shall, subject to the control of the
Board of Directors, have general supervision, direction and control of
the business and officers of the Corporation. He shall preside at all
meetings of the Shareholders and of the Board of Directors. The
President or a Vice President, unless some other person is specifically
authorized by the Board of Directors, shall sign all stock
certificates, bonds, deeds, mortgages, leases and contracts of the
Corporation. The President shall perform all the duties commonly
incident to his office and such other duties as the Board of Directors
shall designate.
(b) In the absence or disability of the President, the
Vice President or Vice Presidents, in order of their rank as fixed by
the Board of Directors, and if not ranked, the Vice Presidents in the
order designated by the Board of Directors shall perform all the duties
of the President, and when so acting, shall have all the powers of, and
be subject to all the restrictions on the President. Each Vice
President shall have such other powers and perform such other duties as
may from time to time be assigned to him by the President.
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(c) The Secretary shall keep accurate minutes of all
meetings of the Shareholders and the Board of Directors. He shall keep,
or cause to be kept, a register of the Shareholders of the Corporation
and shall be responsible for the giving of notice of meetings of the
Shareholders and the Board of Directors. The Secretary shall be
custodian of the records and of the seal of the Corporation and shall
attest the affixing of the seal of the Corporation when so authorized.
The Secretary shall perform all duties commonly incident to his office
and such other duties as may from time to time be assigned to him by
the President.
(d) An Assistant Secretary may, at the request of the
Secretary, or in the absence or disability of the Secretary, perform
all the duties of the Secretary. He shall perform such other duties as
may assigned to him by the President or by the Secretary.
(e) The Treasurer, subject to the order of the Board of
Directors, shall have the care and custody of the money, funds,
valuable papers and documents of the Corporation. He shall keep
accurate books of accounts of the Corporation's transactions, which
shall be the property of the Corporation, and shall render financial
reports and statements of condition of the Corporation when so
requested by the Board of Directors or President. The Treasurer shall
perform all duties commonly incident to his office and such other
duties as may from time to time be assigned to him by the President.
(f) An Assistant Treasurer may, at the request of the
Treasurer, or in the absence or disability of the Treasurer, perform
all of the duties of the Treasurer. He shall perform such other duties
as may be assigned to him by the President or the Treasurer.
SECTION 5.4 - SALARIES. All officers of the Corporation may receive
salaries or other compensation if so ordered and fixed by the Board of Directors
or by a committee created for such purpose by the Board of Directors. The Board,
or a committee thereof, shall have the authority to fix salaries in advance for
stated periods or render the same retroactive as the Board, or a committee
thereof, may deem advisable. Election or appointment of an officer or agent
shall not, of itself, create contract rights to compensation for services
performed as such officer.
SECTION 5.5 - INABILITY TO ACT. In the event of absence or inability of
any officer to act, the Board of Directors may delegate the power or duties of
such officer to any other officer, director or person whom it may select.
SECTION 5.6 - REMOVAL AND RESIGNATION. Any officer or agent of the
Corporation may be removed by the Board of Directors whenever, in its judgment,
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the best interest of the Corporation will be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Any officer or agent appointed by the President or other appointing
officer also may be removed by the person appointing such officer. Any officer
may resign at any time by giving written notice of resignation to any director
(or to any director other than the resigning officer if the officer also is a
director), to the President, to the Secretary or to the officer who appointed
the resigning officer. Acceptance of such resignation shall not be necessary to
make it effective, unless the notice so provides.
ARTICLE VI
FINANCE; CONTRACTS; FISCAL YEAR
SECTION 6.1 - RESERVE FUND. The Board of Directors, in its uncontrolled
discretion, may set aside from time to time, out of the net profits or earned
surplus of the Corporation, such sum or sums as it deems expedient as a reserve
fund to meet contingencies, for equalizing dividends, for maintaining any
property of the Corporation, and for any other purposes.
SECTION 6.2 - LOANS. The Corporation may loan money to, guarantee the
obligations of and otherwise assist directors, officers and employees of the
Corporation, or directors of another corporation of which the Corporation owns a
majority of the voting stock, only upon compliance with the requirements of the
Colorado Business Corporation Act.
No loans shall be contracted on behalf of the Corporation and no
evidence of indebtedness shall be issued in its name unless authorized by
resolution of the Board of Directors. Such activity may be general or confirmed
to specific instances.
SECTION 6.3 - CONTRACTS. The Board of Directors may authorize any
officer or officers, agent or agents to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the Corporation. Such
authority may be general or confined to specific instances.
SECTION 6.4 - CHECKS AND DEPOSITS. The monies of the Corporation shall
be deposited in the name of the Corporation in such bank or banks or trust
companies, as the Board of Directors shall designate, and may be drawn out only
on checks signed in the name of the Corporation by such person or persons as the
Board of Directors by appropriate resolution may direct. Notes and commercial
paper, when authorized by the Board, shall be signed in the name of the
Corporation by such officer or officers or agent or agents as shall thereto be
authorized from time to time.
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SECTION 6.5 - FISCAL YEAR. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
ARTICLE VII
BANKRUPTCY/INSOLVENCY
The Corporation shall not, without the affirmative vote of the whole
Board of Directors of the Corporation, institute any proceedings to adjudicate
the Corporation a bankrupt or insolvent, consent to the institution of
bankruptcy or insolvency proceedings against the Corporation, file a petition
seeking or consenting to reorganization or relief under any applicable federal
or state law relating to bankruptcy, consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of the
Corporation or a substantial part of its property or admit its inability to pay
its debts generally as they become due or authorize any of the foregoing to be
done or taken on behalf of the Corporation.
ARTICLE VIII
WAIVER OF NOTICE
With any notices required by law or under these Bylaws to be given to
any Shareholder or director of the Corporation, a waiver thereof in writing
signed by the person entitled to such notice, whether before, at, or after the
time stated therein shall be the equivalent to the giving of such notice.
ARTICLE IX
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
SECTION 9.1. To the fullest extent permitted by the Colorado Business
Corporation Act, as the same exists or may hereafter be amended, the Corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative and whether formal or
informal (other than an action by or in the right of the Corporation) by reason
of the fact that he or she is or was director, officer, employee, fiduciary or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee, fiduciary or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding, if he or she conducted himself or herself in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of the Corporation, and, with
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respect to any criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the Corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe that his or her conduct was unlawful.
SECTION 9.2. The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a director,
officer, employee, fiduciary or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection with the defense or settlement
of such action or suit if he or she acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
such court shall deem proper.
SECTION 9.3. To the extent that a director, officer, employee,
fiduciary or agent of a corporation has been wholly successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in paragraphs
1 and 2 of this Article, or in defense of any claim, issue or matter therein, he
or she shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection therewith.
SECTION 9.4. Any indemnification under paragraphs 1 and 2 of this
section (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee, fiduciary or agent is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in
paragraphs 1 and 2. Such determination shall be made (1) by the Board of
Directors by a majority vote of a quorum consisting of Directors who were not
parties to such action, suit or proceeding, or (2) if such quorum is not
obtainable, or, even if obtainable a quorum of disinterested Directors so
directs, by independent legal counsel in a written opinion, or (3) by the
shareholders of the Corporation.
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SECTION 9.5. Expenses (including attorneys' fees) incurred in defending
a civil or criminal action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding as
authorized in the manner provided in paragraph 4 of this Article upon receipt of
an undertaking by or on behalf of the director, officer, employee, fiduciary or
agent to repay such amount unless it shall ultimately be determined that he or
she is entitled to be indemnified by the Corporation as authorized in this
Article.
SECTION 9.6. The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was director, officer, employee,
fiduciary or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise against any liability asserted against him or her and incurred by him
or her in any such capacity or arising out of his or her status as such, whether
or not the Corporation would have the power to indemnify him or her against such
liability under the provisions of this section.
SECTION 9.7. In addition to the foregoing, the Corporation shall have
the power to indemnify current or former directors, officer, employees and
agents to the fullest extent provided by law.
ARTICLE X
AMENDMENTS
These Bylaws may be altered, amended or repealed at the annual meeting
of the Board of Directors or at any special meeting of the Board called for that
purpose.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 - EMERGENCY BYLAWS. Subject to repeal or change by action
of the Shareholders, the Board of Directors may adopt emergency Bylaws in
accordance with and pursuant to the provisions of the Colorado Business
Corporation Act (as the same exists or may hereafter be amended).
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AGREEMENT
This Agreement is made effective the 20th day of June 1997 by and
between SportsStar Marketing, Inc., a Colorado corporation, whose address is
5445 DTC Parkway, Suite 735, Englewood, CO 80111 ("SportsStar"), and National
College Recruiting Association, Inc. ("NCRA") 5445 DTC Parkway, Suite 735,
Englewood, CO 80111.
W I T N E S E T H:
WHEREAS, NCRA has developed products and services in the sports
industry which it currently markets on its own and through sales of franchises
("Franchises") and publication of a sports magazine entitled BLUE CHIP
Illustrated, which includes a 900 sports line; and
WHEREAS, NCRA wishes to grant SportsStar the exclusive right to all the
assets and rights for doing business of NCRA on the terms herein in North
America;
WHEREAS, SportsStar desires to sell and service franchises and publish
BLUE CHIP Illustrated; and
WHEREAS, SportsStar shall at all times use its best efforts to promote,
develop and increase the sale and demand for Franchises and franchise services
in all markets; and
WHEREAS, for terms noted herein, NCRA grants SportsStar the right to
use any and all of NCRA's trademarks and trade names, profiles, publications
(including Blue Chip Magazine), and other promotional materials.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. APPOINTMENT. NCRA hereby appoints SportsStar as its exclusive
agent to develop the NCRA programs, and SportsStar hereby accepts said
appointment. SportsStar understands it has the responsibility to
service all existing NCRA Franchisees. However, if an existing
franchise chooses not to participate in the current program, chooses to
dispute the terms of any new agreement offered, or litigate conditions
from the existing agreement, NCRA will continue to be responsible for
this franchise. During such circumstance, SportsStar will continue to
provide services to the franchisee for which they will receive 10% of
the gross income generated from said franchisee during the period in
question.
2. TERM. The term of this Agreement shall commence on the date
stated above and shall be for a five year period, with unlimited five
year renewals under the same terms and conditions, unless or until
earlier terminated in accordance with the provisions of this Agreement.
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3. ROYALTY. SportsStar shall receive all revenues from the sale
of NCRA franchises, franchise royalties and revenues from the
publication of BLUE CHIP Illustrated, i.e., any revenue generated from
NCRA business, and SHALL PAY NCRA $150,000 AS AN INITIAL PAYMENT FOR
SAID LICENSE PLUS 2.5% OF THE GROSS SPORTSSTAR REVENUE FROM NCRA, BLUE
CHIP ILLUSTRATED AND THE 900 LINES OPERATIONS. Such payments are due 15
days after the end of each calendar quarter based on reported revenue
for said quarter.
4. TERMINATION. NCRA shall have right to terminate or renegotiate
the terms of this agreement if the SportsStar revenue forecasts are not
substantially met. For the purpose of this Agreement the "substantially
met" test would be 70% of forecasted revenues from the Business Plan
attached as Exhibit A, and included in the 504 Business Plan.
5. SALES AFTER TERMINATION. Upon termination of this Agreement,
provisions hereof relating to commissions shall remain applicable to
any sales of Franchises or Sponsorships made by SportsStar prior to the
date of termination.
6. INDEMNITY. Each party hereby agrees to indemnify, defend and
save harmless the other party from and against any and all liabilities,
demands, claims, actions or causes of action, assessments, losses,
costs, damages or expenses whatsoever, including attorney's fees,
sustained or incurred by either party resulting from or arising out of
that party's negligence or willful misconduct or breach of its
representations or obligations to be performed pursuant to this
Agreement, except insofar as such losses are caused by the other
party's negligence or willful disregard of its obligations hereunder,
or insofar as such losses are limited by the terms of this Agreement.
NCRA agrees to indemnify SportsStar for any NCRA liabilities occurring
prior to the signing of this agreement.
7. TRADEMARKS AND TRADE NAMES. NCRA warrants and represents that
NCRA owns, controls or licenses the rights for the Franchises, and of
the related trademarks, and trade names, and that for solicitation of
Franchise Offers by SportsStar will be free from claims of infringement
of rights of third parties.
8. NOTICES. All notices to NCRA or SportsStar pursuant to this
Agreement shall be in writing and may be given by personal delivery,
telex, facsimile transmission, or by mailing the same, registered or
certified mail, return receipt requested. Notices shall be deemed to
have been received and given as of the seventh day following the date
of posting in the case of registered or certified mail, and as of the
date of transmission in the case of telexes or facsimile transmissions.
Notices pursuant to this Agreement shall be transmitted to the
addresses set forth above, or if by facsimile, to NCRA at 303-804-0100
or to SportsStar at 303-804-0100. Either party may change its address
upon giving reasonable notice.
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9. ASSIGNMENT. Any purported assignment or transfer of this
Agreement, in whole or in part, by either party without the prior
written consent of the other party, shall be void and of no effect.
10. MISCELLANEOUS.
a. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective
successors and assigns.
b. The terms and conditions of this Agreement shall be
governed by and construed in accordance with the laws of the
State of Colorado.
c. The failure of either party to require performance of
any term or condition of this Agreement or the waiver by
either party of any breach of this Agreement shall not prevent
the subsequent enforcement of such term or condition, nor be
deemed a waiver of any subsequent breach or of any rights it
may have.
d. This Agreement contains the entire agreement of the
parties relating to its subject matter and supersedes all
prior negotiations, understandings and agreements, whether
written, oral, or implied, between the parties hereto with
respect to such subject matter and constitutes the entire
agreement between the parties.
e. This Agreement may not be changed or modified unless
the same is made in writing and executed by authorized
representatives of the parties.
f. If any provision of this Agreement is held invalid by
a court having jurisdiction, such provision shall be deemed
modified to the extent necessary to eliminate such conflict or
invalidity, this Agreement shall be construed to give effect
to the remaining provisions thereof, and the parties shall
mutually negotiate in good faith an acceptable alternative to
such term, sentence, clause or provision for such
jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first given above.
SportsStar Marketing, Inc. National College Recruiting
Association, Inc.
By /s/ William Kroske By /s/ Janice A. Jones
--------------------------------- ------------------------------------
William Kroske, President Janice A. Jones, Chairman
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MEMORANDUM OF UNDERSTANDING
AMONG NATIONAL COLLEGE RECRUITING ASSOCIATION, INC.
AND SPORTSSTAR MARKETING, INC.
JUNE 20, 1997
1. Upon receipt of $135,000 from SportsStar Offering: (a) NCRA, Inc. will
be paid $50,000 of the License fee payable to NCRA, Inc., (b)SportsStar
will use $40,000 for operations, including the new lease and (c) the
balance of $45,000 will be held as a reserve as needed for either
Chartwell International, Inc. or SportsStar Marketing, Inc.
2. Upon receipt of the $865,000 balance from the SportsStar Marketing,
Inc. offering the balance of license fee due NCRA, Inc. will be paid.
3. SportsStar Marketing, Inc. and NCRA, Inc. will endeavor to obtaining
additional financing for SportsStar and upon receipt of said additional
financing, a supplemental license fee of $100,000 will be paid to NCRA,
Inc.
4. SportsStar Marketing, Inc. will be responsible for the new lease for
facilities jointly occupied by NCRA, Inc. and SportsStar Marketing,
Inc.
5. Cash expenditures for SportsStar Marketing, Inc. from January 1, 1997
will be invoiced to SportsStar by and/or NCRA, Inc. and paid by
SportsStar upon receipt of the $865,000 by SportsStar.
6. SportsStar disbursements will the require 2 signatures (Dr. Janice J.
Jones and Dr. Bill Kroske) for expenditures over $250.00.
Agreed, Approved and Understood; Agreed, Approved and Understood;
/s/ Janice A. Jones /s/ William H. Kroske
- ----------------------------------- --------------------------------------
Dr. Janice A. Jones, Chairman of Dr. William H. Kroske, President
the Board National College SportsStar Marketing, Inc.
Recruiting Association
<PAGE>
MINUTES OF THE BOARD OF DIRECTORS
OF
SPORTSSTAR MARKETING, INC.
(A COLORADO CORPORATION)
AMENDMENT TO LICENSE AGREEMENT
DATED JUNE 20, 1997 BETWEEN NCRA, INC. AND
SPORTSSTAR MARKETING, INC.
The parties to said Licensing Agreement hereby agree to amend paragraph 3, to
change the down payment from $150,000 to $210,000, plus an additional $100,000
upon raising at least another $500,000 of capital for SportsStar Marketing, Inc.
June 30, 1997
----------------------------- ---------------
Dr. Janice A. Jones Date
Chair of the Board
June 30, 1997
---------------------------- ---------------
Dr. William Kroske Date
Member of the Board
<PAGE>
MEMORANDUM OF UNDERSTANDING
AMONG CHARTWELL INTERNATIONAL, INC. AND SPORTSSTAR MARKETING, INC.
JUNE 20, 1997
1. SportsStar Marketing, Inc. will be responsible for the new lease for
facilities jointly occupied by Chartwell International, Inc. and
SportsStar Marketing, Inc., and the lease deposit paid (of $7,800) by
Chartwell International Inc. will be returned to Chartwell by
SportsStar upon receipt of the $135,000.
2. Cash expenditures for NCRA, Inc./SportsStar Marketing, Inc. from
January 1, 1997 will be invoiced to SportsStar by Chartwell and paid by
SportsStar upon receipt of the $865,000 by SportsStar, except rent for
which SportsStar will provide six (6) months free rent to Chartwell.
3. Chartwell will start reimbursing SportsStar for rent at the rate of 1/5
of the space at 5275 DTC Parkway, beginning January 1, 1998.
4. Chartwell will contribute $50,000 of ITEX credits to SportsStar
Marketing, Inc.
Agreed, Approved and Understood; Agreed, Approved and Understood;
/s/ Janice A. Jones /s/ William H. Kroske
- ---------------------------------------- ------------------------------------
Dr. Janice A. Jones Chair of the Board Dr. William H. Kroske, President
Chartwell International, Inc. SportsStar Marketing, Inc.
<PAGE>
Management Service Agreement
SportStar Marketing, Inc. and Chartwell International, Inc. are hereby entering
into a Management Service Agreement to provide SportsStar with the following
services:
1. Raising capital for SSMK as required.
2. Accounting and financial services, including:
a. implementing financial controls and procedures;
b. financial advice and direction;
c. oversee preparation of financial statements;
d. management of cash and trade credit resources;
e. establishing effective banking relationships;
f. interface to Chartwell's financial issues;
g. maintaining financial and business relationships with CRG and
related entities;
h. establishing and maintaining investment banking relationships.
3. Provide acquisition services as follows:
a. prospecting
b. investigation of potential targets;
c. consultation on acquisition strategies;
d. negotiation of acquisitions;
e. monitor and advise on the integration of acquired companies with
SSMK.
4. Communicate with major outside investors, business partners, legal counsel
as it relates to the structure and arrangement of important ongoing
business issues.
<PAGE>
5. Assist in effective utilization of trade credits,, including search for
uses, negotiation of terms, etc.
6. Include SSMK in external promotional announcements such as radio, T.V. and
press releases where appropriate.
7. Other advisory services as required.
8. Assist and consult with SSMK in preparation of business plans and
revisions thereof and other related activities.
It should be noted many of the above services were provided to SSMK gratis until
it received funding on January 2, 1998. SSMK agrees to pay $7,500 per month
beginning February 1, 1998 until the revenue of SSMK exceed $4,000,000 per
annum, at which time the fee would be paid monthly at a rate of 2 1/2% of the
revenues. Potential acquisitions where separate management fees to Chartwell are
negotiated would be excluded from the SSMK revenue base for purpose of the
2 1/2% test.
It is understood that Chartwell will provide these services on an as needed
basis and the time committed of Chartwell personnel will vary significantly from
time to time as the needs of SSMK fluctuate. For example, Chartwell will assign
Mr. Robert Fahey to be a temporary financial manager for an estimated six
months, until SSMK needs a full time CEO. The management fee, however will not
be adjusted as changes in Chartwell's efforts on behalf of SSMK occur.
Chartwell will not charge any other fees to SSMK while this agreement remains in
effect. Finders fees paid to outsiders in connection with raising capital and
acquisitions will be born by SSMK, including fees payable for such circumstances
under formal agreements with William Grimes, Robert Fahey and William Willard.
SSMK will pay Chartwell a fee of 10% of the purchase price of Lessonware, if
purchased by SSMK, as such transaction was found and negotiated by Chartwell
prior to the commencement of this Agreement.
All out of pocket expenses in connection with Chartwell's activities on behalf
of SSMK under this Agreement will be reimbursed to Chartwell upon presentment of
appropriate documentation. When at all possible, these expenses will be
acknowledged to SSMK in advance.
While Mr. Fahey is on direct assignment to SSMK as business and finance manager
he will commit whatever time is necessary in conjunction with his
responsibilities with Chartwell to adequately perform his duties, such time is
expected to vary widely as tasks are started and completed.
During the first year of this Agreement Chartwell agrees to
<PAGE>
advance back to SSMK up to the amount of fees received by Chartwell
International, Inc. if SSMK has depleted its funds before receiving additional
financing. These funds are reimbursable back to Chartwell after sufficient funds
are received by SSMK.
The above provisions are hereby noted and agreed to:
/s/ William Kroske 2/25/98
- --------------------------------- ------------------------
Dr. William Kroske Date
President
SportsStar Marketing, Inc.
/s/ Janice A. Jones 2/26/98
- -------------------------------- ------------------------
Dr. Janice A. Jones Date
Chair of the Board
Chartwell International, Inc.
3
<PAGE>
5275 DTC PARKWAY
5275 DTC PARKWAY
GREENWOOD VILLAGE, COLORADO 80111
OFFICE LEASE
BETWEEN
5275 DTC, LLC,
A COLORADO LIMITED LIABILITY COMPANY
(LANDLORD AND/OR LESSOR)
AND
CHARTWELL INTERNATIONAL, INC.,
A NEVADA CORPORATION
(TENANT AND/OR LESSEE)
DATE: JUNE 7, 1997
<PAGE>
OFFICE LEASE INDEX
PARAGRAPH NO. PARAGRAPH TITLE PAGE NO.
- ------------- --------------- --------
<TABLE>
<S> <C>
1. Premises..............................................................1
2. Term..................................................................1
3. Rent..................................................................1
4. Expense and Tax Adjustments...........................................1
5. Character of Occupancy................................................6
6. Service and Utilities.................................................6
7. Quiet Enjoyment.......................................................8
8. Maintenance, Repairs, Alterations and Additions.......................8
9. Entry by Landlord....................................................9
10. Mechanic's Liens.....................................................10
11. Damage to Property, Injury to Persons................................10
12. Insurance, Casualty, and Restoration of Premises.....................12
13. Condemnation.........................................................13
14. Assignment and Subletting............................................14
15. Estoppel Certificate.................................................15
16. Default..............................................................15
17. Remedies for Default.................................................16
18. Completion of Premises...............................................19
19. Removal of Tenant's Property.........................................20
20. Holding Over.........................................................21
21. Control of Common Areas; Parking.....................................21
22. Surrender and Notices................................................22
23. Acceptance of Premises by Tenant.....................................22
24. Subordination and Attornment.........................................22
25. Payments After Termination ..........................................22
26. Authorities for Action and Notice....................................23
27. Security Deposit.....................................................23
28. Miscellaneous........................................................24
29. Brokerage............................................................27
30. Rent Schedule........................................................28
</TABLE>
Exhibit A - Plan of Premises ............................A-1
Exhibit B - Legal Description............................B-1 thru B-2
Exhibit C - Rules and Regulations........................C-1 thru C-3
Exhibit D - Work Letter Agreement........................D-1
Exhibit E - Agreement for Signage........................E-1
Exhibit F - Agreement for Parking........................F-1 thru F-2
Exhibit G - Guaranty of Lease............................G-1 - G-5
Exhibit H - Commencement Letter..........................H-1 thru H-2
<PAGE>
OFFICE BUILDING LEASE
THIS LEASE is made this 7th day of June, 1997, between 5275 DTC,
LLC, a Colorado limited liability company ("Landlord") and Chartwell
International, Inc., A Nevada Corporation ("Tenant").
1. Premises:
In consideration of the payment of rent and the keeping and performance by
Tenant of the covenants and agreements hereinafter set forth, Landlord
hereby leases to Tenant and Tenant hereby rents from Landlord those
certain premises designated on the Plan attached hereto as Exhibit "A"
(the "Premises"), and by this reference made a part hereof, said Premises
consisting of approximately 4,080 rentable square feet of space comprising
Suite 150 of the building located at 5275 DTC Parkway (hereinafter called
the "Building"), together with a non-exclusive license, subject to the
provisions hereof, to use all appurtenances thereto, including, but not
limited to, any plazas, common areas and other areas designated by
Landlord for use by tenants of the Building. The Building, plazas, common
areas, other areas and appurtenances, plus the real property on which the
same is situated, being more particularly described on Exhibit "B"
attached hereto and by this reference made a part hereof, are hereinafter
collectively sometimes called the "Building Complex."
2. Term:
The term of this Lease shall commence at 12:01 a.m. on June 14, 1997, and
terminate at 12:00 midnight on July 31, 2000, unless sooner terminated
pursuant to this Lease (said Thirty-seven month and seventeen day term is
hereinafter referred to as the "Primary Lease Term").
3. Rent:
Tenant shall pay to Landlord, as rent for the Primary Lease Term, the sum
of One Hundred Seventy Nine Thousand Five Hundred Twenty and 00/100 U.S.
Dollars ($179,520.00) (the "Base Rent") which sum shall be payable per
Paragraph 30 commencing August 1, 1997, and continuing thereafter on the
first day of each succeeding calendar month. All Base Rent or other
rentals or sums due hereunder shall be paid in advance without notice,
abatement, deduction or offset at the office of Landlord or to such other
person or at such other place as Landlord may designate in writing. The
installments of the Base Rent for the first and last months of the term
hereof shall be prorated based upon the number of days during each of said
months that the Primary Lease Term is in effect.
4. Expense and Tax Adjustments:
A. Definitions: In addition to the terms elsewhere defined in this
Lease, the following terms shall have the following meanings with
respect to the provisions of this Lease:
(1) "Base Operating Expense" shall mean an amount equal to the
total calendar year 1997 Operating Expenses of the Building
Complex. Base Operating Expenses shall reflect the final tax
adjustments for 1997.
(2) "Rentable Area" shall mean 15,169 square feet.
(3) "Tenant's Pro Rata Share" shall mean that fraction, the
numerator of which is the total number of rentable square feet
of the Premises (i.e. 4,080 square feet) and the denominator
of which is the Rentable Area, (i.e. 15,169 square feet), and
is equal to 26.90%. At such time, if ever, as any space
1
<PAGE>
is added to or subtracted from the Premises, Tenant's Pro Rata
Share shall be increased or decreased accordingly. If it is
determined that the Rentable Area or the rentable square feet
of the Premises, are different than as stated in this
subparagraph, Landlord shall so notify Tenant and Tenant's Pro
Rata Share shall be recalculated accordingly.
(4) "Lease Year" shall mean each twelve (12) month period
beginning with the date the Primary Lease Term commenced, or
any anniversary thereof, and ending on the same date one (1)
year later. If the Lease Year is not concurrent with a
calendar year, then Landlord reserves the right at any time to
make all adjustments provided for herein on a calendar year
basis, with an appropriate proration for the Lease Years in
which such conversion is made and in which the term ends, and
"Lease Year" as used in this Paragraph (4) shall thereafter be
deemed to refer to "calendar year".
(5) "Operating Expenses" shall mean all operating expenses of any
kind or nature which are necessary, ordinary, or customarily
incurred in connection with the operation and maintenance of
the Building Complex as determined by Landlord's Accountants.
Operating Expenses shall include, but not be limited to:
(a) All real property taxes and assessments levied against
the Building Complex by any governmental or
quasi-governmental authority. The foregoing shall
include any taxes, assessments, surcharges, or service
or other fees of a nature not presently in effect which
shall hereafter be levied on the Building Complex as a
result of the use, ownership or operation of the
Building Complex or for any other reason, whether in
lieu of or in addition to any current real estate taxes
and assessments; provided, however, that any taxes which
shall be levied on the rentals of the Building Complex
shall be determined as if the Building Complex were
Landlord's only property and provided, further, that in
no event shall the term "taxes or assessments," as used
herein, include any federal, state or local income taxes
levied or assessed on Landlord, unless such taxes are a
specific substitute for real property taxes. Such term
shall, however, include gross taxes on rentals. Expenses
incurred by Landlord for tax consultants and in
contesting the amount or validity of any such taxes or
assessments shall be included in such computations (all
of the foregoing are collectively referred to herein as
the "Taxes"). "Assessments" shall include any and all
so-called special assessments, license tax, business
license fee, business license tax, commercial rental
tax, levy, charge or tax, imposed by any authority
having the direct power to tax, including any city,
county, state or federal government, or any school,
agricultural, lighting, water, drainage or other
improvement or special district thereof, against the
Premises, the Building or the Building Complex, or
against any legal or equitable interest of Landlord
therein. For the purposes of this Lease, any special
assessments shall be deemed payable in such number of
installments as is permitted by law, whether or not
actually so paid. If the Building Complex has not been
fully assessed as a completed project, for the purposes
of computing the Operating Expenses for any adjustment
required herein, the Taxes and Assessments shall be
increased by Landlord's Accountants in accordance with
their estimate of what the assessment will be upon full
completion of the Building Complex, including
installation of all tenant finish items;
(b) Costs of supplies, including but not limited to the cost
of "relamping" of building standard tenant lighting as
the same may be required from time to time;
(c) Costs incurred in connection with obtaining and
providing energy for the Building Complex, including but
not limited to costs of propane, butane, natural gas,
steam, electricity, solar energy and fuel oils, coal or
any other
2
<PAGE>
energy sources;
(d) Costs of water and sanitary and storm drainage services;
(e) Costs of janitorial and security services;
(f) Costs of general maintenance and repairs, including
costs under HVAC and other mechanical maintenance
contracts; and repairs and replacements of equipment
used in connection with such maintenance and repair
work;
(g) Costs of maintenance and replacement of landscaping; and
costs of maintenance of parking areas, common areas,
plazas and other areas used by tenants of the Building
Complex.
(h) Insurance premiums, including fire and all-risk
coverage, together with loss of rent endorsement; public
liability insurance; and any other insurance carried by
Landlord on the Building Complex or any component parts
thereof. All such insurance shall be in such amounts as
may be required by any mortgagee of Landlord or as
Landlord may reasonably determine;
(i) Labor costs, including wages and other payments, costs
to Landlord of workmen's compensation and disability
insurance, payroll taxes, welfare fringe benefits and
all legal fees and other costs or expenses incurred in
resolving any labor disputes;
(j) Professional building management fees;
(k) Legal, accounting, inspection, and other consultation
fees (including, without limitation, fees charged by
consultants retained by Landlord for services that are
designed to produce a reduction in Operating Expenses or
reasonably to improve the operation, maintenance or
state of repair of the Building Complex) incurred in the
ordinary course of operating the Building Complex;
(l) Increases, subsequent to the commencement date of the
term hereof, in the debt service payable by Landlord
under the first deed of trust or mortgage encumbering
the Building Complex as a result of increases in the
interest rate above the rate in effect during the first
month of the first Lease Year; provided, however, that
such increases are not attributable to increases in the
principal amount of such loan;
(m) The costs of capital improvements and structural repairs
and replacements made in or to the Building Complex
(including finance costs) in order to conform to any
applicable laws, ordinances, rules, regulations, or
orders of any governmental or quasi-governmental
authority having jurisdiction over the Building Complex
(herein, "Required Capital Improvements"); the costs of
any capital improvements and structural repairs and
replacements designed primarily to reduce Operating
Expenses (herein, "Cost Savings Improvements"); and a
reasonable annual reserve for all other capital
improvements and structural repairs and replacements
reasonably necessary to permit Landlord to maintain the
Building as a first class office building. The
expenditures for Required Capital Improvements and Cost
Savings Improvements shall be recovered by Landlord: (i)
over the useful life of such capital improvement or
structural repair or replacement (as determined by
Landlord's Accountants); or (ii) based on the savings
realized in each such Lease Year, for Cost Savings
Improvements, with interest thereon at the rate of ten
percent (10%) per annum, whichever is less; and
(m) Costs incurred by Landlord's Accountants in engaging
experts or other
3
<PAGE>
consultants to assist them in making the computations
required hereunder.
(6) "Operating Expenses" shall not include:
(a) Costs of work, including painting and decorating and
tenant change work, which Landlord performs for any
tenant or in any tenant's space in the Building other
than work of a kind and scope which Landlord would be
obligated to furnish to all tenants whose leases contain
a rental adjustment provision similar to this one;
(b) Costs of repairs or other work occasioned by fire,
windstorm or other insured casualty to the extent of
insurance proceeds received;
(c) Leasing commissions, advertising expenses, and other
costs incurred in leasing space in the Building;
(d) Costs of repairs or rebuilding necessitated by
condemnation;
(e) Any interest on borrowed money or debt amortization,
except as specifically set forth above; or
(f) Depreciation on the Building.
(7) Notwithstanding anything contained herein to the contrary, if
any lease entered into by Landlord with any tenant in the
Building is on a so-called "net" basis, or provides for a
separate basis of computation for any Operating Expenses with
respect to its leased premises, then, to the extent that
Landlord's Accountants determine that an adjustment should be
made in making the computations herein provided for,
Landlord's Accountants shall be permitted to modify the
computation of Base Operating Expenses, Rentable Area, and
Operating Expenses for a particular Lease Year in order to
eliminate or otherwise modify any such expenses which are paid
for in whole or in part by such tenant. Furthermore, in making
any computations contemplated hereby, Landlord's Accountants
shall also be permitted to make such adjustments and
modifications to the provisions of this Paragraph 4 as shall
be reasonably necessary to achieve the intention of the
parties hereto.
(8) "Landlord's Accountants" shall mean that individual or firm
employed by Landlord from time to time to keep the books and
records for the Building Complex, and to prepare the federal
and state income tax returns for Landlord with respect to the
Building Complex, all of which books and records shall be
certified by an appropriate representative of Landlord.
B. Adjustment Mechanism:
(1) It is hereby agreed that during each Calendar Year Tenant
shall pay to Landlord, as Additional Rent, Tenant's Pro Rata
Share of the Operating Expenses for such Calendar Year in
excess of the Base Operating Expenses, payable monthly, in
advance, at the rate of one twelfth (1/12) of Landlord's
estimate thereof, on the same date and at the same place Base
Rent is payable, with an adjustment to be made between the
parties at a later date as hereinafter provided. As soon as
practicable following the end of any Calendar Year, but no
later than the first day of May, Landlord shall submit to
Tenant a statement setting forth the exact amount of the
Operating Expenses for the prior Calendar Year just completed
and the difference, if any, between the actual Tenant's Pro
Rata Share of the Operating Expenses for such Calendar Year
just completed in excess of the Base Operating Expenses and
the total amount of the estimated payments of Tenant's Pro
Rata Share of Operating Expenses which was paid in accordance
with this subparagraph for such year. Such statement may also
set forth the amount of the estimated Operating Expenses
reimbursement for the new Calendar Year or
4
<PAGE>
Landlord may provide such information in a separate statement
issued to Tenant at such earlier date to coincide with the
start of each Calendar Year. To the extent that the actual
Tenant's Pro Rata Share of Operating Expenses in excess of the
Base Operating Expenses for any period covered by such
statement is greater than the estimated amounts previously
paid by Tenant during the same period, Tenant shall pay to
Landlord the difference in cash within thirty (30) days
following receipt of said statement from Landlord. To the
extent that the actual Tenant's Pro Rata Share of Operating
Expenses for the period covered by the statement is less than
the estimated amount which Tenant previously paid during such
period, Landlord shall credit the excess against any sums then
owing or next coming due from Tenant to Landlord. In addition,
until Tenant receives a statement indicating otherwise,
Tenant's monthly reimbursement for the new Calendar Year shall
continue to be paid at the rate for the previous Calendar
Year, but Tenant shall commence payment to Landlord of the
monthly installments of reimbursement on the basis of the new
statement beginning on the first day of the month following
the month in which Tenant receives such statement. If the
statement reflects a change in the monthly reimbursement
amount, such difference shall be adjusted by increasing or
decreasing the first monthly reimbursement payment after the
statement is given in order to bring the reimbursement amount
for the new Calendar Year current as of such date.
(2) Tenant's obligation with respect to its Pro Rata Share of the
Operating Expenses shall survive the expiration or early
termination of this Lease, and subsequent to such expiration
or termination Tenant shall pay its Pro Rata Share of the
actual Operating Expenses for the portion of the final Lease
Year of the Lease during which Tenant was obligated to pay
such expenses. If Tenant occupies the demised Premises for
less than a full calendar year during the first or last Lease
Years of the term hereof, Tenant's Pro Rata Share for such
partial year shall be prorated based upon the number of
calendar months and days during which Tenant occupied the
Premises. Tenant shall pay its Pro Rata Share of any such
increase within thirty (30) days following receipt of notice
thereof.
(3) Tenant shall have the right, at any time within ninety (90)
days after a statement of actual Operating Expenses for any
Calendar Year has been rendered by Landlord as provided
herein, at its sole cost and expense, to examine Landlord's
books and records relating to the determination of Operating
Expenses; provided, however, that Tenant shall give Landlord
prior written notice of its intent to exercise such right, the
inspection may not take place outside of normal business
hours, and Tenant shall not interfere with Landlord's normal
business activities. Unless Tenant objects to the rental
adjustment within said ninety (90) day period, such statement
and adjustment shall be deemed conclusive.
(4) In the event that the Rentable Area is not filly occupied
during any particular Calendar Year, Landlord's Accountants
shall adjust those Operating Expenses for the particular
Calendar Year, or portion thereof, as the case may be, which
are affected by the occupancy rates to reflect an occupancy of
not less than ninety-five percent (95%) of all such Rentable
Area.
5. Character of Occupancy:
A. The Premises are to be used for any legally permitted general office
use and for no other purpose without the prior written consent of
Landlord.
B. Tenant shall not use or permit the Premises to be used for any act
which will increase the existing rate of insurance upon the Building
or the Building Complex, or cause a cancellation of any insurance
policy covering the Building, the Building Complex or any part
thereof, nor shall Tenant sell, or permit to be kept, used, or sold
in or about the Premises any article which may be prohibited by
Landlord's insurance policies. Tenant shall not use any apparatus,
machinery or device in or about the
5
<PAGE>
Premises which shall make any noise or set up any vibration which
will unreasonably disturb other tenants. Tenant agrees not to
connect any apparatus, machinery or device to any mechanical,
electrical or other Building system without the prior consent of
Landlord. Tenant shall not commit waste or suffer or permit waste to
be committed, nor shall Tenant permit any nuisance in or about the
Premises.
C. Tenant shall not use the Premises or permit anything to be done in
or about the Premises which will in any way conflict with any law,
statute, ordinance or governmental rule or regulation now in force
or hereafter enacted or promulgated. Tenant shall at its sole cost
and expense promptly comply with all laws, statutes, ordinances or
governmental rules, regulations and requirements now in force or
which may hereafter be in force and with the reasonable requirements
of any insurer, underwriter or other similar entity now or hereafter
relating to or affecting the condition, use or occupancy of the
Premises, excluding structural changes not related to or affected by
Tenant's improvements or acts. Tenant shall be solely responsible
for compliance with the provisions of the Americans with
Disabilities Act (the "ADA") as it applies to Tenant's business and
the Premises. Landlord makes no warranty express or implied that
Tenant's intended use of the Premises in suitable or allowable under
any applicable governmental code, statute or regulation.
6. Service and Utilities:
A. Landlord, in accordance with standards from time to time prevailing
for first-class office buildings in the greater Denver, Colorado
area, agrees: (1) to furnish water to the Building for use in
lavatories and drinking fountains (and to the Premises if the tenant
finish plans for the Premises so provide); (2) to furnish during
Ordinary Business Hours, as hereinafter defined, such heated or
cooled air to the Premises as may, in the judgment of Landlord, be
reasonably required for the comfortable use and occupancy of the
Premises; (3) to provide a general office janitorial service for the
Premises on Monday through Friday, excluding Holidays, as
hereinafter defined; (4) to provide such window washing as may, in
the judgment of Landlord, be reasonably required; (5) and (6) to
cause electric current to be supplied to the Premises for all of
Tenant's Standard Electrical Usage, as hereinafter defined, during
Ordinary Business Hours. "Tenant's Standard Electrical Usage", as
used herein, shall mean and refer to electrical consumption by
equipment capable of operating from outlets serviced by less than 20
ampere, single phase, 115 volt circuit breakers installed in the
Premises as part of the original tenant finish pursuant to the Work
Letter, as defined in Paragraph 18 of this Lease but shall in no
event exceed three (3) watts per square foot. "Ordinary Business
Hours," as used herein, shall mean 7:00 a.m. to 6:00 p.m. Monday
through Friday and 9:00 a.m. to 1:00 p.m. on Saturdays, Holidays
excepted. "Holidays", as used herein, shall mean New Year's Day,
Presidents' Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, Christmas Day, and such other days as may
hereafter be established by Landlord.
B. Tenant shall reimburse Landlord for costs incurred by Landlord for
Excess Usage, as hereinafter defined, and for After Hours Usage, as
hereinafter defined. "Excess Usage" shall be defined as any usage by
Tenant of electricity (1) in an amount in excess of Tenant's
Standard Electrical Usage; or (2) for "Special Equipment," which, as
used herein, shall mean: (a) any equipment with power requirements
other than that defined as Tenant's Standard Electrical Usage; or
(b) self-contained heating, ventilation and air conditioning
("HVAC") equipment; or (c) equipment that requires the use of
self-contained HVAC units. Prior to the installation of Special
Equipment or any other Excess Usage, Tenant shall notify Landlord
and shall obtain Landlord's consent therefor. Monthly charges for
Excess Usage shall be determined on the basis of the amount of power
required for such Excess Usage, in kilowatt hours, as determined by
Landlord, multiplied by the then-current average kilowatt hour cost
("AKWHC") for the Building Complex. AKWHC will be determined by
Landlord
6
<PAGE>
by totalling the electricity charges for the Building Complex for
the preceding twelve month period and dividing that sum by the
number of kilowatt hours of electricity consumed during the same
period. Tenant shall be billed monthly for Excess Usage and shall
pay such charges monthly as Additional Rent. In addition to the
foregoing, Tenant, at Tenant's option, at the time of notice to
Landlord of Excess Usage, or at any time thereafter, may request
Landlord, at Tenant's sole cost and expense, to install a check
meter or flow meter to assist in determining the cost to Landlord of
Tenant's Excess Usage.
C.
D. (1) If Tenant requires janitorial services other than those
required to be provided to other tenants of the Building
Complex generally, Tenant shall separately pay for such
services monthly as Additional Rent upon billing by Landlord,
or Tenant shall, at Landlord's option, separately contract for
such services with the same company furnishing janitorial
services to Landlord. Notwithstanding the foregoing, Tenant
shall have the right, subject to Landlord's prior written
consent and to such rules, regulations and requirements as
Landlord may impose (including but not limited to the
requirement that such janitors belong to a trade union), to
employ Tenant's own janitors to perform such additional
services.
(2) Tenant agrees that Landlord shall not be liable for failure to
supply any heating, air conditioning, elevator, electrical,
janitorial, lighting or other services during any period when
Landlord uses reasonable diligence to supply such services, or
during any period when Landlord is required to reduce or
curtail such services pursuant to any applicable laws, rules
or regulations now or hereafter in force or effect, it being
understood that Landlord may discontinue, reduce or curtail
such services, or any of them (either temporarily or
permanently), at such times as may be necessary by reason of
accident, unavailability of employees or materials at
reasonable cost, repairs, alterations, improvements, strikes,
lockouts, riots, acts of God, application of applicable laws,
statutes, rules and regulations, or due to any other happening
beyond the control of Landlord. In the event of any such
interruption, reduction or discontinuance of Landlord's
services (either temporarily or permanently), Landlord shall
not be liable for damages to persons or property as a result
thereof, nor shall the occurrence of any such event in any way
be construed as an eviction of Tenant, or cause or permit an
abatement, reduction or setoff of rent, or operate to release
Tenant from any of Tenant's obligations hereunder.
E. Whenever machines or equipment which generate heat either as a prime
purpose or as an incidental effect and which affect the temperature
otherwise maintained by the air conditioning system are used by
Tenant in the Premises, Landlord reserves the right to install
supplementary air conditioning units in the Premises, and the costs
therefor, including the costs of installation, operation and
maintenance thereof, shall be paid by Tenant as Additional Rent upon
demand by Landlord.
7. Quiet Enjoyment:
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Subject to liens, covenants, easements and restrictions of record,
Landlord agrees to warrant and defend Tenant in the quiet enjoyment and
possession of the Premises during the term of this Lease so long as Tenant
complies with the provisions hereof.
8. Maintenance, Repairs, Alterations and Additions:
A. Maintenance and Repairs:
(1) Landlord shall maintain the Building, and all other portions
of the Building Complex not the obligation of Tenant or any
other tenant in the Building, in good order, condition and
repair.
(2) Except for services furnished by Landlord pursuant to
Paragraph 6 hereof, Tenant shall, at Tenant's sole cost and
expense, maintain the Premises in good order, condition and
repair, ordinary wear and tear excepted, including without
limitation: the interior surfaces of the ceilings, walls and
floors; all doors and interior windows; and all plumbing
pipes, electrical fixtures, furnishings and equipment.
(3) In the event that Tenant fails to maintain the Premises in
good order, condition and repair, Landlord shall give Tenant
notice to do such acts as are required to so maintain the
Premises. In the event that Tenant fails to commence such work
promptly upon demand by Landlord, and diligently prosecute it
to completion, then Landlord shall have the right, but shall
not be required, to do such acts and expend such funds at the
expense of Tenant as are reasonably required to perform such
work. Landlord shall have no liability to Tenant for any
damage, inconvenience or interference with Tenant's use of the
Premises as a result of performing any such work.
(4) Landlord and Tenant shall each do all acts required to comply
with all applicable laws, ordinances, regulations and rules of
any public authority relating to their respective maintenance
obligations as set forth herein.
B. Alterations and Additions:
(1) Tenant shall make no alterations, additions or improvements to
the Premises or any part thereof without obtaining the prior
written consent of Landlord, which consent shall not be
withheld unreasonably. Landlord may condition its consent to
any alterations, additions or improvements upon such
reasonable requirements as Landlord may deem necessary in its
sole discretion, including without limitation the manner in
which the work is done, the right to approve the contractor by
whom the work is to be performed, and the times during which
the work is to be accomplished.
(2) All alterations and additions to the Premises including, by
way of illustration but not limitation, all partitions,
paneling, carpeting, drapes, other window coverings, and light
fixtures (but not including movable office furniture not
attached to the Building) shall, upon completion or
installation, be deemed to be a part of the real estate and
the property of Landlord and shall remain upon and be
surrendered with the Premises as a part thereof without
molestation, disturbance or injury at the end of said term,
whether by lapse of time or otherwise. Notwithstanding the
foregoing, Landlord, by notice given to Tenant no later than
thirty (30) days after the end of the term, may elect to have
Tenant remove any or all of such alterations or additions,
and, in such event, Tenant shall promptly, at its sole cost
and expense, remove such alterations and additions and shall
restore the Premises to their condition prior to the making of
the same, reasonable wear and tear excepted. Tenant shall
indemnify Landlord against any loss or liability resulting
from delay by Tenant in so surrendering the Premises,
including without limitation any claims made by any succeeding
tenant founded on such delay.
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(3) If Landlord authorizes persons requested by Tenant to perform
any alterations, repairs, modifications or additions to the
Premises, then, prior to the commencement of any such work,
Tenant shall upon request deliver to Landlord such payment and
performance bonds or other security as Landlord may require,
and certificates issued by insurance companies qualified to do
business in the State of Colorado, evidencing that Workmen's
Compensation, public liability insurance and property damage
insurance, all in amounts, with companies and on forms
satisfactory to Landlord, are in force and effect and
maintained by all contractors and subcontractors engaged by
Tenant to perform such work. All such policies shall name
Landlord as an additional insured. Each such certificate shall
provide that the insurance policy may not be canceled or
modified without thirty (30) days' prior written notice to
Landlord. Further, Tenant shall permit Landlord to post
notices in the Premises in locations which will be visible by
persons performing any work on the Premises stating that
Landlord is not responsible for the payment for such work and
setting forth such other information as Landlord may deem
necessary. All Tenant alterations, repair and maintenance work
shall be performed in such a manner as not to interfere with,
delay, or impose any additional expense upon Landlord in the
maintenance or operation of the Building or upon other
tenant's use of their premises.
9. Entry by Landlord:
Landlord and its agents shall have the right to enter the Premises at all
reasonable times for the purpose of: (1) examining or inspecting the same;
(2) supplying janitorial services and any other services to be provided by
Landlord or Tenant hereunder; (3) showing the same to prospective
purchasers or tenants of the Building; and (4) making such alterations,
repairs, improvements or additions to the Premises or to the Building of
which they are a part as Landlord may deem necessary or desirable. If
Tenant shall not be personally present to open and permit an entry into
the Premises at any time when such entry by Landlord is necessary or
permitted hereunder, Landlord may enter by means of a master key without
liability to Tenant, except for any failure to exercise due care for
Tenant's property, and without affecting this Lease. If during the last
month of the term hereof, Tenant shall have removed substantially all of
its property therefrom, Landlord may immediately enter and alter, renovate
and redecorate the Premises without elimination or abatement of rent and
without incurring liability to Tenant for any compensation. Such entry
shall not be construed as a manifestation by the Landlord of an intent to
terminate this Lease. Landlord, during the entire term of this Lease,
shall have the right, upon ninety (90) days' prior written notice to
Tenant, to change the number, designation or name of the Building without
liability to Tenant. Tenant shall not, without the prior consent of
Landlord, change the locks or install additional locks on any entry door
or doors to the Premises.
10. Mechanic's Liens:
Tenant shall pay or cause to be paid all costs for work done by Tenant or
caused to be done by Tenant on the Premises of a character which will or
may result in liens on Landlord's interest therein. Tenant will keep the
Premises and Building Complex free and clear of all mechanic's liens and
other liens on account of work done or claimed to have been done for
Tenant or persons claiming under it. Tenant hereby agrees to indemnify
Landlord for, save Landlord harmless from, and defend Landlord against all
liability, loss, damage, costs or expenses, including attorneys' fees and
interest incurred on account of any claims of any nature whatsoever,
including lien claims of laborers, materialmen, or others for work
actually or allegedly performed for, or for materials or supplies actually
or allegedly furnished to Tenant or persons claiming under Tenant. Should
any liens be filed or recorded against the Premises or any portion of the
Building Complex, or should any action affecting the title thereto be
commenced, Tenant shall cause such liens to be removed of record within
five (5) days after notice from Landlord. If Tenant desires to contest any
claim of lien, Tenant may do so only if within such five (5) day period
Tenant posts adequate security with a court of competent jurisdiction and
obtains an order discharging the lien of record, as then provided by the
Colorado mechanics' lien statute.
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If a final judgment is entered establishing the validity or existence of
any lien for any amount which lien has not been discharged or bonded off
as hereinabove required, Tenant shall pay and satisfy the same at once. If
Tenant shall be in default in paying any charge for which a mechanic's
lien or suit to foreclose the lien has been recorded or filed, and shall
not have caused the same to be released of record, Landlord may (but
without being required to do so) pay such lien or claim and any costs, and
the amount so paid, together with reasonable attorneys fees incurred in
connection therewith, shall be immediately due from Tenant to Landlord as
Additional Rent.
11. Damage to Property, Injury to Persons:
A. Tenant hereby indemnifies and agrees to hold Landlord harmless from
and to defend Landlord against any and all claims of liability for
any injury (including death) or damage to any person or property
whatsoever: (1) occurring in, on or about the Premises or any part
thereof; or (2) occurring in or about the Building Complex, when
such injury or damage is caused in whole or in part by the act,
neglect, fault or omission to act on the part of Tenant, its agents,
contractors, employees, or invitees. Tenant further indemnifies and
agrees to hold Landlord harmless from and to defend Landlord against
any and all claims arising from any breach or default in the
performance of any obligation on Tenant's part to be performed under
the terms of this Lease, or arising from any act or negligence of
Tenant, or any of its agents, contractors, employees or invitees,
and from and against all costs, attorneys' fees, expenses and
liabilities incurred as a result of any such claim or any action or
proceeding brought thereon. Landlord shall not be liable to Tenant
for any damage by or from any act or negligence of any co-tenant or
other occupant of the Building, or by any owner or occupant of
adjoining or contiguous property. Tenant agrees to pay for all
damage to the Building Complex, and to tenants or occupants thereof,
caused by Tenant's misuse or neglect of the Premises or any portion
of the Building Complex.
B. Neither Landlord nor its agents shall be liable for any damage,
including resulting loss of use and additional expenses, to property
entrusted to Landlord, its agents or employees, or the building
manager, if any, nor for the loss or damage, including resulting
loss of use and additional expenses, to any property by theft or
otherwise, by any means whatsoever, nor for any injury (including
death) or damage to persons or property resulting from fire,
explosion, falling plaster, steam, gas, electricity, water, or rain
which may leak from any part of the Building or from the pipes,
appliances or plumbing works therein or from the roof, street or
subsurface, or from any other place, or resulting from dampness or
any other cause whatsoever; provided, however, that nothing
contained herein shall be construed to relieve Landlord from
liability for any personal injury resulting from its negligence or
that of its agents, servants or employees. Landlord or its agents
shall not be liable for interference with the light, view or other
incorporeal hereditament. Tenant shall give prompt notice to
Landlord in case of fire or accidents in the Premises or in the
Building, or of defects therein or in the fixtures or equipment.
Neither Landlord nor its agents shall be liable for any loss, cost,
damage, bodily injury (including death) or personal injury arising
or resulting from the criminal activities of third persons.
C. In case any action or proceeding is brought against Landlord by
reason of any obligation on Tenant's part to be performed under the
terms of this Lease, or arising from any act or negligence of
Tenant, or of its agents or employees, Tenant, upon notice from
Landlord, shall defend the same at Tenant's expense by counsel
reasonably satisfactory to Landlord.
D. Landlord, its agents and employees shall not be liable, and Tenant
hereby waives its rights, if any, to claim for any damage or loss as
a result of any failure of the Building to comply strictly with the
ADA as it applies to the Building. Tenant hereby agrees to save,
hold harmless and defend Landlord from any claims, suits or
liabilities made against the Landlord by any of Tenant's existing or
prospective clients, employees, agents, servants or invitees as a
result of or in connection
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with any non-compliance of the Building with the ADA. In the event
of any failure of the Building to comply with the ADA, if such
alleged defect was not apparent at the date of execution hereof, and
if such failure substantially interferes with the operation of
Tenant's business in the Premises, Tenant's sole remedy shall be for
termination of this Lease, provided that, Tenant shall have no claim
for termination of this Lease based on the non-compliance with the
ADA by the Building unless Tenant (i) promptly gives notice of any
such non-compliance and allows Landlord a reasonable time to correct
any such non-compliance, and (ii) if such compliance is not effected
within a reasonable time, Tenant gives no less than ninety (90) days
prior written notice of the termination date, Tenant actually
vacates the Premises on or before such termination date, and Tenant
is in compliance with its obligations under this Lease on the date
the notice is given and on the termination date.
In case any claim, demand, action or proceeding is made or brought
against Landlord, its agents or employees, as a result of Tenant's
default or alleged default of any obligation on Tenant's part to be
performed under the terms of this Lease, or arising from any act,
omission or negligence of Tenant, its agents or employees, or which
gives rise to Tenant's obligation to indemnify Landlord, Tenant
shall be responsible for all costs and expenses, including but not
limited to reasonable attorney's fees incurred in defending or
prosecution of the same, as applicable.
E. TENANT'S INSURANCE. Tenant shall, at its own cost, at all times
during the term of this Lease and any extensions hereof, procure and
maintain all risk insurance for hazard, fire and extended coverage
on Tenant's Property and the contents of the Premises in an amount
equal to full replacement cost thereof with a deductible of no more
than $2,500.00 workers' compensation and employers' liability
insurance in the minimum statutory amount and including a waiver of
subrogation in favor of the Landlord and Landlord's insuror, and
comprehensive general liability insurance on an occurrence basis,
including coverage for bodily injury, broad form property damage,
personal injury (employee and contractual liability exclusions
deleted), products and completed operations, contractual liability,
owner's protective liability, host liquor legal liability and cross
liability with the following limits of liability: One Million
Dollars ($1,000,000.00) combined single limit for each occurrence of
bodily injury, property damage and personal injury; Two Million
Dollars ($2,000,000.00) aggregate for bodily injury and property
damage for products and completed operations. Tenant shall further,
at its own cost, at all times during the term of this Lease and any
extensions hereof, procure and maintain insurance for automobile
liability including coverage for bodily injury, property damage and
personal injury for owned, hired and non-owned autos with the
following limits of liability: One Million Dollars ($1,000,000.00)
combined single limit for each occurrence of bodily injury, property
damage and personal injury. Tenant shall also maintain business
interruption insurance in an amount sufficient to reimburse Tenant
for direct and indirect loss of earnings attributable to prevention
of access to the Building or Premises as a result of such perils,
and such other forms and amounts of insurance as Landlord or its
mortgagee may reasonably require from time to time. All such
insurance shall be procured from a responsible insurance company or
companies authorized to do business in the State where the Premises
are located, with general policyholder's ratings of not less than
"A-" and a financial rating of not less than "XI" in the most
current available Best's Insurance Reports, and shall be otherwise
reasonably satisfactory to Landlord. All such policies shall name
Landlord and Landlord's property management agent as additional
insureds, and shall provide that the same may not be canceled or
altered except upon thirty (30) days prior written notice to
Landlord. All insurance maintained by Tenant shall be primary to any
insurance provided by Landlord. Tenant shall provide certificate(s)
of such insurance to Landlord prior to occupancy of the Premises and
commencement of the Lease term and at least thirty (30) days prior
to the annual renewal date thereof and upon request from time to
time and such
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certificate(s) shall disclose that such insurance names Landlord and
Landlord's designated property management agent as an additional
insured, in addition to the other requirements set forth herein. The
limits of such insurance shall not, under any circumstances, limit
the liability of Tenant hereunder.
Should Tenant fail to procure such insurance within the time period
hereinbefore specified, Landlord may, at its option, but Landlord
shall have no obligation to do so, procure such insurance and pay
the premiums therefor and Tenant agrees to reimburse Landlord for
the cost thereof plus interest thereon at the rate of eighteen
percent (18%) per annum (but in no event in excess of the maximum
rate permitted under law), as Additional Rent on the first day of
the calendar month following the rendition of the bill or bills
therefor and Landlord shall have the same rights and remedies in
enforcing the payment of such additional rent as in the case of
Tenant's failure to pay the rent herein reserved.
12. Insurance, Casualty, and Restoration of Premises:
A. LANDLORD'S INSURANCE. Landlord agrees to carry and maintain the
following insurance during the term of this Lease and any extension
hereof general public liability insurance against claims for
personal injury, including death and property damage in or about the
Premises and the Building or the Building Complex (excluding
Tenant's Property), such insurance to be in an amount not less than
One Million Dollars ($1,000,000.00) combined single limit. Such
insurance may expressly exclude property paid for by tenants or paid
for by Landlord for which tenants have reimbursed Landlord located
in, or constituting a part of the Building or the Building Complex.
Such insurance shall afford coverage for damages resulting from (a)
fire, (b) perils covered by extended coverage insurance, and (c)
explosion of steam and pressure boilers and similar apparatus
located in the Building or the Building Complex. Landlord may carry
such other additional insurance coverage as Landlord or Landlord's
mortgagee deems appropriate including coverage for loss of rents.
All such insurance shall be procured from a responsible insurance
company or companies authorized to do business in the State where
the Premises are located, with general policyholder's ratings of not
less than "A-" and a financial rating of not less than "XI" in the
most current available Best's Insurance Reports.
B. In the event that the Premises or the Building is damaged by fire or
other insured casualty and insurance proceeds in an amount
sufficient to repair the damages have been made available therefor
by the holder or holders of any mortgages or deeds of trust
encumbering the Building Complex, the damage shall be repaired by
and at the expense of Landlord to the extent of such available
insurance proceeds, provided that such repairs and restoration can,
in Landlord's sole opinion, be made within one hundred eighty (180)
days after the occurrence of such damage without the payment of
overtime or other premiums. Until such repairs and restoration are
completed the rent shall be abated in proportion to the part of the
Premises which is unusable by Tenant in the conduct of its business.
(But there shall be no abatement of rent by reason of any portion of
the Premises being unusable for a period equal to one (1) day or
less.) If the damage is due to the fault or neglect of Tenant or its
employees, agents or invitees, there shall be no abatement of rent.
Landlord agrees to notify Tenant within sixty (60) days after such
casualty if it estimates that it will be unable to repair and
restore the Premises or Building within said one hundred eighty
(180) day period. Such notice will set forth the approximate length
of time Landlord estimates will be required to complete such repairs
and restoration. If Landlord estimates it cannot make such repairs
and restoration within said one hundred eighty (180) day period,
then either party, by written notice to the other, may cancel this
Lease as of the date of occurrence of such damage, provided that
such notice is given to the other party within fifteen (15) days
after Landlord notifies Tenant of the estimated time for completion
of such repairs and restoration. If no notice is given by Tenant
evidencing its intent to terminate this Lease, this Lease shall
continue in
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effect and the rent shall be apportioned in the manner provided
above.
C. Except as provided in this Paragraph, there shall be no abatement of
rent and no liability of Landlord by reason of any injury to or
interference with Tenant's business or property arising from the
making of any repairs, alterations or improvements in or to the
fixtures, appurtenances and equipment in the Building Complex.
Tenant understands that the Landlord will not carry insurance of any
kind on Tenant's furniture and furnishings or on any fixtures or
equipment removable by Tenant under the provisions of this Lease,
and agrees that Tenant shall be obligated promptly to repair any
damage thereto or to replace the same. Landlord shall not be
required to repair any injury or damage by fire or other cause, or
to make any repairs or replacements of removable improvements
installed in the Premises by or for Tenant.
D. In case sufficient insurance proceeds are unavailable, or the
Building throughout shall be so injured or damaged, whether by fire
or otherwise (though said Premises may not be affected, or if
affected, can be repaired within said one hundred eighty (180)
days), that Landlord, within sixty (60) days after the happening of
such injury, shall decide not to reconstruct or rebuild said
Building, then, notwithstanding anything contained herein to the
contrary, upon notice in writing to that effect given by Landlord to
Tenant within said sixty (60) days, Tenant shall pay the rent,
properly apportioned up to said date, this Lease shall terminate
from the date of delivery of said written notice, and both parties
hereto shall be freed and discharged from all further obligations
hereunder. A total destruction of the Building shall automatically
terminate this Lease.
E. Landlord and Tenant hereby waive any and all rights of recovery
against one another and their officers, agents and employees for
damage to real or personal property, including resulting loss of use
and additional expenses, occurring as a result of the use or
occupancy of the Premises or the Building Complex to the extent of
insurance coverage which would be included in a standard "all-risk"
or special form policy of property insurance. Landlord and Tenant
each agree that all policies of insurance obtained by them pursuant
to the provisions of this Lease shall contain endorsements or
provisions waiving the insurer's rights of subrogation with respect
to claims against the other, and, unless the policies permit waiver
of subrogation without notice to the insurer, each shall notify its
insurance companies of the existence of the waiver and indemnity
provisions set forth in this Lease.
13. Condemnation:
If any portion of the Premises which materially affects Tenant's ability
to continue to use the remainder thereof for the purposes set forth
herein, or if any portion of the Building, the loss of which renders the
Premises untenantable, is taken by right of eminent domain or in
condemnation, or is conveyed in lieu of any such taking, then this Lease
may be terminated at the option of either Landlord or Tenant. Such option
shall be exercised by either party giving notice to the other of such
termination within thirty (30) days after such taking or conveyance;
whereupon this Lease shall forthwith terminate and the rent shall be duly
apportioned as of the date of such taking or conveyance. Upon such
termination, Tenant shall surrender to Landlord the Premises and all of
Tenant's interest therein under this Lease, and Landlord may re-enter and
take possession of the Premises or remove Tenant therefrom. If any portion
of the Premises or of any area appurtenant thereto is taken which does not
materially affect Tenant's right to use the remainder of the Premises for
the purposes set forth herein, this Lease shall continue in full force and
effect and Landlord shall promptly perform any repair or restoration work
required to restore the Premises, insofar as possible, to its former
condition, and the rental owing hereunder shall be adjusted, if necessary,
in such just manner and proportion as the part so taken (and its effect on
Tenant's ability to use the remainder of the Premises) bears to the whole.
In the event of taking or conveyance as described herein, Landlord shall
receive the entire award or consideration for the lands, improvements and
the leasehold so taken. Tenant shall have no rights to any such
condemnation award.
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14. Assignment and Subletting:
A. Tenant shall not permit any part of the Premises to be used or
occupied by any persons other than Tenant and the employees of
Tenant, nor shall Tenant permit any part of the Premises to be used
or occupied by any licensee or concessionaire, or permit any persons
to be upon the Premises other than Tenant, and employees, customers
and others having lawful business with Tenant. Tenant shall not
assign this Lease, or sublet or part with the possession of all or
part of the Premises, without the prior written consent of Landlord,
which consent shall not be unreasonably withheld, provided that: (1)
Tenant shall use Landlord approved forms and shall pay to Landlord a
fee of $500.00 per occurrence to compensate Landlord and Landlord's
agent for their services in effecting a Sublease or Assignment; (2)
The Base Rent shall not be less than the prevailing market rate the
Landlord would charge for comparable space; (3) such consent to any
assignment or subletting shall not relieve the Tenant from its
obligations as primary obligor (and not as surety or guarantor) for
the payment of all rental due hereunder, and for the full and
faithful observance and performance of the covenants, terms and
conditions herein contained; (4) the proposed subtenant or assignee
is engaged in a business and the Premises will be used in a manner
which is in keeping with the then standards of the Building; (5) the
proposed subtenant or assignee is a reputable party of reasonable
financial worth in light of the responsibilities involved, and
Tenant shall have provided Landlord with reasonable proof thereof;
(6) Tenant is not in default hereunder at the time it makes its
request for such consent; and, (7) sublessee is a parent or
affiliate. The sale of all or a majority of the stock of Tenant, if
Tenant is a corporation, or the sale of all or a majority of the
ownership interest in Tenant, if Tenant is a partnership, or the
sale of all or substantially all of the assets of Tenant, shall
constitute an assignment of the Lease for purposes of this
Paragraph. Consent of the Landlord to an assignment or subletting
shall not in any way be construed to relieve the Tenant from
obtaining the consent of the Landlord to any further assignment or
subletting. Subletting or assignment by subtenants or assignees
shall not be permitted under any circumstances.
B. Notwithstanding the provisions of Paragraph 14A, if Tenant requests
Landlord's consent to an assignment of this Lease or to a subletting
of the whole or any part of the Premises, Tenant shall submit to
Landlord the information required in Paragraph 14A above. Upon
receipt of such request and information from Tenant, Landlord shall
have the right, exercisable by notice in writing within fourteen
(14) days after such receipt, to terminate this Lease if the request
is to assign this Lease or to sublet all of the Premises or, if the
request is to sublet more than twenty percent (20%) of the Premises,
to terminate this Lease with respect to such portion, in each case
as of the date set forth in Landlord's notice of exercise of such
right, which shall be not more than thirty (30) days following the
giving of such notice. If Landlord exercises such right, Tenant
shall surrender possession of the entire Premises or of the portion
which is the subject of the right, as the case may be, on the date
set forth in such notice in accordance with the provisions of this
Lease relating to surrender of the Premises at the expiration of the
term. If this Lease shall be canceled as to a portion of the
Premises only, the Base Rent and other charges payable by Tenant
under this Lease shall be abated proportionately. If Landlord gives
such notice of termination, Tenant may withdraw its request for
consent to assignment or subletting by delivering written notice of
such withdrawal prior to the termination date set forth in
Landlord's notice, and this Lease shall remain in full force and
effect.
C. In the event that Landlord does not exercise its rights as provided
in Paragraph 14B, all documents utilized by Tenant to evidence any
subletting or assignment to which Landlord has consented shall be
subject to prior approval by Landlord or its counsel. Tenant shall
pay on demand all of Landlord's costs and expenses, including
reasonable attorney's fees, incurred in determining whether or not
to consent to any requested sublease or assignment and in reviewing
and approving such documentation. Further, Tenant shall pay to
Landlord fifty percent (50%) of the excess of the per square foot
rent received by Tenant over the per square foot rent
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then being paid by Tenant to Landlord. If the Premises is sublet in
its entirety or if this Lease is assigned, any rights of Tenant to
renew this Lease or to lease additional space in the Building shall
be extinguished thereby, and will not be transferred to the
subtenant or assignee.
D. Notwithstanding anything to the contrary contained in this Lease, if
a trustee in bankruptcy is entitled to assume control over Tenant's
rights under this Lease, and assigns such rights to any third party,
the Base Rent to be paid hereunder by such party shall be increased
to the then current Base Rent (if greater than then being paid for
the Premises) which Landlord would charge for comparable space in
the Building as of the date of such third party's occupancy of the
Premises.
E. Notwithstanding anything to the contrary contained in this Lease,
Tenant shall have no right to assign this Lease or sublet any
portion of the Premises during any period that all or any portion of
the Base Rent is abated.
15. Estoppel Certificate:
Tenant agrees, at any time and from time to time, upon not less than ten
(10) days' prior written request by Landlord, to execute, acknowledge and
deliver to Landlord, or to any third party designated by Landlord, an
estoppel certificate certifying that this Lease is unmodified and in full
force and effect (or if there have been modifications, that it is in full
force and effect as modified, and stating the modifications), that there
have been no defaults thereunder by Landlord or Tenant (or if there have
been defaults, setting forth the nature thereof), the date to which the
rent and other charges have been paid in advance, if any, and such other
matters as are reasonably requested by Landlord, it being intended that
any such statement delivered pursuant to this Paragraph may be relied upon
by Landlord and by any prospective purchaser of all or any portion of
Landlord's interest herein, or a holder or prospective holder of any
mortgage or deed of trust encumbering the Building Complex. Tenant's
failure to deliver such statement within such time shall constitute an
event of default (as that term is defined elsewhere in this Lease) and
shall conclusively be deemed to be an admission by Tenant of the matters
set forth in the request for an estoppel certificate.
16. Default:
The happening of any one or more of the following events shall constitute
an "event of default":
A. Tenant shall fail to pay when due any installment of Base Rent,
Additional Rent or other charge, including the Expense Adjustments
set forth in Paragraph 4 of this Lease, and such default shall
continue for three (3) days after receipt of written notice from
Landlord; provided, however, that Tenant shall not be entitled to
more than one (1) notice of a delinquency in a monetary obligation
during any Lease Year, and if thereafter any rent or other amount
owing hereunder is not paid when due, a default shall be considered
to have occurred even though no notice thereof is given; or Tenant
shall fail to procure the release of any mechanic's lien as set
forth in Paragraph 10;
B. Tenant shall vacate or abandon the Premises, or shall not
continually operate its business in the Premises during Ordinary
Business Hours and such cessation or curtailment of operations
occurs for more than ten (10) days;
C. This Lease or the estate of Tenant hereunder shall be transferred
to or shall pass to or devolve upon any other person or party except
in a manner permitted herein;
D. This Lease or the Premises or any part thereof shall be taken upon
execution or by other process of law directed against Tenant, or
shall be taken upon or subject to any attachment at the instance of
any creditor or claimant against Tenant, and said attachment shall
not be discharged or disposed of within fifteen (15) days after the
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levy thereof;
E. Tenant or any guarantor of this Lease shall file a petition in
bankruptcy or insolvency or for reorganization or arrangement under
the bankruptcy laws of the United States or under any insolvency act
of any state, or shall voluntarily take advantage of any such law or
act by answer or otherwise, or shall be dissolved, or shall make an
assignment for the benefit of creditors, or shall admit in writing
its inability to pay its debts as they mature;
F. Involuntary proceedings under any such bankruptcy law or insolvency
act or for the dissolution of Tenant or any guarantor of this Lease
shall be instituted against Tenant or such guarantor, or a receiver
or trustee of all or substantially all of the property of Tenant or
any guarantor of this Lease shall be appointed, and such proceeding
shall not be dismissed or such receivership or trusteeship vacated
within sixty (60) days after such institution or appointment.
G. Tenant shall fail to take possession of the Premises within thirty
(30) days of the commencement of the Primary Lease Term;
H. Tenant shall fail to perform any of the other agreements, terms,
covenants or conditions hereof on Tenant's part to be performed, and
such nonperformance shall continue for a period of thirty (30) days
after notice thereof by Landlord to Tenant.
17. Remedies for Default:
A. Upon the happening of any event of default as hereinabove described,
Landlord shall have the right, at its election, then or at any time
thereafter and while any such event of default shall continue,
either:
(1) To give Tenant written notice of intention to terminate this
Lease on the date of the notice or on any later date specified
therein, whereupon Tenant's right to possession of the
Premises shall cease and this Lease shall be terminated,
except as to Tenant's liability, as if the expiration of the
term fixed in such notice were the end of the term herein
originally demised; or
(2) To re-enter and take possession of the Premises or any part
thereof, and repossess the same as of Landlord's former
estate, and expel Tenant and those claiming through or under
Tenant, and remove the effects of both or either using such
force for such purposes as may be necessary, without being
liable for prosecution therefor, without being deemed guilty
of any manner of trespass, and without prejudice to any
remedies for arrears of rent or preceding breach of covenants
or conditions. Should Landlord elect to re-enter as provided
in this subparagraph (2), or should Landlord take possession
pursuant to legal proceedings or pursuant to any notice
provided for by law, Landlord may, from time to time, without
terminating this Lease, relet the Premises or any part thereof
in Landlord's or Tenant's name, but for the account of Tenant,
for such term or terms (which may be greater or less than the
period which would otherwise have constituted the balance of
the term of this Lease) and on such conditions and upon such
other terms (which may include concessions of free rent and
alteration and repair of the Premises) as Landlord, in its
uncontrolled discretion, may determine, and Landlord may
collect and receive the rents therefor. Landlord shall in no
way be responsible or liable for any failure to relet the
Premises, or any part thereof, or for any failure to collect
any rent due upon such reletting. No such reentry or taking
possession of the Premises by Landlord shall be construed as
an election on Landlord's part to terminate this Lease unless
a written notice of such intention is given to Tenant. No
notice from Landlord hereunder or under a forcible entry and
detainer statute or similar law shall constitute an election
by Landlord to terminate this Lease unless such notice
specifically so states. Landlord reserves the right following
any such reentry or reletting to exercise its right to
terminate this Lease by giving Tenant written
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notice to that effect, in which event the Lease will
terminate as specified in said notice.
B. In the event that Landlord does not elect to terminate this Lease as
permitted in subparagraph A.(1) of this Paragraph, but on the
contrary, elects to take possession as provided in subparagraph A.
(2)hereof, Tenant shall pay to Landlord (i) the rent and other sums
as herein provided, which would be payable hereunder if such
repossession had not occurred, less (ii) the net proceeds, if any,
of any reletting of the Premises after deducting Landlord's
reasonable expenses in connection with such reletting, including,
but without limitation, all repossession costs, brokerage
commissions, legal expenses, attorneys' fees, expenses of employees,
alteration and repair costs and expenses or preparation for such
reletting. If, in connection with any reletting, the new lease term
extends beyond the existing term, or the premises covered thereby
include other premises not part of the Premises, a fair
apportionment of the rent received from such reletting and the
expenses incurred in connection therewith will be made in
determining the net proceeds from such reletting. Any rent
concessions will be apportioned over the term of the new lease.
Tenant shall pay such rent and other sums to Landlord monthly on the
days on which the rent would have been payable hereunder if
possession had not been retaken, and Landlord shall be entitled to
receive the same from Tenant on each such day.
C. Nothing herein shall preclude Landlord at its election from
recovering, at a minimum, the fair rental value of the Premises as
damages for the failure of Tenant to pay the agreed upon rentals.
D. In the event that this Lease is terminated (except as provided in
the paragraphs on casualty or condemnation), Tenant shall remain
liable to Landlord for damages in an amount equal to the rent and
other sums which would have been owed by Tenant hereunder for the
balance of the term had this Lease not been terminated, less the net
proceeds, if any, of any reletting of the Premises by Landlord
subsequent to such termination, after deducting all Landlord's
expenses in connection with such reletting, including, but without
limitation, the expenses enumerated above. Landlord shall be
entitled to collect such damages from Tenant monthly on the days on
which the rent and other amounts would have been payable hereunder
if this Lease had not been terminated, and Landlord shall be
entitled to receive the same from Tenant on each such day.
Alternatively, at the option of Landlord, in the event that this
Lease is terminated, Landlord shall be entitled to recover forthwith
against Tenant, as damages for the loss of the bargain and not as a
penalty, an aggregate sum which, at the time of such termination of
this Lease, represents the amount, if any, by which the aggregate of
the rent and all other sums payable by Tenant hereunder which would
have accrued for the balance of the term exceeds the aggregate
rental value of the Premises (such rental value to be computed on
the basis of a tenant paying not only Base Rent, but also such other
charges as are required to be paid by Tenant under the terms of this
Lease) for the balance of such term, both discounted to present
worth at the rate of eight percent (8%) per annum.
E. Suit or suits for the recovery of the amounts and damages set forth
herein may be brought by Landlord, from time to time, at Landlord's
election; and nothing herein shall be deemed to require Landlord to
await the date that this Lease or the term hereof would have expired
had there been no such default by Tenant, or no such termination, as
the case may be. Each right and remedy provided for in this Lease
shall be cumulative and shall be in addition to every other right or
remedy provided for in this Lease or now or hereafter existing at
law or in equity or by statute or otherwise, including, but not
limited to, suits for injunctive relief and specific performance.
The exercise or beginning of the exercise by Landlord of any one or
more of the rights or remedies provided for in this Lease or now or
hereafter existing at law or in equity or by statute or otherwise
shall not preclude the simultaneous or later exercise by Landlord of
any or all other rights or remedies provided for in this Lease or
now or hereafter existing at law or in equity or by statute or
otherwise. All costs incurred by Landlord in connection with
collecting any amounts and damages
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owed by Tenant pursuant to the provisions of this Lease or to
enforce any provision of this Lease, including reasonable attorneys'
fees from the date any such matter is turned over to an attorney,
shall also be recoverable by Landlord from Tenant. Landlord and
Tenant agree that any action or proceeding arising out of this Lease
shall be heard by the court sitting without a jury, and they hereby
waive all rights to trial by jury. In the event of default, in
addition to all other remedies therefor, Landlord shall be entitled
to receive from Tenant all sums the payment of which may previously
have been waived by Landlord, or which may have been paid by
Landlord, pursuant to any agreement by Landlord to grant Tenant a
rental abatement or other monetary inducement or concession,
including any tenant finish allowance and all other payments made by
Landlord to or on behalf of Tenant, together with interest on such
amounts at the rate of twenty-one percent (21%) per annum, from the
date or dates such amounts were paid by Landlord or would have been
due from Tenant but for the abatement, until finally paid or repaid.
F. No failure by Landlord to insist upon the strict performance of any
agreement, term, covenant or condition hereof or to exercise any
right or remedy consequent upon a breach thereof, and no acceptance
of full or partial rent during the continuance of any such breach,
shall constitute a waiver of any such breach or any such agreement,
term, covenant or condition. No agreement, term, covenant or
condition hereof to be performed or complied with by Tenant, and no
breach thereof, shall be waived, altered or modified except by
written instrument executed by Landlord. No waiver of any breach
shall affect or alter this Lease; but each and every agreement,
term, covenant and condition hereof shall continue in full force and
effect with respect to any other then existing or subsequent breach.
Notwithstanding any termination of this Lease, the same shall
continue in force and effect as to any provisions hereof which
require observance or performance by Landlord or Tenant subsequent
to termination.
G. (1) Nothing contained in this Paragraph 17 shall limit or
prejudice the right of Landlord to prove and obtain as
liquidated damages in any bankruptcy, insolvency,
receivership, reorganization or dissolution proceeding an
amount equal to the maximum allowed by any statute or rule of
law governing such proceeding and in effect at the time when
such damages are to be proved, whether or not such amount is
greater than, equal to or less than the amounts recoverable,
either as damages or rent, referred to in any of the preceding
provisions of this Paragraph 17.
(2) Notwithstanding anything in this Paragraph 17 to the contrary,
any such proceeding or action involving bankruptcy,
insolvency, reorganization, arrangement, assignment for the
benefit of creditors, or appointment of a receiver or trustee,
as specified in subparagraphs 16E and 16F above, shall be
considered to be an event of default only when such
proceeding, action or remedy shall be taken or brought by or
against the then holder of the leasehold estate under this
Lease or by or against any person or entity then liable under
any guaranty of this Lease.
H. LATE CHARGES: Tenant hereby acknowledges that late payment by Tenant
to Landlord of rent or other sums due hereunder will cause Landlord
to incur costs not contemplated by this Lease, the exact amount of
which will be difficult to ascertain. Such costs include, but are
not limited to, processing and accounting charges, and late charges
which may be imposed upon Landlord by terms of any mortgage or trust
deed covering the Premises. Accordingly, if an installment of rent
or of a sum due from Tenant shall not be received by Landlord or
Landlord's designee within five (5) days of when due, then Tenant
shall pay to Landlord a late charge equal to five percent (5%) of
such overdue amount. The parties hereby agree that such late charges
represent a fair and reasonable estimate of the cost that Landlord
will incur by reason of the late payment by Tenant. Acceptance of
such late charges by the Landlord shall in no event constitute a
waiver of Tenant's default with respect to such overdue amount, nor
prevent Landlord from exercising any of the other rights and
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remedies granted hereunder.
I. INTEREST DUE. If any amount due from Tenant to Landlord hereunder
whether it be rental or other charges, is not paid within five (5)
days of when due, Tenant shall pay Landlord an amount equal to
eighteen percent (18%) per annum of the total amount due Landlord,
from the original due date until paid. Interest charges shall be in
addition to, and not in substitution of, late charges imposed.
J. RENTAL PAYMENTS AND CHECK CHARGES. All payments of rent and other
charges under this Lease shall be made by Tenant in a negotiable
instrument form for which there are immediately available funds.
Unless previously agreed by Landlord, no such payments shall be made
in cash. If Tenant has, for any payment made in connection with this
Lease, tendered a check or other negotiable instrument which has
been dishonored, any or all future payments hereunder, if requested
by Landlord, shall be made by Tenant in cashiers check or other
certified funds. If Tenant is in default, and late charges have been
incurred with regard to the payment(s) then outstanding, if
requested by Landlord, the payment to cure such default shall be
made by Tenant in cashiers check or other certified funds.
18. Completion of Premises:
A. Landlord has agreed to complete the Premises as more fully set forth
in the work letter (the "Work Letter") to be executed between
Landlord and Tenant and attached hereto as Exhibit "D" and
incorporated herein. Other than as set forth in the Work Letter,
Landlord shall have no obligation for the completion of the
Premises, and Tenant shall accept the Premises in their condition as
of the date of the commencement of the Lease term, except for those
items set forth in a written communication received by Landlord as
described in Exhibit D. In any event, Landlord shall not have any
obligation for the repair or replacement of any portions of the
interior of the Premises which are damaged or wear out during the
term hereof, regardless of the cause therefor, except if the cause
is attributable to the negligence or fault of Landlord. If the
Premises are not ready for occupancy on the date upon which the term
hereby demised is to begin, unless the delay is caused by Tenant or
its agents or employees, the rent under this Lease shall not
commence until the Premises are ready for occupancy, whereupon this
Lease, and all of the covenants, conditions and agreements herein
contained, shall be in full force and effect; and the expiration of
the term hereof shall be postponed for an equivalent period of time.
Such postponement of rent for the period prior to the delivery to
Tenant of the Premises ready for occupancy shall be in full
settlement of all claims which Tenant might otherwise have by reason
of said Premises not being ready for occupancy on the date specified
in Paragraph 2. Tenant may occupy the Premises prior to the
commencement of the Lease term, provided that: (a) it has obtained
Landlord's prior written consent thereto; (b) it will not in any way
hinder the tenant improvement work, if any, to be performed by
Landlord, and will cooperate with all reasonable requests of workers
and Landlord in conjunction therewith; and (c) the rent for such
period shall be at the monthly rate (prorated accordingly) set forth
in Paragraph 3 hereof. Upon Tenant's occupancy of the Premises all
of the provisions of this Lease shall be in full force and effect.
"Ready for occupancy", as that term is used herein, shall mean the
date that Landlord shall have substantially completed the Premises
or any remodeling work to be performed by Landlord to the extent
agreed to in the Work Letter. The certificate of the architect (or
other representative of Landlord) in charge of supervising the
completion or remodeling of the Premises shall control conclusively
the date upon which the Premises are ready for occupancy and the
obligation to pay rent begins as aforesaid. In addition to the
foregoing, if Landlord is delayed in delivering the Premises to
Tenant due to the failure of a prior occupant to vacate the same,
then the rent and term shall also be postponed as hereinabove set
forth, and such postponement shall be in full settlement of all
claims which Tenant may otherwise have by reason of the delay of
delivery.
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B. If, as a result of the postponement of the commencement of the
Primary Lease Term, the Primary Lease Term would begin other than on
the date set forth in Paragraph 2 hereof, the commencement date
shall be postponed and Tenant shall pay proportionate rent at the
same monthly rate set forth herein (also in advance) for such
partial month, and all other terms and conditions of this Lease
shall be in force and effect during such partial month. As soon as
the term commences, Landlord and Tenant shall execute an addendum to
this Lease, which may be requested by either party, setting forth
the exact dates of commencement and expiration of the Primary Lease
Term. Notwithstanding the provisions set forth in this Paragraph,
and except for circumstance beyond Landlord's control, if Landlord
is unable to deliver possession of the Premises within ninety (90)
days of the commencement date set forth in Paragraph 2 hereof, then
Tenant shall have the right to terminate this Lease upon written
notice to Landlord.
19. Removal of Tenant's Property:
All movable furniture and personal effects of Tenant not removed from the
Premises upon the vacation or abandonment thereof or upon the termination
of this Lease for any cause whatsoever shall conclusively be deemed to
have been abandoned and may be appropriated, sold, stored, destroyed or
otherwise disposed of by Landlord without notice to Tenant or any other
person and without obligation to account therefore; and Tenant shall pay
Landlord for all expenses incurred in connection with the disposition of
such property.
20. Holding Over:
Should Tenant hold over after the termination of this Lease and continue
to pay rent, and should Landlord accept such rent, without any express
written agreement as to such holding over, Tenant shall become a tenant
from month-to-month only upon each and all of the terms herein provided as
may be applicable to such month-to-month tenancy, but any such holding
over shall not constitute an extension of this Lease. During such holding
over Tenant shall pay rental equal to two hundred percent (200%) of the
last monthly rental rate and the other charges as provided herein. Such
tenancy shall continue until terminated by Landlord as provided by law or
until Tenant shall have given to Landlord a written notice at least thirty
(30) days prior to the intended date of termination of such monthly
tenancy of Tenant's intention to terminate such tenancy. Nothing contained
herein shall be construed as requiring Landlord to accept any rental
tendered by Tenant after the expiration of this Lease.
21. Control of Common Areas; Parking:
A. All automobile parking areas, driveways, entrances and exits thereto
and other facilities furnished by Landlord, including all parking
areas, truck way or ways, loading areas, pedestrian walkways and
ramps, landscaped areas, stairways and other areas and improvements
provided by Landlord both inside and outside the Building (all of
the foregoing are hereinafter collectively referred to as "Common
Areas") for the general use in common of tenants, their officers,
employees, agents, invitees, licensees, visitors and customers (all
of the foregoing are hereinafter collectively referred to as
"Permitted Users"), shall be at all times subject to the exclusive
control and management of Landlord, and Landlord shall have the
right at any time and from time to time to establish, modify and
enforce reasonable rules and regulations with respect to all such
Common Areas. Landlord shall have the right to construct, maintain
and operate lighting facilities within the Common Areas; to employ
personnel to operate and maintain the Common Areas; to change at any
time and from time to time the area, level, location and arrangement
of parking areas and other Common Areas; to restrict parking and
impose parking charges; to close all or any portion of the Common
Areas to such extent as may, in the opinion of Landlord's counsel,
be legally sufficient to prevent a public dedication thereof or the
accrual of any rights therein to any person or the public; to
discourage parking by other than Permitted Users; and to do and
perform such other acts in and to the Common Areas
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as, in the use of good business judgment, Landlord shall determine
to be advisable with a view to the improvement of the convenience
and use thereof by the Permitted Users. Reference in this section to
parking areas shall in no way be construed as giving Tenant any
rights or privileges in connection with such parking areas unless
such rights or privileges are expressly set forth herein. All
reasonable expenses incurred by Landlord in the maintenance and
operation of the Common Areas shall be included in the definition of
Operating Expenses.
B. Landlord shall not be responsible for unauthorized use of parking
spaces and may, at Landlord's sole option, relocate Tenant's parking
spaces to a suitable alternative parking area during repair or
reconstruction of the Building Complex parking areas. If at any time
Landlord is prevented by circumstances beyond its control from
providing the number of parking spaces specified, Tenant shall be
entitled to a proportionate abatement of the parking space rental
owed, and to no other claim or remedy. If Landlord installs parking
meters or uses an attendant to collect fees for parking, Landlord
will cause all charges imposed upon the Permitted Users of Tenant to
be credited to Tenant or its Permitted Users. See Exhibit F -
Agreement for Parking.
22. Surrender and Notices:
Upon the expiration or other termination of the term of this Lease, Tenant
shall promptly quit the Premises and surrender the Premises to Landlord
broom clean, in good order and condition, except for ordinary wear and
tear and loss by fire or other casualty (unless caused, whether by action
or inaction, by Tenant, its agents, servants, employees or invitees).
Tenant shall remove all of its movable furniture and other effects and
such alterations, additions and improvements as Landlord shall require
Tenant to remove pursuant to Paragraph 8 hereof. In the event that Tenant
fails to vacate the Premises in a timely manner as required, Tenant shall
be responsible to Landlord for all costs incurred by Landlord as a result
of such failure, including, but not limited to, any amounts required to be
paid to third parties who were to have occupied the Premises.
23. Acceptance of Premises by Tenant:
Taking possession of the Premises by Tenant shall be conclusive evidence
as against Tenant that said Premises were in the condition agreed upon
between Landlord and Tenant. Tenant also acknowledges that the Premises
are leased by Tenant on an "AS-IS" basis.
24. Subordination and Attornment:
This Lease, at Landlord's option, shall be subordinate to any mortgage,
deed of trust (now or hereafter placed upon the Building Complex), ground
lease or declaration of covenants (hereafter placed upon the Building
Complex) regarding maintenance and use of any areas contained in any
portion of the Building Complex, and to any and all advances made under
any mortgage or deed of trust and to all renewals, modifications,
consolidations, replacements and extensions thereof. Tenant agrees, with
respect to any of the foregoing documents, that no documentation other
than this Lease shall be required to evidence such subordination. If any
holder of a mortgage or deed of trust shall elect for this Lease to be
superior to the lien of its mortgage or deed of trust, and shall give
written notice thereof to Tenant, then this Lease shall automatically be
deemed prior to such mortgage or deed of trust, whether this Lease is
dated earlier or later than the date of said mortgage or deed of trust or
the date of recording thereof. Tenant agrees to execute such documents as
may be further required to evidence such subordination or to make this
Lease prior to the lien of any mortgage or deed of trust, as the case may
be, and by failing to do so within ten (10) days after written demand,
Tenant does hereby make, constitute and irrevocably appoint Landlord as
Tenant's attorney-in-fact and in Tenant's name, place and stead, to do so.
This power of attorney is coupled with an interest. Tenant hereby attorns
to all successor owners of the Building, whether or not
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such ownership is acquired as a result of a sale through foreclosure of a
deed of trust or mortgage, or otherwise. Notwithstanding the foregoing,
Tenant shall only be obligated to subordinate its leasehold interest to
any mortgage, deed of trust, ground lease or declaration of covenants now
or hereafter placed upon the Building Complex if the holder of such
mortgage or deed of trust or the landlord under such ground lease or the
declarant under such declaration of covenants will grant to Tenant a
non-disturbance agreement, using the form of document then being employed
by such holder, landlord or declarant for such purposes, which will
provide that Tenant, notwithstanding any default of Landlord hereunder,
shall have the right to remain in possession of the Premises described
herein in accordance with the terms and provisions of this Lease for so
long as Tenant shall not be in default under this Lease.
25. Payments After Termination:
No payments of money Tenant to Landlord after the termination of this
Lease, in any manner, or after giving of any notice of default (other than
a demand for payment of money) by Landlord to Tenant, shall reinstate,
continue or extend the term of this Lease or affect any notice given to
Tenant prior to the payment of such money, it being agreed that after the
service of notice of the commencement of a suit or after any final
judgment granting Landlord possession of the Premises, Landlord may
receive and collect any sums of rent due, or any other sums of money due
under the terms of this Lease, or may otherwise exercise any of its rights
and remedies hereunder. The payment of such sums of money, whether as rent
or otherwise, shall not waive said notice, or in any manner affect any
suit theretofore commenced or judgment theretofore obtained.
26. Authorities for Action and Notice:
A. Except as herein otherwise provided, Landlord may act in any matter
provided for herein by and through its Building Manager, or through
any other person who may from time to time be designated by Landlord
in writing.
B. All notices or demands required or permitted to be given to Landlord
hereunder shall be in writing, and shall be deemed duly served when
deposited in the United States Mail, with proper postage prepaid,
certified or registered, return receipt requested, addressed to
Landlord at 5275 DTC Parkway, Greenwood Village, Colorado 80111, or
at the most recent address of which Landlord has notified Tenant in
writing. All notices or demands required to be given to Tenant
hereunder shall be in writing, and shall be deemed duly served when
deposited in the United States Mail, with proper postage prepaid,
certified or registered, return receipt requested, addressed to
Chartwell International, Inc., 5275 DTC Parkway, Greenwood Village,
CO 80111. If Tenant fails to designate an address, such notice may
be mailed to Tenant's Premises in the Building. Either party shall
have the right to designate in writing, served as above provided, a
different address to which notice is to be mailed. The foregoing
shall in no event prohibit notice from being given as provided in
Rule 4 of the Colorado Rules of Civil Procedure, as the same may be
amended from time to time.
27. Security Deposit:
It is agreed that Tenant, concurrently with the execution of this Lease,
has deposited with Landlord, and will keep on deposit at all times during
the term hereof, the sum of Five Thousand One Hundred Dollars ($ 5,100.00)
would be required, the receipt of which is hereby acknowledged, as
security for the payment by Tenant of the rent herein agreed to be paid
and for the faithful performance of all the terms, conditions and
covenants of this Lease. If, at any time during the term hereof, Tenant
shall be in default in the performance of any provision of this Lease,
Landlord shall have the right to use said deposit, or so much thereof as
is necessary, in payment of any rent in default as aforesaid,
reimbursement of any expense incurred by Landlord, and in payment of any
damages incurred by Landlord by reason of Tenant's default. In such event,
Tenant shall, on written demand of Landlord, forthwith remit to Landlord a
sufficient amount in cash to
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restore said deposit to its original amount. In the event said deposit has
not been used as aforesaid, said deposit, or as much thereof as has not
been used for such purposes, shall be refunded to Tenant, without
interest, upon full performance of this Lease by Tenant. Landlord shall
have the right to commingle said deposit with other funds of Landlord.
Landlord may deliver the funds deposited herein by Tenant to any purchaser
of Landlord's interest in the Premises in the event such interest is sold,
and thereupon Landlord shall be discharged from further liability with
respect to such deposit. If claims of Landlord exceed said deposit, Tenant
shall remain liable for the balance of such claims.
28. Landlord's Lien:
Tenant hereby grants to Landlord a lien upon any and all furniture,
fixtures, inventory, leasehold improvements, accounts receivable, and
equipment belonging to the Tenant or used at, in or upon the Premises,
whether acquired by the Tenant before or after execution of this Lease, to
secure the due payment of all rent and other liabilities of the Tenant
hereunder. Upon failure of the Tenant to pay any part of any rent due
under this Lease, the Landlord may avail itself of all rights and remedies
then available under the Uniform Commercial Code as enacted in the State
in which the Premises are located. To accomplish the foregoing, Tenant (i)
hereby appoints Landlord as its agent and attorney-in-fact to sign any
Security Agreements and Financing Statements to be filed with the
Secretary of State and appropriate County in order to perfect this
security interest, and (ii) also agrees, if requested by Landlord, to
execute a Security Agreement and Financing Statement.
Upon written request by Tenant, Landlord agrees to subordinate its lien in
the movable trade fixtures, furniture, inventory and equipment in the
event Tenant is requested by any Lender to provide such collateral in
connection with a loan or extension of credit to Tenant. All fixtures,
walls carpeting, flooring, plumbing, electrical, heating and air
conditioning equipment and fixtures, and other similar leasehold
improvements installed by Tenant shall remain subject to the first lien of
Landlord until the termination of Tenant's right to possession of the
Premises, at which time they shall become the property of Landlord, at
Landlord's option.
29. Miscellaneous:
A. The rules and regulations attached hereto and marked Exhibit "C", as
well as such rules and regulations as may hereafter be adopted by
Landlord for the safety, care and cleanliness of the Premises and
the Building Complex and the preservation of good order therein, are
hereby expressly made a part hereof; and Tenant agrees to obey all
such rules and regulations. The violation of any of such rules and
regulations by Tenant shall be deemed an event of default of this
Lease by Tenant, affording Landlord all those remedies set out
herein. Landlord shall not be responsible to Tenant for the failure
of any other tenant or occupant of the Building to comply with any
of said rules and regulations.
B. The term "Landlord", as used in this Lease, so far as covenants or
obligations on the part of Landlord are concerned, shall be limited
to mean and include only the owner or owners of the Building at the
time in question. In the event of any transfer or transfers of the
title to the Building, the Landlord herein named (and in the case
of any subsequent transfers or conveyances, the then-grantor) shall
be automatically released, from and after the date of such transfer
or conveyance, from all liability with respect to the performance of
any covenants or obligations on the part of Landlord contained in
this Lease thereafter to be performed; provided that the grantee
assumes the duty to perform Landlord's covenants and obligations
hereunder, and provided that any funds in which Tenant has an
interest in the hands of Landlord or the then-grantor at the time of
such transfer shall be turned over to the grantee. Any amount then
due and payable to Tenant by Landlord or the then-grantor under any
provisions of this Lease shall be paid to Tenant at the time of any
transfer or conveyance.
23
<PAGE>
C. The termination or mutual cancellation of this Lease shall not work
a merger, and such termination or mutual cancellation shall, at the
option of Landlord, either terminate all subleases and subtenancies
or operate as an assignment to Landlord of any or all of such
subleases or subtenancies.
D. Tenant agrees that for the purposes of completing or making repairs
or alterations in any portion of the Building, Landlord may use one
or more of the street entrances, halls, passageways and elevators of
the Building.
E. This Lease shall be construed as though the covenants herein between
Landlord and Tenant are independent, and not dependent. Tenant shall
not be entitled to any setoff of the rent or other amounts owing
hereunder against Landlord if Landlord fails to perform its
obligations set forth herein; provided, however, that the foregoing
shall in no way impair the right of Tenant to commence a separate
action against Landlord for any violation by Landlord of the
provisions hereof so long as notice is first given to Landlord and
to any holder of a mortgage or deed of trust covering the Building
Complex or any portion thereof, and an opportunity is granted to
Landlord and such holder to correct such violation as provided in
subparagraph J of this Paragraph.
F. Landlord shall have the right upon thirty (30) days' written notice
to Tenant to substitute other premises within the Building for the
Premises, subject to the same terms and conditions as though such
substitute premises were originally leased to Tenant at the time of
the execution and delivery of this Lease; provided, however, that
the substituted premises shall contain at least as much square
footage as the originally leased Premises without any increase in
the Base Rent and other charges then being paid. Landlord agrees to
pay all reasonable moving expenses of Tenant, including the
reasonable replacement of tenant improvements incidental to such
substitution of premises.
G. If any clause or provision of this Lease is illegal, invalid or
unenforceable under present or future laws effective during the
term of this Lease, then and in that event, it is the intention of
the parties hereto that the remainder of this Lease shall not be
affected thereby; and it is also the intention of the parties to
this Lease that in lieu of each clause or provision of this Lease
that is illegal, invalid or unenforceable, there shall be added as a
part of this Lease a legal, valid and enforceable clause or
provision as similar in terms to such illegal, invalid or
unenforceable clause or provision as may be possible.
H. The captions of each Paragraph are added as a matter of convenience
only and shall be considered to be of no effect in the construction
of any provision or provisions of this Lease.
I. Except as herein specifically set forth, all terms, conditions and
covenants to be observed and performed by the parties hereto shall
be applicable to and binding upon their respective heirs,
administrators, executors, successors and assigns.
J. In the event of any alleged default on the part of Landlord
hereunder, Tenant shall give written notice to Landlord in the
manner herein set forth and shall afford Landlord a reasonable
opportunity to cure any such default. Notice to Landlord of any such
alleged default shall be ineffective unless Tenant shall send notice
of such default by certified or registered mail, with proper postage
prepaid, to each holder of a mortgage or deed of trust covering the
Building Complex or any portion thereof of whose address Tenant has
been notified in writing, and unless Tenant shall afford such holder
a reasonable opportunity to cure any alleged default on Landlord's
behalf. In no event will Landlord or any mortgagee be responsible
for any consequential damages incurred by Tenant, including, but not
limited to, lost profits or interruption of business, as a result of
any alleged default by Landlord.
If the Building is, at the execution hereof or at any time during
the term hereof, subject to a mortgage or deed of trust, the Tenant
agrees to give the holder
24
<PAGE>
thereof (the "Note Holder") written notice of each and every alleged
default by the Landlord under the Lease and agrees not to exercise
any of Tenant's remedies under the Lease unless the Note Holder
fails to cure such default within ten (10) days after the time for
cure thereof allotted to the Landlord under the forgoing
subparagraph or within such longer period as may be reasonably
necessary if such default cannot be cured within such ten (10) days.
The Tenant understands that the Note Holder shall have the right but
not the obligation or duty to cure any such default by the Landlord.
K. If the Tenant under this Lease is more than one entity or person,
the obligations imposed upon Tenant under this Lease shall be joint
and several.
L. No act or thing done by Landlord or Landlord's agent during the term
hereof, including, but not limited to, any agreement to accept
surrender of the Premises or to amend or modify this Lease, shall be
deemed to be binding upon Landlord unless such act or thing shall be
done by a general partner of Landlord or a party designated in
writing by Landlord as so authorized to act. The delivery of keys to
Landlord or Landlord's agent, employees or officers shall not
operate as a termination of this Lease or a surrender of the
Premises. No payment by Tenant, or receipt by Landlord, of a lesser
amount than the monthly rent herein stipulated shall be deemed to be
other than on account of the earliest stipulated rent, nor shall any
endorsement of statement on any check or any letter accompanying any
check, or payment as rent, be deemed an accord and satisfaction; and
Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such rent or to pursue
any other remedy available to Landlord.
M. Landlord shall have the right to change the name of the Building, to
construct other buildings or improvements in any plaza or other area
designated by Landlord for use by tenants, or to change the location
or character of, or make alterations of or additions to, any of said
plazas or other areas.
N. Tenant acknowledges and agrees that it has not relied upon any
statements, representations, agreements or warranties except such as
are expressed in this Lease, and that no amendment or modification
of the Lease shall be valid or binding unless expressed in writing
and executed by Landlord and Tenant in the same manner as the
execution of this Lease.
O. Liability. Tenant agrees that Tenant shall look solely to the estate
of Landlord in the Building for the collection of any judgment (or
other judicial process) requiring the payment of money by Landlord
in the event of any default or breach by Landlord with respect to
any of the terms and provisions of this Lease to be observed or
performed by Landlord, subject, however, to the prior rights of the
holder of any mortgage covering the Building, and no other assets of
Landlord shall be subject to levy, execution or other judicial
process for the satisfaction of the Tenant's claim, and Landlord
shall not be liable for any such default or breach except to the
extent of Landlord's estate in the Building.
P. Time is of the essence hereof.
Q. Tenant and the parties executing this Lease on behalf of Tenant
represent to Landlord that such parties are authorized to do so by
requisite action of Tenant's board of directors, or partners, as the
case may be, and agree, upon request, to deliver to Landlord a
resolution or similar document to that effect.
R. Landlord and Tenant understand that notwithstanding certain
provisions to the contrary contained herein, a trustee or debtor in
possession under the Bankruptcy Code of the United States may have
certain rights to assume or assign this Lease. Landlord and Tenant
further understand that, in any event, Landlord is entitled under
the Bankruptcy Code to Adequate Assurance of future performance of
the terms and provisions of this Lease. For purposes of any such
assumption or assignment,
25
<PAGE>
"Adequate Assurance" shall include at least the following:
(1) In order to assure Landlord that the proposed assignee will have the
resources with which to pay the rent called for herein, any proposed
assignee must have, as demonstrated to Landlord's satisfaction, a
net worth (as defined in accordance with generally accepted
accounting principles consistently applied) at least as great as the
net worth of Tenant on the date this Lease became effective,
increased by seven percent (7%), compounded annually, for each year
from the Lease Commencement Date through the date of the proposed
assignment. The financial condition and resources of Tenant were a
material inducement to Landlord in entering into this Lease.
(2) Any proposed assignee of this Lease must assume and agree to be
personally bound by the terms, provisions, and covenants of this
Lease.
S. Any obligation of the Landlord hereunder which is delayed or not
performed due to acts of God, strike, riot, war, weather, failure to
obtain labor and materials at a reasonable cost, or any other reason
beyond the control of the Landlord, shall not constitute a default
hereunder and shall be performed within a reasonable time after the
end of such cause for delay or nonperformance.
T. Tenant shall not record this Lease or a memorandum hereof without
the prior written consent of Landlord. In the event that Tenant
violates this provision, this Lease shall be null, void, and of no
further force and effect, except that Tenant shall be liable to
Landlord, as liquidated damages, in the amount of the remaining
rental to be paid hereunder.
U. During the first month of each Lease Year, Tenant will provide an
Annual Report to Landlord for Tenant's preceding fiscal year.
V. This Lease may be executed in two or more duplicate originals. Each
duplicate original shall be deemed to be an original hereof, and it
shall not be necessary for a party hereto to produce more than one
such original as evidence hereof.
W. The Tenant does hereby specifically allow and permit the Landlord to
execute an Assignment Agreement, including a General Assignment of
Rents, and to assign this particular Lease.
X. Tenant shall pay, or cause to be paid, before delinquency, any and
all taxes levied or assessed and which become payable during the
term hereof upon all of Tenant's income, leasehold improvements,
equipment, furniture, fixtures and personal property located in the
Premises. In the event that any or all of Tenant's leasehold
improvements, equipment, furniture, fixtures and personal property
shall be assessed and taxed with the Building, Tenant shall pay to
Landlord as Additional Rent hereunder its share of such taxes within
ten (10) days after delivery to Tenant by Landlord of a statement in
writing setting forth the amount of such taxes applicable to
Tenant's property.
Y. During the term of the Lease, Tenant shall comply with all statutes,
ordinances, rules, orders, regulations and requirements of the
federal, state, county and city governments and all departments
thereof applicable to the presence, storage, use, maintenance and
removal of toxic, hazardous or contaminated substances
(collectively, "hazardous material") in, on or about the Premises,
which presence, storage, use, maintenance or removal is caused or
permitted by Tenant. In no event shall the aforesaid be construed to
mean that Landlord has given or will give its consent to Tenant's
storing, using, maintaining or removing hazardous materials in, on
or about the Premises.
Z. The submission of this document for examination and review does not
constitute an option, an offer to lease space in the Building or an
agreement to lease. This
26
<PAGE>
document shall have no binding effect on the parties unless and
until executed by both Landlord and Tenant and will be effective
only upon Landlord's execution of the same.
29. Brokerage:
Tenant represents and warrants to Landlord that it has dealt only with
Frederick Realty Interests and Moore & Co.(the "Broker") in the
negotiation of this Lease. Landlord shall make payment of the brokerage
fee due to the Broker pursuant to and in accordance with a separate
agreement with the Broker. Tenant hereby agrees to indemnify and hold
Landlord harmless of and from any and all damages, losses, costs or
expenses (including without limitation, all attorneys' fees and
disbursements) by reason of any claim of or liability to any other broker
or other person claiming through Tenant and arising out of or in
connection with the negotiation, execution and delivery of this Lease.
Additionally, Tenant acknowledges and agrees that Landlord shall have no
obligation for payment of any brokerage fee or similar compensation to any
person with whom Tenant has dealt or may in the future deal with respect
to leasing of any additional or expansion space in the Building or
renewals or extensions of this Lease.
30. RENT SCHEDULE
Rent Schedule subject to Paragraph 4 of this Lease.
<TABLE>
<CAPTION>
================================================================================
BASE RENTAL TOTAL BASE
RATE/RSF/YR MONTHLY RENT FOR
PERIOD DATES FOR PERIOD BASE RENT PERIOD
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Month 6/14/97 thru $0.00 RSF $ 0.00 $ 0.00
and 7/31/1997
seventeen
days
- --------------------------------------------------------------------------------
1 Month 8/1/97 thru $8.00 RSF $2,720.00 $2,720.00
8/31/97
- --------------------------------------------------------------------------------
11 Months 9/1/97 thru $14.00 $4,760.00 $52,360.00
7/31/98
- --------------------------------------------------------------------------------
12 Months 8/1/98 thru $15.00 $5,100.00 $61,200.00
7/31/99
- --------------------------------------------------------------------------------
12 Months 8/1/99 thru $15.50 $5,270.00 $63,240.00
7/31/2000
================================================================================
</TABLE>
27
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the day
and year below written.
LANDLORD:
Address: 5275 DTC Parkway 5275 DTC, LLC,
Greenwood Village, CO 80111 a Colorado limited liability company
By:
---------------------------------
Name:
-------------------------------
Title: Manager
------------------------------
Date:
-------------------------------
TENANT:
Address: 5275 DTC Parkway Chartwell International, Inc.
------------------- -----------------------------
Greenwood Village, CO 80111 A Nevada Corporation
- --------------------------- --------------------
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Date:
-------------------------------
28
<PAGE>
ACKNOWLEDGEMENT OF TENANT
State of )
)ss.
County of )
The foregoing Office Building Lease was acknowledged before me this _____ day of
_____________,1996, by_________________________________________________________
_______________________________________________________________________________
__________________________________, as Tenant.
WITNESS my hand and official seal.
My Commission expires:
---------------------------
- ---------------------------------------
Notary Public
ACKNOWLEDGEMENT OF LANDLORD
State of )
)ss.
County of )
The foregoing Office Building Lease was acknowledged before me this _____ day
of ______________, 19__ , by_________________________ as Manager of 5275 DTC,
LLC, a Colorado limited liability company, as Landlord.
WITNESS my hand and official seal.
My Commission expires:
----------------------------
- ---------------------------------------
Notary Public
29
<PAGE>
EXHIBIT "A"
PLAN OF PREMISES
5275 DTC PARKWAY
[FLOOR PLAN]
A-1
<PAGE>
EXHIBIT "B"
LEGAL DESCRIPTION
Covering the Land in the State of Colorado and County of Arapahoe Described as:
A Part of Lot 1, A resubdivision of Block 1, Denver Technological Center,
located in the Northeast one-quarter section 16, Township 5 South, range 67 West
of the Sixth Principal Meridian, more particularly described as follows:
Commencing at the Northwest corner of said Lot 1, Thence N 89 degrees 58 minutes
54 seconds along said north line of said Lot 1 a distance of 3.00 feet to the
point of beginning on the east right-of-way line of South Syracuse Street;
thence continuing north 89 degrees 58 minutes 54 seconds east along said north
line a distance of 410.16 feet to the northwest corner of the parcel of land
described in Book 2643 at Page 27, Arapahoe County Records; thence south 00
degrees 11 minutes 53 seconds east along the west line of said parcel of land a
distance of 277.86 feet to the southwest corner of said parcel on the northerly
right-of-way line of East Prentice Avenue; thence along said northerly
right-of-way line east of Prentice Avenue and said east right-of-way of South
Syracuse Street the following (3) courses:
1. North 72 degrees 47 minutes 12 seconds west a distance of 347.93 feet to the
point of curve;
2. Along the arc of said curve to the right, having a central angle of 73
degrees 18 minutes 20 seconds and a radius of 112.79 feet, a distance of 144.31
feet to the point of tangent
3. North 00 degrees 31 minutes 08 seconds east along said tangent line a
distance of 66.01 feet to the point of beginning, County of Arapahoe, State of
Colorado.
B-1
<PAGE>
EXHIBIT "C"
RULES AND REGULATIONS
Landlord and Tenant agree that the following Rules and Regulations shall
be and hereby are made a part of this Lease, and Tenant agrees that Tenant's
employees and agents, or any others permitted by Tenant to occupy or enter the
Premises, will at all times abide by said Rules and Regulations:
1. The sidewalks entries, passages, corridors, stairways, and elevators
of the Building shall not be obstructed by Tenant, or Tenant's
agents or employees, or used for any purpose other than ingress to
and egress from the Premises.
2. Furniture, equipment or supplies will be moved in or out of the
Building only upon the elevator designated by Landlord and then only
during such hours and in such manner as may be prescribed by
Landlord. Landlord shall have the right to approve or disapprove the
movers or moving company employed by Tenant. Tenant shall cause its
movers to use only the loading facilities and elevator designated by
Landlord. In the event Tenant's movers damage the elevator or any
part of the Building, Tenant shall forthwith pay to Landlord the
amount required to repair said damage.
3. No safe or articles, the weight of which may in the opinion of
Landlord constitute a hazard or damage to the Building or Building's
equipment, shall be moved into the Premises.
4. Safes and other equipment, the weight of which is not excessive,
shall be moved into, from and about the Building only during such
hours and in such manner as shall be prescribed by Landlord; and
Landlord shall have the right to designate the location of such
articles in the Premises.
5. During the entire term of this Lease, Tenant shall at Tenant's
expense install and maintain under each and every caster chair a
chair pad to protect the carpeting.
6. No sign, advertisement or notice shall be inscribed, painted or
affixed on any part of the inside or outside of the Building unless
of such color, size and style and in such place upon or in the
Building as shall be first designated by Landlord; but there shall
be no obligation or duty on the part of Landlord to allow any sign,
advertisement or notice to be inscribed, painted or affixed on any
part of the inside or outside of the Building. A Directory in a
conspicuous place, with the name(s) of Tenant(s), not to exceed one
name per 500 square feet of space contained in the Premises, will be
provided by Landlord; any necessary revision to this Directory will
be made by Landlord at Tenant's expense, within a reasonable time
after notice from Tenant of the change making the revision
necessary. No furniture shall be placed in front of the Building or
in any lobby or corridor, without the prior written consent of
Landlord. Landlord shall have the right to remove all nonpermitted
signs and furniture, without notice to Tenant, and at the expense of
Tenant.
7. Tenant shall not do or permit anything to be done in the Premises or
bring or keep anything therein which would in any way increase the
rate of property insurance on the Building or on property kept
therein, constitute a nuisance or waste, or obstruct or interfere
with the rights of other tenants or in any way injure or annoy them,
or conflict with the laws relating to fire or with any regulations
of the fire department or with any insurance policy upon the
Building or any part thereof or conflict with any of the rules or
ordinances of the Department of Health of the City and County where
the Building is located.
8. Tenant shall not employ any person or persons other than the janitor
or cleaning contractor of Landlord for the purpose of cleaning or
taking care of the Premises, without the prior written consent of
Landlord. Landlord shall be in no way responsible
C-1
<PAGE>
to Tenant for any loss of property from the Premises, however
occurring, or for any damage done to Tenant's furniture or equipment
by the janitor or any of the janitor's staff, or by any other person
or persons whomsoever. The janitor of the Building may at all times
keep a pass key, and other agents of Landlord shall at all times be
allowed admittance to the Premises.
9. Water closets and other water fixtures shall not be used for any
purpose other than that for which they are intended; and any damage
resulting to the same from misuse on the part of Tenant or Tenant's
agents or employees shall be paid for by Tenant. No person shall
waste water by tying back or wedging the faucets or in any other
manner.
10. Except for seeing eye dogs for the blind and hearing ear dogs for
the deaf, no animals shall be allowed in the offices, halls,
corridors and elevators of the Building. No persons shall disturb
the occupants of this or adjoining buildings or premises by the use
of any radio, sound equipment or musical instrument or by the making
of loud or improper noises.
11. Except for wheelchairs, no vehicles, including bicycles, shall be
permitted in the offices, hail, corridors, and elevators in the
Building, nor shall any vehicles be permitted to obstruct the
sidewalks or entrances of the Building.
12. Tenant shall not allow anything to be placed on the outside of the
Building, nor shall anything be thrown by Tenant or Tenant's agents
or employees out of the windows or doors, or down the corridors,
elevator shafts, or ventilating ducts or shafts of the Building.
Tenant, except in case of fire or other emergency, shall not open
any outside window.
13. No additional lock or locks shall be placed by Tenant on any door in
the Building unless written consent of Landlord shall first have
been obtained. A reasonable number of keys to the Premises and the
toilet rooms, if locked by Landlord, will be furnished by Landlord;
and neither Tenant nor Tenant's agents or employees shall have any
duplicate keys made. At the termination of this tenancy, Tenant
shall promptly return to Landlord all keys to offices toilet rooms
or vaults.
14. No window shades, blinds, screens, draperies or other window
coverings will be attached or detached by Tenant without Landlord's
prior written consent. Tenant agrees to abide by Landlord's rules
with respect to maintaining uniform curtains, draperies and linings
at all windows and hallways.
15. No awnings shall be placed over any window.
16. If any Tenant desires telegraphic, telephonic or other electric
connections, Landlord or Landlord's agents will direct the
electricians as to where and how the wire may be introduced; and
without such directions, no boring or cutting for wires will be
permitted. Any such installation and connection shall be made at
Tenant's expense.
17. Tenant shall not install or operate any steam or gas engine or
boiler in the Premises. The use of oil, gas or inflammable liquids
for heating, lighting or any other purpose is expressly prohibited.
Explosives or other articles deemed extra hazardous shall not be
brought into the Building Complex.
18. Any painting or decorating as may be agreed to be done by and at the
expense of Landlord shall be done during regular weekday working
hours. Should Tenant desire such work on Saturdays, Sundays,
holidays or outside of regular working hours, Tenant shall pay for
the extra cost thereof.
19. Except as permitted by Landlord, Tenant shall not mark upon, paint
signs upon, cut, drill into, drive nails or screws into, or in any
way deface the walls, ceilings, partitions or floors of the Premises
or of the Building; and any defacement, damage or injury caused by
Tenant or Tenant's agents or employees shall be paid for by
C-2
<PAGE>
Tenant.
20. Landlord shall, with reasonable prior notice, at all times have the
right, by and through Landlord's officers or agents, to enter the
Premises and show the same to persons wishing to lease them, and
may, at any time within sixty (60) days preceding the termination of
Tenant's Lease Term, place upon the doors and windows of the
Premises the notice "For Rent," which notice shall not be removed by
Tenant.
21. Use of the parking areas of the Building Complex shall be subject to
the following rules:
A. Drivers shall use due care not to injure pedestrians, other
vehicles, or the fixtures and improvements within the parking
areas.
B. Vehicles shall be parked only in marked parking spaces, and
not in ramps, corridors, fire lanes, entrances, exits or other
areas posted for no parking.
C. From time to time Landlord may promulgate such other
reasonable and nondiscriminatory rules and regulations as
Landlord deems necessary or useful, and Tenant and its
Permitted Users shall be bound thereby.
22. Tenant and its employees shall use ordinary care to safeguard their
belongings by locking the Premises when not in use and during times
other than Ordinary Business Hours, by locking their automobiles,
and by taking reasonable precautions with respect to items such as
handbags, wallets and other valuables.
23. Tenant agrees that Landlord may reasonably amend, modify, delete or
add new and additional rules and regulations for the use and care of
the Premises, the Building and the Building Complex. Tenant agrees
to comply with all such rules and regulations upon notice to Tenant
from Landlord. In the event of any breach of any rules and
regulations herein set forth, or any reasonable amendments,
modifications or additions thereto, Landlord shall have all remedies
set forth in this Lease in the event of default by Tenant.
C-3
<PAGE>
Exhibit D - Work Letter
WORK LETTER
This EXHIBIT D is dated JUNE 7, 1997 between 5275 DTC, LLC, A COLORADO
LIMITED LIABILITY COMPANY ("Landlord") and CHARTWELL INTERNATIONAL, INC., A
NEVADA CORPORATION ("Tenant").
1. This EXHIBIT D is attached to and forms a part of that certain
office lease dated JUNE 7, 1997, (the "Office Lease") pursuant to which Landlord
has leased to Tenant office space in the building located at 5275 DTC PARKWAY,
GREENWOOD VILLAGE, COLORADO 80111 (the "Building").
2. Tenant agrees to accept the Premises in their "as is" condition
other than Landlord's Work as set forth in this EXHIBIT D and Landlord shall
have no other obligation for completion of the Premises.
3. Landlord's Work shall consist solely of the minor modification,
repair and maintenance items as enumerated below:
"AS IS; WHERE IS"
4. By taking possession of the Premises Tenant will be deemed to have
accepted the Premises in their condition on the date of delivery of possession
and to have acknowledged that Landlord had performed all of Landlord's Work as
required by this EXHIBIT D and that there are no items needing additional work
or repair. The punch list will not include any damage to Premises caused by
Tenant's move-in or early access if permitted. Damage caused by Tenant will be
repaired or corrected by Landlord at Tenant's expense. Tenant acknowledges that
neither Landlord nor its agents or employees have made any representations or
warranties as to the suitability or fitness of the Premises for the conduct of
Tenant's business or for any other purpose, nor has Landlord or its agents or
employees agreed to undertake any alterations or construct any tenant
improvements to the Premises except as expressly provided in this Lease and this
EXHIBIT D. If Tenant fails to submit a punch list to Landlord prior to
occupancy, it will be deemed that there are no items needing additional work or
repair.
This EXHIBIT D is executed by Landlord and Tenant below:
LANDLORD: TENANT:
5275 DTC, LLC, CHARTWELL INTERNATIONAL, INC.
A COLORADO LIMITED LIABILITY COMPANY A NEVADA CORPORATION
By: By:
--------------------------- -------------------------------
Name: Name: Janice A. Jones
------------------------- -----------------------------
Title: Title: CHAIRMAN OF THE BOARD
------------------------ ----------------------------
Date: Date:
------------------------- -----------------------------
D- 1
<PAGE>
Exhibit E - Agreement for Signage
AGREEMENT FOR SIGNAGE
THIS AGREEMENT FOR SIGNAGE is dated this 7TH day of JUNE, 1997
between 5275 DTC, LLC, A COLORADO LIMITED LIABILITY COMPANY, (the "Landlord")
and CHARTWELL INTERNATIONAL, INC., A NEVADA CORPORATION (the "Tenant").
W I T N E S S E T H :
A. By Office Lease dated JUNE 7, 1997, Landlord leased to Tenant
certain space located at 5275 DTC PARKWAY, GREENWOOD VILLAGE, COLORADO 80111.
B. Landlord is willing to provide signage to Tenant AT TENANT'S
EXPENSE pursuant to the terms and conditions contained herein.
NOW, THEREFORE, the parties agree as follows:
1. One (1) door sign, bearing the name of the tenant company and
suite number, to be located on the front door made out of vinyl letters, will be
provided at TENANT'S expense.
2. One (1) building-typical identification sign will be displayed
on the wall located on DTC Parkway. The building-typical identification will be
provided by the Landlord at the TENANT'S expense.
3. Default. Tenant shall be in default under this Agreement upon
the occurrence of any of the following events:
3.1 Tenant is in default for any reason pursuant to the
terms and conditions of the Office Lease.
4. Remedies. Upon the occurrence of an event of default, Landlord shall
be entitled to declare this Agreement terminated, to terminate the rights of
Tenant to utilize the signage, and seek whatever damages Landlord may deem
reasonable and proper including, without limitation, its fees and expenses
(including attorneys' fees) incurred in pursuing such action.
IN WITNESS WHEREOF, the Landlord and Tenant have executed this statement
on the date above written.
LANDLORD: TENANT:
5275 DTC, LLC
By: By:
-------------------------- -------------------------------
Name: Name:
------------------------ -----------------------------
Title: Title:
----------------------- ----------------------------
Date: Date:
------------------------ -----------------------------
<PAGE>
Exhibit F - Agreement for Parking
AGREEMENT FOR PARKING
This AGREEMENT FOR PARKING is dated this 7TH day of JUNE, 1997
between 5275 DTC, LLC, A COLORADO LIMITED LIABILITY COMPANY, ("Landlord") and
CHARTWELL INTERNATIONAL, INC., A NEVADA CORPORATION ("Tenant").
W I T N E S S E T H
A. By Office Lease dated JUNE 7, 1997, Landlord leased to Tenant
certain office building space located at 5275 DTC PARKWAY, GREENWOOD VILLAGE,
COLORADO 80111 (the "Building").
B. Appurtenant to the Building are uncovered parking spaces. Tenant
desires to lease from Landlord parking spaces in said area.
C. Landlord is willing to let certain parking spaces to Tenant pursuant
to the terms and conditions contained herein.
NOW, THEREFORE, the parties agree as follows:
1. Lease of Parking Spaces. Landlord hereby leases to Tenant SIXTEEN
(16) parking spaces located in the improvements adjacent to the Building. Said
Lease shall be for a period concurrent with the term of the Office Lease and
rental shall be as follows:
<TABLE>
<CAPTION>
========================================================================================
NO. OF RATE/STALL/ TOTAL FOR
PERIOD DATES STALLS/LOCATION MONTH MONTHLY PERIOD
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
37 Months 6/14/97 thru Sixteen (16) $0.00 $0.00 $0.00
and 7/31/2000
seventeen
days
========================================================================================
</TABLE>
Said amount shall be payable on or before the first day of each month of
this Lease, without setoff, deduction or other claim.
2. Nonexclusive. This Lease creates a license to utilize the parking
spaces above- referenced. It is not a Lease of specific parking spaces and no
parking spaces shall be reserved for the use of the Tenant.
3. Operation of Parking Spaces. Tenant agrees to comply with all rules
and regulations imposed by Landlord for the operation, utilization and
maintenance of the parking spaces. Tenant shall not undertake any activity which
will increase Landlord's insurance or create a disturbance or waste to the
parking spaces. Landlord shall have the right, at any time and from time to time
by written notice to Tenant, to designate specific parking spaces for use by
Tenant, its agents, employees and invitees, in which case Tenant shall use, and
shall require its agents, employees and invitees to use only such spaces.
4. Default. Tenant shall be in default under this Agreement upon the
occurrence of any of the following events:
4.1 Failure to pay the rental described herein when due.
4.2 Tenant is in default for any reason pursuant to the terms and
conditions of the Office Lease.
<PAGE>
5. Remedies. Upon the occurrence of an event of default, Landlord shall
be entitled to declare this Agreement terminated, to terminate the rights of
Tenant to utilize the parking spaces, and seek whatever damages Landlord may
deem reasonable and proper including, without limitation, its fees and expenses
(including attorneys' fees) incurred in pursuing such action.
IN WITNESS WHEREOF, the Landlord and Tenant have executed this statement
on the date above written.
LANDLORD: TENANT:
5275 DTC, LLC, CHARTWELL INTERNATIONAL, INC.,
A COLORADO LIMITED LIABILITY A NEVADA CORPORATION
COMPANY
By: By:
------------------------- -----------------------------
Name: Name:
----------------------- ---------------------------
Title: Title:
---------------------- --------------------------
Date: Date:
----------------------- ---------------------------
<PAGE>
Exhibit G - Guarantee
GUARANTEE OF LEASE
THIS GUARANTEE is made between JANICE A. JONES, AS AN INDIVIDUAL (the
"Guarantor"), and 5275 DTC , LLC, , A COLORADO LIMITED LIABILITY COMPANY (the
"Landlord"), and CHARTWELL INTERNATIONAL, INC., a NEVADA corporation (the
"Tenant") who represent and agree as follows:
1. Tenant has executed a lease (the "Lease"), dated the ____ day of
June, for property located at 5275 DTC PARKWAY, GREENWOOD VILLAGE, COLORADO
80111, and more particularly described in the Lease.
2. This Guarantee is given by the Guarantor to induce the Landlord to
enter into the Lease with the Tenant, and the parties understand that the
Landlord would not enter into the Lease without this Guarantee. It is expressly
understood that if this Guarantee is signed after the execution of the Lease,
the Landlord would not have entered into the Lease without the prior commitment
by the Guarantor to execute this Guarantee. Guarantor hereby acknowledges and
confirms that this Guarantee is supported by adequate consideration.
3. Guarantor hereby, jointly and severally, unconditionally and
irrevocably guarantees to the Landlord the full, faithful, prompt and complete
performance by Tenant of each and every obligation, condition and provision to
be performed by the Tenant, and any assignee of Tenant, under the Lease.
4. This Guarantee shall be binding upon the Guarantor for all option
periods and/or assignments, renewals or extensions of the Lease, and shall
include any and all modifications of the Lease or amendments thereto at any time
made by the Tenant and Landlord. Landlord and Tenant shall have no obligation to
obtain Guarantor's approval prior to executing or making any renewals,
extensions, modifications or other amendments to the Lease, and the failure by
Landlord and Tenant to obtain such approval shall not in any way affect or
diminish the validity and enforceability of this Guarantee.
5. Guarantor further agrees to indemnify, save and hold harmless
Landlord from any and all loss, damage, liability, costs and expense in any way
resulting from or arising out of the failure of the Tenant to perform fully,
faithfully and completely any one or more of the duties, liabilities and/or
obligations under the Lease, or as the same may be modified, amended, renewed
and/or extended. In the event of a default by Tenant, Landlord may commence any
action or proceeding against the Guarantor, or may otherwise exercise any remedy
available at law or in equity to enforce the provisions of this Guarantee.
Landlord may maintain successive actions for successive defaults. Landlord's
rights hereunder shall not be exhausted by Landlord's exercise of any of its
rights or remedies or by any such action or by any number of successive actions,
until and unless all obligations hereby guaranteed have been paid and fully
performed.
6. No waiver or delay by the Landlord of the enforcement of any of its
rights and/or remedies under the Lease shall affect the obligations of Guarantor
under this Guarantee.
7. The obligation of the Guarantor hereunder is joint and several with
the Tenant. Landlord may proceed to enforce this obligation of Guarantor against
Guarantor and Tenant, or either of them, without first proceeding against the
other. The right of Landlord to enforce the obligations of Guarantor shall not
be postponed, delayed or otherwise prejudiced by the commencement of proceedings
(whether voluntary or involuntary) to have the Tenant named as a debtor under
the Federal Bankruptcy Code, or under any similar state or federal law. If
Tenant becomes insolvent or is adjudicated a bankrupt or files a petition for
reorganization, arrangement or similar relief under any present or future
provisions of the Federal Bankruptcy Code, or similar state or federal law, or
if such a petition filed by creditors of Tenant shall be approved by a court, or
if Tenant shall seek a judicial readjustment of the rights of its creditors
under any present or future federal or state law, or if a receiver of all or any
part of Tenant's
<PAGE>
property is appointed by any state or federal court:
7.1 If the Lease is terminated or rejected, or the obligations of Tenant
thereunder are modified, Landlord shall have the right to recover from the
undersigned that which Landlord would be entitled to recover from Tenant under
the Lease in the event of a default under the Lease by the Tenant; and
7.2 If any obligation under the Lease is performed by Tenant, and all or
any part of such performance is avoided or recovered from Landlord as a
preference, fraudulent transfer or otherwise, in any bankruptcy, insolvency,
liquidation, reorganization or other proceeding involving Tenant, the liability
of Guarantor under this Guarantee shall remain in full force and effect for any
part of the performance which is so avoided or recovered.
8. Tenant agrees to notify Guarantor of any defaults, or declared
defaults, under the Lease, and Landlord may, but shall have no obligation to
provide notice of any such defaults to Guarantor. Any notice or notices given by
Landlord to Guarantor shall be deemed to be for convenience only, and shall not
release Tenant of its obligation to give notice of any defaults or declared
defaults to Guarantor. The failure of Landlord to give notice of any such
defaults shall in no way prejudice Landlord's right to enforce this Guarantee;
but Landlord may not enforce this Guarantee until and unless Landlord has
complied with any requirements (contained in the Lease) for notice to Tenant of
any such default.
9. This Guarantee shall be binding upon the parties hereto, their
heirs, successors, representatives and assigns.
10. If any portion of this Guarantee is deemed to be unenforceable by a
court of competent jurisdiction, this Guarantee shall be deemed to be modified
only to the extent necessary to comply with applicable law.
11. Guarantor specifically understands and agrees that if Landlord
enforces any of its rights hereunder as a result of any default under the Lease,
Guarantor shall be liable to pay all attorneys' fees and costs incurred by
Landlord as a result of the default.
12. If there is more than one Guarantor or more than one Tenant or
Landlord, the singular shall also be deemed to mean the plural. If there is more
than one Guarantor, the obligations of the Guarantors shall be joint and
several. The release of any one or more Tenant(s) and/or Guarantor(s) shall not
reduce the obligation of the remaining Tenant(s) and Guarantor(s) for all
amounts due or to become due under the Lease.
13. This Agreement shall be construed according to the laws of the State
where the Premises are located.
14. If Landlord has any interest in any collateral to secure all or any
portion of Tenant's obligation under the Lease, or to secure any other
obligations of Tenant to Landlord, such interest shall be deemed to be held for
the benefit of Landlord only and shall not inure at any time to or for the
benefit of Guarantor. Landlord shall have no obligation to record, maintain or
otherwise enforce any such security interest, and Landlord's failure to do so
shall neither diminish the enforceability of this Guarantee nor create any claim
or right of Guarantor against Landlord.
15. Nothing in this shall be deemed to grant or allow to Guarantor any
right of possession of the Premises, whether before or after any payment by
Guarantor under the Lease.
16. Guarantor acknowledges that Landlord is specifically relying on
Guarantor's financial statements dated N/A, delivered to Landlord by Guarantor,
in accepting this Guarantee and entering into the Lease.
17. The liability of the Guarantor hereunder shall in no way be affected
by, and Guarantor expressly waives any defenses that may arise by reason of, (a)
the release or discharge of the Tenant in any creditors' workout, receivership,
bankruptcy or other proceedings; (b) the impairment, limitation or modification
of the liability of the Tenant or the estate of the Tenant
<PAGE>
in bankruptcy, or of any remedy for the enforcement of the Tenant's liability
under the Lease which results from the operation of any present or future
provision of the federal Bankruptcy Code or other Statute, or from the decision
in any court; (c) the rejection or disaffirmance of the Lease in any such
proceeding; (d) the modification, assignment, or transfer of the Lease by
Tenant; (e) any disability or other defense of the Tenant; or (f) the cessation
from any cause whatsoever of the liability of the Tenant, other than full
compliance therewith by the Tenant.
18. No payment by Guarantor shall entitle Guarantor under any
obligations owed by Tenant to Guarantor, by subrogation or otherwise, to any
payment by Tenant under or out of the property of the Tenant, including but not
limited to, the revenues derived from Premises, except after payment in full to
Landlord of all amounts due and payable by Tenant to Landlord pursuant to the
Lease. Guarantor hereby assigns to Landlord all of Guarantor's rights to any
payments or distributions to which Guarantor may be entitled from Tenant out of
any bankruptcy or similar state or federal proceeding in which filing of claims
is required, and Guarantor hereby directs all applicable persons to make such
distributions to Landlord, and not to Guarantor, until such time as all amounts
due under the Lease to Landlord have been fully paid.
19. This Guarantee shall be enforced in accordance with the laws of the
State of Colorado, and the parties agree that venue of any disputes hereunder
shall be in ARAPAHOE COUNTY, COLORADO.
IN WITNESS WHEREOF, the parties have signed this Guarantee on the dates
indicated below.
LANDLORD: TENANT:
5275 DTC , LLC, CHARTWELL INTERNATIONAL, INC.
A COLORADO LIMITED LIABILITY COMPANY A NEVADA CORPORATION
By: By:
----------------------------- -----------------------------
Name: Name:
--------------------------- ---------------------------
Title: Title:
-------------------------- --------------------------
Date: Date:
--------------------------- ---------------------------
GUARANTOR: JANICE A. JONES
By:
------------------------
Title:
---------------------
Date:
----------------------
Address:
----------------------------
----------------------------
(S.S.#)
---------------------
<PAGE>
STATE OF COLORADO )
) SS.
COUNTY OF DENVER )
Sworn to before me this day of
,199 , by
Witness my hand and official seal.
My commission expires
Notary Public
STATE OF COLORADO )
) SS.
COUNTY OF DENVER )
Sworn to before me this day of
,199 , by
Witness my hand and official seal.
My commission expires
Notary Public
<PAGE>
Exhibit H - Commencement Letter
COMMENCEMENT OF LEASE TERM AND ESTOPPEL CERTIFICATE
THIS COMMENCEMENT OF LEASE TERM AND ESTOPPEL CERTIFICATE, dated this 7th day of
June, 1997, by and between 5275 DTC, LLC, a COLORADO LIMITED LIABILITY COMPANY,
(the "Landlord"), whose address is 5275 DTC PARKWAY, GREENWOOD VILLAGE, COLORADO
80111 AND CHARTWELL INTERNATIONAL, INC., A NEVADA CORPORATION, (the "Tenant"),
whose address is 5275 DTC PARKWAY, GREENWOOD VILLAGE, COLORADO 80111.
W I T N E S S E T H
WHEREAS, the Landlord and Tenant, entered into an Office Lease dated June 7,
1997, ("the Lease") which Lease demised the premises located at 5275 DTC
PARKWAY, GREENWOOD VILLAGE, COLORADO 80111, described in EXHIBIT A to the
Lease.
WHEREAS, the parties desire to reaffirm and/or amend and certify to certain
provisions of the Lease; and
WHEREAS, the parties desire that the matters set forth herein be conclusive and
binding on the parties.
NOW, THEREFORE, for a good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. The Lease Commencement Date is deemed and agreed to be ______________,
199__, and the Lease Termination Date is agreed and deemed to be
______________, 199__, unless sooner terminated, as provided therein.
2. Tenant's first installment of Base Rent in the amount of
_______________________________ Dollars ($________) for the period of
________________________________ (is due on) (was paid on) _________,199___.
3. Tenant's first installment of Tenant's Pro Rata Share of Operating Expenses
in an amount to be determined is due on ______________________, 199__.
4. By execution hereof, Tenant acknowledges and agrees that all improvements or
other work required of Landlord has been satisfactorily performed and Tenant
hereby accepts the Premises in full compliance with the terms and conditions of
the Lease.
5. Except as may be amended herein, all terms and conditions of the Lease shall
continue in full force and effect and are hereby republished and reaffirmed in
their entirety.
6. This Certificate shall be binding upon and may be relied upon by the parties
hereto and their respective legal representatives, successors and assigns.
IN WITNESS WHEREOF, the Landlord and Tenant have executed this statement
on the date below written.
LANDLORD: TENANT:
5275 DTC, LLC CHARTWELL INTERNATIONAL, INC.
A COLORADO LIMITED LIABILITY COMPANY A NEVADA CORPORATION
By: By:
-------------------------- -------------------------
Name: Name:
------------------------ -----------------------
Title: Title:
----------------------- ----------------------
Date: Date:
------------------------ -----------------------
<PAGE>
INDENTURE OF LEASE
THIS INDENTURE OF LEASE, Made as of this 18th day of July, 1995, by and
between The Intrepid Company, a Wisconsin partnership hereinafter referred to
as "Lessor" and Company 2000, Inc., a Wisconsin Corporation, hereinafter
referred to as "Lessee",
WITNESSETH:
That for and in consideration of the rents hereinafter reserved and of
the covenants and agreements hereinafter contained, Lessor has and by these
presents does hereby grant, demise and lease unto Lessee, and Lessee has and
by these presents does hereby hire and take from Lessor, premises consisting
of approximately 4,710 square feet of ground floor area in an office and
warehouse building located and situated on Lessor's real estate known as N19
W6717 Commerce Court, Cedarburg, Wisconsin, which premises are outlined in
red and identified on Exhibit A appended hereto and made a part hereof (the
"Leased Premise"). The building and the real estate appurtenant thereto of
which the Leased Premises are a part is hereinafter referred to as the
"Industrial Facility". The exterior walls and roof of the Leased Premises and
the area beneath said premises are not demised hereunder, and the use thereof
together with the right to install, maintain, use, repair, and replace pipes,
ducts, conduits, wires and structural elements leading through the Leased
Premises in locations which will not materially interfere with Lessee's use
thereof and serving other parts of the Industrial Facility are hereby
reserved unto Lessor. Prior to commencement of the term, Lessor shall perform
and substantially complete construction work identified and described on
Exhibit B appended hereto and made a part hereof (Lessor's Work). No
warranties or representations are made or have been made by Lessor or its
agents or representative that are not expressly set forth in this Lease.
I. TERM OF LEASE
The term of this Lease shall be for a period of approximately Five (5)
years commencing on 1 September, 1995 (the "Commencement Date"), and ending
31 August, 2000, unless sooner terminated in accordance with the provisions
hereof. Lessor's work on account of construction of the Leased Premises as
set forth above shall be substantially completed on or pior to the
commencement date of the term set forth above. Substantial completion of
construction as used herein shall mean such state in Lessor's work that all
items of construction for which Lessor is obligated under the terms of this
Lease are completed except for "punch list" items and similar matters which
do not substantially and materially adversely affect Lessee's use and
enjoyment of the Leased Premises and which allow Lessee to have possession of
the Leased Premises without undue interference from Lessor's workmen. In the
event that Lessor is prevented from substantially completing its work because
of delays caused by force majeure, acts of God, strikes, lockouts, shortages
of materials and/or workmen or other causes beyond Lessor's control, the date
by which Lessor's work shall be substantially completed and the
<PAGE>
commencement date of the term shall be extended for a period equal to the
delay.
II. RENTAL
1. Beginning on the Commencement date and continuing thereafter Lessee
shall pay to Lessor a guaranteed fixed and minimum annual rental, payable in
advance in monthly installments on the first day of each calendar month
during such period, in accordance with the following:
<TABLE>
<CAPTION>
Period Monthly Rate
<S> <C>
1 Sept. 1995 thru 31 August 1996 $2,700.00
1 Sept. 1996 thru 31 August 1997 $2,700.00
1 Sept. 1997 thru 31 August 1998 $3,200.00
1 Sept. 1998 thru 31 August 1999 $3,640.00
1 Sept. 1999 thru 31 August 2000 $3,710.00
</TABLE>
If for any reason the Commencement Date shall not be on the first day
of a calendar month, then the rent payable for the initial partial calendar
month shall be prorated on a thirty (30) day basis. Notwithstanding anything
to the contrary contained herein Lessee shall pay to Lessor the monthly rent
for the initial month of the term in the amount set forth above.
2. All rent and other charges to be paid by Lessee to Lessor under the
terms of this Lease shall be paid at such place as Lessor may from time to
time designate, and in lieu of such designation, then at the place specified
in Article XVIII of this lease for the giving of notices to Lessor. The
payments stated herein shall be a guaranteed and a fixed return to Lessor,
free from any expense, charges, set-off or other deduction whatsoever.
3. Lessee shall have the option to extend the term for one (1)
additional period of Five (5) years. The option shall be exercised only by
Lessee giving Lessor written notice thereof which is received by Lessor on or
before six months before the expiration of the original term then in effect.
Time shall be of the essence with respect to Lessee's notice to exercise
option as aforesaid. Such option shall be exercisable by Lessee, and the term
of this Lease, shall, in fact be extended, only if this Lease is in full
force and effect and Lessee is not in default hereunder beyond any applicable
grace period. Not withstanding anything to the contrary the sum of $39,240.00
shall be used as the annual rent amount in place at the end of the initial
five year Lease. In the event that the term of this Lease is, in fact,
extended pursuant to the foregoing, then any such extension shall be upon all
of the same and/or remaining terms and provisions contained in this Lease
provided, however, the minimum annual rental during each option period shall
be the amounts set forth below:
The fixed rent provided for in this Paragraph 3 above shall be
$39,240.00 and shall be increased as of 1 September 2000 and annually
thereafter by an adjustment which will be equal to the greater of a
compounded 3% annual increase or 70% of the percentage increase, if any, in
the Cost of Living Index for the month last published immediately preceding
the date of the rent adjustment over the Cost of Living Index as determined
one year previous to each
<PAGE>
adjustment date. Cost of Living Index, as used herein shall mean the index
presently known as "Consumer Price Index", for Milwaukee, Wisconsin, all
items, all urban consumers, (1984=100) published by the Bureau of Labor
Statistics, United States Department of Labor.
If the computation and publication of the Cost of Living Index is
discontinued, a comparable index shall be used in lieu thereof. If the
computation and publication of the Cost of Living Index is transferred to
another governmental bureau, such bureau's publication shall be substituted
for the presently published index. If such Cost of Living Index is
substantially revised, or its method of calculation is substantially altered,
adjustments shall be made to such new index by Lessor as may be necessary to
make it comparable to the original index used, provided, however, that the
addition or elimination of particular items or commodities included in the
Cost of Living Index shall not be deemed a "substantial" revision or a event
the Bureau of Labor Statistics or other governmental bureau to whom the
publication of the Cost of Living Index is transferred publishes such
adjustment, then such adjustment as published shall be controlling upon the
parties. In the event the Cost of Living Index is discontinued, Lessor and
Lessee shall accept comparable statistics on the purchasing power of the
consumer dollar as published at the time of such discontinuation by a
responsible financial periodical of recognized authority to be then chosen by
Lessor.
III. TAXES
1. From and after the Commencement Date of the term, Lessee shall pay
as additional rental to Lessor, Lessee's proportionate share of all real
property taxes and assessments and water and sewer use charges that accrued
during the term of the lease which may be levied or assessed by any lawful
authority for each calendar year or partial calendar year during the term
hereof against the land, buildings and other improvements from time to time
comprising the Industrial Facility. Lessee's proportionate share shall be
equal to Twelve and 77/100 percent (12.77%) percent, subject to adjustment
pursuant to the provisions of Paragraph 3 of this Article III. Should any
governmental agency or political subdivision impose any taxes and/or
assessments, whether or not now customary or within the contemplation of the
parties hereto, either by way of substitution for taxes and assessments
presently levied and assessed against the real estate, as well as the
improvements thereon, or in addition thereto, including but not limited to,
any tax or assessment levied, assessed or imposed upon or measured by the
rental payable hereunder (other than Lessor's personal income tax or any
estate tax or inheritance tax) such taxes and/or assessments shall be deemed
to constitute a tax and/or assessment on the real estate, as well as the
improvements thereon for the purposes of this Article III, and Lessee shall
pay its proportionate share thereof.
2. Lessee's proportionate share of all such real property taxes,
assessments and charges during the term hereof shall be paid in advance in
estimated monthly installments of Three Hundred Eighty Dollars. ($380.00),
which amount is presently projected by Lessor (based upon the most recent
billing available to Lessor for real property taxes, assessments and charges
for the Industrial Facility) to be equal to 12.77% of Lessee's estimated
obligation for such taxes, assessments and charges. Such estimated monthly
installments shall be payable by Lessee on the first day of each calendar
month during the term. Within ninety (90) days after
<PAGE>
the end of each calendar year during the term, Lessor shall furnish Lessee
with a statement of the actual amount of Lessee's proportionate share of such
taxes, assessments and charges for the calendar year in question. Within
fifteen (15) days after the rendition of each such statement to Lessee by
Lessor, Lessee shall pay to Lessor, or Lessor shall credit to the obligations
of Lessee, As the case may be, the difference between the estimated payments
actually made by Lessee for the calendar year in question and Lessee's
correct proportionate share of such actual taxes, assessments and charges for
such year as shown on such statement. For the calendar years in which this
Lease commences and terminates the provisions of this Article III shall
apply, and Lessee's liability for its proportionate share of such taxes,
assessments and charges for such years shall be subject to a pro rata
adjustment based on the number of days of such calendar years during which
the term of this Lease is in effect. A copy of a tax bill or assessment bill
submitted by Lessor to Lessee shall at all times be sufficient evidence of
the amount of taxes, assessments and/or charges assessed or levied against
the property to which such bill relates. From time to time hereafter, Lessor
may notify Lessee in writing of adjustments to Lessee's monthly installments
due hereunder, which adjustments shall be based upon the most current tax and
assessment information available to Lessor, and Lessee shall adjust its
installment payments accordingly. Lessor's and Lessee's obligations under this
Article III shall survive the expiration of the term of this Lease.
3. The parties acknowledge that Lessee's proportionate share as set
forth above represents that portion of the total number of square feet of
constructed gross leasable floor area in the Industrial Facility which
constitutes the amount of square floor area within the Leased Premises.
Lessor represents that as of the date hereof there are approximately 36,885
square feet of constructed gross leasable floor area in the Industrial
Facility. In the event that during the term hereof there shall be a change in
the number of square feet of floor area within the Leased Premises, or a
change in the number of square feet of floor area in the Industrial Facility
(whether or not the same affects the Leased Premises), then Lessee's
proportionate share shall be recalculated at the time or times in question to
be equal to a fraction, the numerator of which shall be the number of square
feet of floor area in the Leased Premises, and the denominator of which shall
be the total number of square feet of constructed gross Leasable floor area
in the Industrial Facility. From and after the effective date of any change
in Lessee's proportionate share, all payments due from Lessee under this
Lease which are calculated by reference to Lessee's proportionate share shall
be appropriately adjusted.
IV. COMMON AREAS
Lessor shall provide a paved parking area for use in common by Lessee
and other tenants of the Industrial Facility. Lessor shall maintain such
parking area and all of the other common areas and facilities used for
operation and maintenance of the Industrial Facility in good condition and
repair, including, but not limited to, the parking area, parking area
lighting standards, landscaped areas, canopies, and Industrial Facility
signs; and Lessee agrees to pay upon demand, but not more often than once
each calendar month during the term as additional rental (which additional
rental may be estimated by Lessor, subject to adjustment in future billings
to Lessee), Lessee's proportionate share (Lessee's proportionate share of
it's leased
<PAGE>
gross floor area to the total gross leased floor area of the industrial
facility) of the reasonable expenses and costs of managing, operating,
lighting, landscaping maintenance, cleaning, removing snow, policing,
insuring, repairing, supplying, replacing and properly maintaining such
common areas and facilities as here defined the drives, asphaltic parking and
trucking areas (Lessee shall be responsible only for repairing, sealing and
maintaining i.e. crack filling, pot hole patching of asphaltic drives,
parking and trucking areas due to normal wear and tear. The replacement of
the total asphaltic drives, parking and trucking area are excluded as it is a
capital improvement) sidewalks, landscaped and grass areas of the Industrial
Facility. Costs shall be limited to actual net payments made to third party
service companies. Within 90 days after the close of each calendar year a
reconciliation of all common area charges shall be performed to determine
whether cash refunds are due the lessee or an additional payment is due the
lessor as a result of the actual reasonable expenses and cost incurred of
that just concluded calendar year and to adjust, if necessary, the monthly
charge for the coming year of the lease.
Lessor expressly reserves the right to promulgate from time to time
reasonable rules and regulations relating to the use of all common areas and
facilities or any part thereof for the welfare of all tenants in the
Industrial Facility and their employees, agents and invitees. Said rules and
regulations shall be binding upon Lessee upon delivery of a copy thereof to
Lessee. Said rules and regulations may be amended from time to time by Lessor
with or without advance notice, and all such amendments shall be effective
upon delivery of a copy thereof to Lessee. For the enforcement of said rules
and regulations, Lessor shall have available to it all remedies provided in
this Lease in the event of a breach thereof and all legal remedies whether or
not provided for in this Lease by law or in equity.
V. USE OF PREMISES
1. Lessee shall use the Leased Premises for the following and for no
other purposes: Offices, Sales and Mail Processing Operations and
Distribution.
All such use of the Leased Premises shall be in full compliance with all
laws, ordinances, rules and regulations of all public authorities having
jurisdiction over the premises and no part of the Leased Premises shall be
occupied or used for any purpose or in any manner so that, in accordance with
any requirements of law or any public authority, Lessor shall be obligated to
make any addition or alteration to or in the building. Lessee shall perform
no act or activity in connection with its use of the Leased Premises which
shall be a nuisance or, in the opinion of Lessor reasonably exercised,
adversely affect the use and enjoyment of the other occupants of the
Industrial Facility, including, but not limited to, the creation and/or
emission of noxious fumes or odors or noise at unreasonably high sound
levels. Impossibility of performance by either party due to unforeseen
governmental requirements or intervention, other than as elsewhere provided
herein, not triggered by the action or inaction of a party (nonculpable
party) shall provide the nonculpable party with the option to terminate the
lease by written notice stating circumstances conforming herewith.
2. Lessee shall, at its own cost and expense, comply promptly and
conform with all
<PAGE>
present and future laws, ordinances, rules, requirements and regulations of
the federal, state, county and city governments and of any and all other
governmental authorities or agencies affecting the Leased Premises or its
use, as a result of the particular use and occupancy of the Leased Premises
by Lessee and Lessee shall, at its own cost and expense, make all additions,
alterations or changes to the Leased Premises or any portion thereof as may
be required by any governmental authority or agency and shall comply promptly
with all present and future orders, rules, rulings, regulations and
directives and of any governmental authority or agency. Any such additions,
alterations or changes will become the exclusive property of Lessor unless
otherwise agreed in writing between the parties prior to being placed into
effect. Notwithstanding anything to the contrary contained herein, Lessor
shall have the obligation to make any such additions, alterations or changes
to the structure of the Leased Premises unless such additions, alterations or
changes are required solely as a result of the particular use and occupancy
of the Leased Premises by Lessee.
VI. LESSOR'S AND LESSEE'S WORK
1. Lessor, at Lessor's cost and expense, shall make the alterations and
improvements to the Leased Premises which are identified and described on
Exhibit B. All such work shall be done in a good and workmanlike manner in
compliance with all building codes and regulations. Notwithstanding any
provision hereof the contrary, Lessor may make such variations in the work to
be performed by it as may be necessary or appropriate for the development of
the Industrial Facility and construction of the Leased Premises, but no such
changes shall materially alter the general appearance or amount of floor
space nor substantially affect the quality or substantially change the
interior arrangement of the Leased Premises.
2. Lessee, at Lessee's sole cost and expense, shall perform any future
alterations, improvements and other work necessary to finish such future work
to the Leased Premises for Lessee's use except for such work as is the
obligation of Lessor pursuant to Paragraph 1 above. All such work shall be
done in a good and workmanlike manner in compliance with all building codes
and regulations, and in accordance with plans and specifications therefor
first approved in writing by Lessor. Lessee shall indemnify Lessor and save
Lessor harmless from and against any and all claims, costs and expenses on
account of such work.
3. Nothing contained in this Article or in any part of this Lease shall
be taken or construed to create any agency between Lessor and Lessee or to
authorize the Lessee to do any act or thing or to make any contract so as to
encumber in any manner the title of the Lessor to the Leased Premises or to
create any claim or lien upon the interest of the Lessor in the Leased
Premises, it being expressly agreed and covenanted that all of the cost and
expense of Lessee for Lessee's work as referred to in this Article, or any
other work undertaken by Lessee affecting the Leased Premises or the
Industrial Facility, shall be promptly paid by the Lessee as required by the
terms of its contracts or agreements with the general contractor and all
subcontractors and material men. If any lien is at any time filed or
recorded, Lessee shall immediately obtain the release and satisfaction of
record of such lien. Upon failure of Lessee to do so Lessor may obtain same
at the sole expense of Lessee and such expense shall be conclusively deemed
additional rent due promptly upon demand.
<PAGE>
VII. REPAIRS AND MAINTENANCE
1. Lessor shall keep the exterior structure, to-wit, foundation,
bearing walls and roof of the Leased Premises in proper repair during the
lease term, or any renewal or extension thereof; except that the cost of any
such repairs occasioned by Lessee's fault shall be paid by Lessee, unless
proceeds from insurance maintained by Lessee are made available to Lessor to
cover the entire cost of such repairs.
2. Lessor shall pay for all necessary repairs during the first year of
the lease as it relates only to faulty workmanship and/or defective material
or equipment. Lessee shall at all times during the Lease term pay for and
make all other necessary repairs and replacements to the Leased Premises,
including, but not limited to, the doors, windows, plate glass, fixtures,
heating, air conditioning systems serving the Leased Premises, electrical and
sewage (to main sewer lines) facilities of the Leased Premises, and keep and
maintain the same in good condition and repair so that the expiration of the
Lease, or any renewal or extension thereof, the Leased Premises shall be
surrendered to Lessor in the same condition that the same are in at the
commencement of said Lease, ordinary wear and tear excepted. Notwithstanding
the foregoing, provided Lessee established and follows the usual and
customary preventive maintenance program for the heating, ventilating and
air-conditioning facilities servicing the Leased Premises, Lessor shall
repair and replace the compressor and compressor motor as may be necessary
during the four (4) year after possession of the Leased Premises is furnished
to Lessee; provided, however, if any such repair and/or replacement shall be
occasioned by the sole fault or neglect of Lessee or its employees or agents,
such repair and/or replacement shall be made and paid for by Lessee.
Leasehold improvements furnished by Lessee shall not be included in warranty.
3. Lessor shall not cause or permit any toxic materials injurious to
animal life forms to be sprayed or otherwise placed in or about Lessee's
leased premises for the control of insects or other vermin unless
specifically requested by lessee or specifically approved by Lessee.
VIII. TRADE FIXTURES
All trade fixtures installed by Lessee, or by its subtenants or assigns, in
connection with the business conducted by it or them on the Leased Premises
may be removed by it or them during or at the expiration of this Lease or of
any renewal thereof. Any damage caused by such removal shall be repaired by
Lessee unless excused in writing by the then owners of the premises.
IX. UTILITIES
From and after the Commencement Date, Lessee shall be responsible for
and promptly pay all separately metered charges for heat, gas, electricity
and sewer charges as well as any charges for any other utility used or
consumed in the Leased Premises. Should Lessor elect to supply any utility to
Lessee used or consumed in the Leased Premises, Lessee agrees to pay for the
same as additional rent, but in no event at a cost greater than as if
purchased directly
<PAGE>
and in the same quantity from the public utility furnishing the same. Lessee
shall keep the Leased Premises sufficiently heated so as to prevent freezing
or damage thereto or to the equipment and facilities contained therein. In no
event shall Lessor be liable for an interruption or failure in the supply of
any utility to the Leased Premises. In the event that water usage for the
Leased Premises is not separately metered, and Lessee shall use water in
connection with its production processes conducted at the Leased Premises,
then Lessee, at its own cost and expense, shall provide all mains, pipes,
meters and other equipment and supplies to allow the separate metering of all
water used in the Leased Premises by the public authority supplying the same,
and if, required by such authority, the individual metering of sanitary sewer
usage by Lessee at the Leased Premises, and Lessee shall pay for all such
water, sprinkler, and sanitary sewer use charges as billed. (Municipal water,
sewer and sprinkler consumption charges shall be invoiced on a pro-rated
basis, based on Lessee's leased floor area to the total leased only square
footage of the building premises. Such invoicing shall be on a quarterly
billing period.
X. ALTERATIONS
Lessee shall not make any alterations in or additions to the Leased
Premises without first procuring Lessor's written consent and delivering to
Lessor the plans and specifications therefor.
XI. SIGNS
Lessee shall not place any shade, awning, fence, sign or any structure
or device upon or above the exterior of the Leased Premises or upon the
windows of the Leased Premises without first obtaining the consent of Lessor,
in each instance and governing local authority.
Lessee shall be allowed to install a sign constructed of translucent
Plexiglas or equal. Sign dimensions shall be 7" high x 4'-O" long.
Lessee shall have the right to install sign at Lessee's expense on
monument structure located at Northwest corner of property at no cost to
Lessee.
Maintenance of sign mounting structure (See Exhibit C) shall be
included in common area charges, maintenance of actual Lessee sign shall be
solely at the Lessee's expense.
XII. INSURANCE AND INDEMNITY
1. Lessee shall, during the entire term hereof, keep in full force and
effect a policy of comprehensive general public liability insurance with
respect to the Leased Premises, and the business operated by Lessee and any
permitted sublessee of Lessee in the Leased Premises in an amount of not less
than One Million Dollars single limit or such greater amount as may be
reasonably required by Lessor from time to time in accordance with prudent
real estate
<PAGE>
management practices. The policy shall name Lessor, as additional insured in
its capacity, and Lessee as insured, and shall contain a clause that the
insurer will not cancel or change the insurance without first giving the
Lessor thirty (30) days prior written notice. Notwithstanding that the loss
was caused by an "INSURED" OR "COINSURED" regardless of any other provision
in the policy excluding coverage for loss caused by an insured or coinsured.
Such insurance may be furnished by Lessee under any blanket policy carried by
it or under a separate policy therefor. A copy of the policy evidencing such
insurance or a certificate of insurer certifying to the issuance of such
policy be delivered to Lessor prior to commencement of the term of this Lease
or Lessee's occupancy, whichever is sooner, and such delivery shall also be
made upon renewal of such policy not less than thirty (30) days prior to the
expiration of such coverage. Lessor shall provide evidence of an in force
comprehensive general public liability insurance for the leased premises to
the lessee.
2. Lessee agrees to carry, at its expense, insurance against fire,
vandalism, malicious mischief, and such other perils as are from time to time
included in a standard extended coverage endorsement, insuring the betterment
and improvements made by it to the Leased Premises and its trade fixtures,
furnishings, equipment and all other items of personal property of Lessee
located on or within the Leased Premises, in an amount equal to not less than
Eighty Percent (80%) of the actual replacement cost thereof and to furnish
Lessor with a certificate evidencing such coverage.
3. Lessee shall not use, occupy, carry any stock of goods, or do
anything in or about the Leased Premises which will in any way prevent the
obtaining of insurance or tend to increase the insurance rates on the Leased
Premises and/or the building of which they are a part without Lessor's prior
written approval. Notwithstanding anything to the contrary in this Lease, if
anything done, omitted to be done, or suffered to be done by Lessee, or
anything kept in, upon or about the Leased Premises by Lessee shall cause the
rate of fire insurance or other insurance on the building of which it is a
part to be increased beyond the minimum rate from time to time applicable
thereto, Lessor shall notify Lessee of such increase upon Lessor's receipt of
notice thereof, and Lessee shall pay the amount of such increase promptly
upon Lessor's written demand therefor. If Lessee installs any electrical
equipment that overloads the lines in the Leased Premises, Lessee shall at
its own expense make whatever changes are necessary to comply with the
requirements of the insurance underwriters and governmental authorities
having jurisdiction; and upon failure to do so, Lessor may so comply at the
sole and exclusive expense of Lessee, which expense shall be conclusively
deemed additional rent and due upon demand.
4. Lessee hereby indemnifies Lessor and agrees to save Lessor harmless
from and against any and all claims, actions, damages, liability and expense
in connection with loss of life personal injury and/or damage to property
arising from or out of an occurrence in, upon or at the Leased Premises. For
the purpose hereof, the Leased Premises shall include any service areas
adjoining the same and any loading area allocated to the use of Lessee. In
case Lessor shall be made a party to any litigation arising directly or
indirectly out of any such occurrence, then Lessee shall protect and hold
Lessor harmless and shall pay all costs, expense and reasonable attorney fees
incurred or paid by Lessor's insurance company in connection with
<PAGE>
such litigation. PROVIDED ALWAYS that if Lessee provides Lessor with timely
written notice of a defect in the premises, which defect under the terms of
the lease is the responsibility of Lessor to repair or maintain, and the same
is not repaired or maintained by Lessor within a reasonable time after such
notice, then and only then the indemnity provided for in this subparagraph
will not apply and in such case only, Lessor indemnifies Lessee in like
manner. This shall not include common areas over which Lessee does not have
exclusive control, provided the loss is not caused by acts or inaction of
Lessee, its employees or any other person or entity over which Lessee has any
control.
5. Lessee hereby indemnifies Lessor and agrees to save Lessor harmless
from and against any and all claims, actions, damages, liability and expense
in connection with loss of life, personal injury and/or damage to property
arising from or out of Lessee's negligence upon or at the Leased Premises or
Industrial facility. For the purpose hereof, the Leased Premises shall
include any service areas adjoining the same and any loading area allocated
to the use of Lessee. In case Lessor shall be made a party to any litigation
arising directly or indirectly out of such occurrence, then Lessee shall
protect and hold Lessor harmless and shall pay all costs, expense and
reasonable attorney fees incurred or paid by Lessor's insurance company in
connection with such litigation. PROVIDED ALWAYS that if Lessee provides
Lessor with timely written notice of a defect in the Leased Premises, which
defect under the terms of the lease is the responsibility of Lessor to repair
or maintain, and the same is not repaired or maintained by Lessor within a
reasonable time after such notice, then the indemnity provided for in this
subparagraph will not apply and in such case, Lessor indemnifies Lessee in
like manner. This shall not include common areas over which Lessee does not
have exclusive control, provided the loss is not caused by acts or inaction
of Lessee, its employees or nay other person or entity over which Lessee has
any control.
6. Lessor hereby indemnifies Lessee and agrees to save Lessee harmless
from and against any and all claims, actions, damages, liability and expense
in connection with loss of life, personal injury and/or damage to property
arising from or out of Lessor's negligence upon or at the Leased Premises or
Industrial Facility. For the purpose hereof, the Leased Premises shall
include any service areas adjoining the same and any loading area allocated
to the use of Lessor. In case Lessee shall be made a party to any litigation
arising directly or indirectly out of any such occurrence, then Lessor shall
protect and hold Lessee harmless and shall pay all costs, expense and
reasonable attorney fees incurred or paid by Lessee in connection with such
litigation. PROVIDED ALWAYS that if Lessor provides Lessee with timely
written notice of a defect in the Leased Premises, which defect under the
terms of the lease is the responsibility of Lessee to repair or maintain, and
the same is not repaired or maintained by Lessee within a reasonable time
after such notice, then the indemnity provided for in this subparagraph will
not apply and in such case, Lessee indemnifies Lessor in like manner. This
shall not include common areas over which Lessor does hot have exclusive
control, provided the loss is not caused by acts or inaction of Lessor, its
employees or any other person or entity over which Lessor has any control.
7. Notwithstanding anything in this Lease to the contrary, neither
Lessor nor Lessee shall be liable to the other for loss arising out of damage
or destruction of the Leased Premises, the
<PAGE>
Industrial Facility or other improvement, or personal property or contents
therein if such damage of destruction is caused by a peril included within a
standard form of fire insurance policy, with full extended coverage
endorsement added, as from time to time issued in Wisconsin, to the extent
that proceeds from such insurance are realized. Such absence of liability
shall exist whether or not the damage or destruction is caused by the
negligence of either Lessor or Lessee, or their respective officers,
employees, agents or customers. It is the intention and agreement of Lessor
and Lessee that the rents reserved by this Lease have been provided in
contemplation that each party shall carry such insurance policy, each with
respect to its own property as its own expense, and that each party shall
look to its insurer for reimbursement of any such loss, and further that the
insurer involved shall have no subrogation rights against the other party.
Each party shall advise its insurance company of this release and such policy
shall, if necessary, contain a waiver of any right of subrogation by the
insurer against the other party.
8. A copy of this Article XII shall be supplied to the insurance
company writing the insurance called for in this lease; and Lessee shall
obtain written assurance from such company that the policy(s) it has issued
complies with the terms of this Article XII.
9. Lessor shall provide proof of insurance to Lessee during term of
lease.
XIII. DESTRUCTION OF LEASED PREMISES
In the event the Leased Premises shall be partially or totally
destroyed by fire or other insured casualty as to become partially or totally
untenantable, the damage to the Leased Premises shall be promptly repaired by
Lessor, unless Lessor shall elect not to rebuild as hereinafter provided, and
a just and proportionate part of the fixed minimum rental shall be abated
until such repairs are substantially completed. In no event shall Lessor be
required to repair or replace Lessee's betterment and improvements or trade
fixtures, furnishings or equipment If more than Twenty-Five Percent (25%) of
the floor area of the Leased Premises or of the floor area of the Industrial
Facility shall be damaged or destroyed by fire or other casualty, then Lessor
may elect to either repair or rebuild the Leased Premises or the Industrial
Facility, as the case may be or to terminate this Lease by giving written
notice to Lessee of its election to so terminate, such notice to be given
within ninety (90) days after the occurrence of such damage or destruction.
If lessor is required or elects to repair or rebuild the Leased Premises as
herein provided, the work shall be initiated with reasonable dispatch and
diligently proceeded with to completion and Lessee shall repair or replace
its trade fixtures, furnishings and equipment in a manner and to at least a
condition equal to that prior to its damage or destruction. The rent shall
abate during construction from the date of damage destruction to substantial
completion.
XIV. EMINENT DOMAIN
1. If the whole of the premises hereby leased shall be taken by any
public authority under the power of eminent domain, then the term of this
Lease shall cease as of the day possession shall be taken by such public
authority and the rent shall be paid up to that day with a proportionate
refund by Lessor of such rent as may have been paid in advance for a period
<PAGE>
subsequent to the date of the taking.
2. If less than the whole but more than Twenty-Five Percent (25%) of
the Leased Premises or more than Fifty Percent (50%) of the common areas of
the Industrial Facility shall be taken under eminent domain, Lessee shall
have the right either to terminate this Lease and declare same null and void,
or subject to Lessor's right of termination as set forth in Paragraph 3 of
this Article, to continue in the possession of the remainder of the Leased
Premises, and shall notify Lessor in writing of Lessee's intention within
(10) days after such taking provided Lessor has given written notice to
Lessee within 10 days of having first learned or being notified of the
commencement of proceedings expected to result in such taking. In the event
Lessee elects to remain in possession, the rent and any other charges due
hereunder shall be reduced proportionately and all other terms provided
herein, shall continue in effect and Lessor shall, at its own cost and
expense, make all the necessary repairs or alterations to the basic building
as originally installed by lessor, so as to constitute the remaining Leased
Premises a complete architectural unit. If Twenty-Five Percent (25%) or less
of the Leased Premises shall be so taken, the Lease Term shall cease only on
the part so taken as of the day possession shall be taken by such public
authority and Lessee shall pay rent up to that day, with an appropriate
prorated refund by Lessor of such rent as may have been paid in advance for a
period subsequent to the date of the taking, and thereafter the fixed minimum
annual rental shall be reduced in proportion to the amount of the Leased
Premises taken. Lessor, following such a taking, shall with reasonable
dispatch, at its expense, make all necessary repairs or alteration to the
basic building, as originally constructed by Lessor, so as to constitute the
remaining Leased Premises a complete architectural unit.
3. If more than Twenty-Five Percent (25%) of the Leased Premises or the
building in which the Leased Premises are located or more than Fifty Percent
(50%) of the common area of the Industrial Facility shall be taken under
power of eminent domain, Lessor may, by written notice to Lessee delivered on
or before the date of surrendering possession to the public authority,
terminate this lease as of the date of such taking and rent shall
proportionately abate, and provide Lessee with a refund for any prepaid rent.
4. All damages awarded for a taking under the power of eminent domain
of any part of the Industrial Facility shall belong to and be the sole
property of Lessor and Lessee shall have no claim for loss of its leasehold
estate or the value of the unexpired term hereof; provided, however, that
Lessee shall be entitled to any separate award made for depreciation or
damage to, and cost of removal of Lessee's equipment fixtures and other
property.
XV. ASSIGNMENT AND SUBLETTING
Lessee shall not assign or in any manner transfer this Lease or any estate
or interest therein without the prior written consent of Lessor, nor sublet
said premises or any part or parts thereof or permit the use or occupancy of
the Leased Premises or any part thereof by anyone other than Lessee without
like consent. Consent by Lessor to one or more assignment of this Lease or to
one more subletting of said Leased Premises shall not operate to exhaust
Lessor's rights
<PAGE>
under this Article. In the event that Lessee, with or without the previous
consent of Lessor, does assign or in any manner transfer this Lease or any
estate or interest therein, Lessee shall in no way be released from any of
its obligations under this Lease. In the event that Lessor shall approve any
assignment, subletting or other transfer of Lessee's interest in this Lease,
the Lessee shall reimburse Lessor for Lessor's legal fees and expenses
incurred in connection with such approval and the drafting and preparation of
appropriate documentation effectuating the assignment, subletting or other
transfer in question. See subparagraph 18 of Article XXV.
XVI. OFF-SET STATEMENT AND SUBORDINATION
1. Lessee agrees, within ten (10) days after request therefor by
Lessor, to execute, in recordable form and deliver to Lessor a statement, in
writing, certifying (if such be the case) (a) that to Lessee's knowledge this
Lease is in full force and effect, (b) the date of commencement of the term
of this Lease, (c) that rent is paid currently without any off-set or defense
thereto, (d) the amount of rent, if any, paid in advance, (e) that to
Lessee's knowledge there are no uncured defaults by Lessor or, if such
defaults are claimed, stating the facts giving rise thereto, and (f) other
similar matters as may be requested by Lessor.
2. Lessee agrees that this Lease shall, at the request of the Lessor,
be subordinate to any mortgages or deeds of trust that may hereafter be
placed upon said premises by Lessor and to any and all advances to be made
thereunder and to the interest thereon and all renewals, replacements and
extensions thereof, provided that the mortgagee or trustee named in said
mortgages or trust deeds shall agree to recognize this Lease of Lessee in the
event of foreclosure provided Lessee is not in default and shall not
terminate or modify this lease.
3. Failure of the Lessee to execute any of the above instruments,
within ten (10) days upon written request so to do by Lessor, shall
constitute a breach of this Lease and the Lessor may, at its option, cancel
this Lease and terminate the Lessee's interest therein in addition to any
other rights and remedies lessor may have.
XVII. LESSEE'S PROPERTY
1. Lessee shall be responsible for and shall pay before delinquency all
municipal, county, state and federal taxes assessed during the term of this
Lease against any leasehold interest or personal property of any kind, owned
by or placed in, upon or about the Leased Premises by the Lessee.
2. Lessor shall not be responsible or liable to the Lessee for any loss
or damage that may be occasioned by or through the acts or omissions of
persons occupying adjoining premises or any part of the premises adjacent to
or connected with the premises hereby leased or any part of the building of
which the Leased Premises are a part, or for any loss or damage resulting to
the Lessee or its property from bursting, stoppage or leaking of water, gas,
sewer or steam pipes or for any damage, injury, or loss of property within
the Leased Premises from any cause whatsoever except as provided in Article
XII Para 6.
<PAGE>
3. Lessee shall give immediate notice to Lessor in case of fire or
accidents in the Leased Premises or in the building of which the premises are
a part or of defects therein or in any fixtures or equipment.
XVIII. NOTICE
All notices and demands by either party to the other shall be given in
writing and sent by United States certified mail, postage prepaid, return
receipt requested and addressed.
To Lessor: The Intrepid Company
4320 Cedar Creek Rd.
Slinger, WI 53086
To Lessee: Company 2000, Inc.
N19 W6717 Commerce Court
Cedarburg, Wisconsin
Either party may, upon prior notice to the other, specify a different
address for the giving of notice. After commencement of the term, all bills,
statements and other communications which Lessor may be required or desired
to render to Lessee shall either be delivered to the Leased Premises or sent
by United States mail addressed to Lessee at the Leased Premises.
XIX. ADDITIONAL COVENANTS OF LESSEE
1. Lessee shall not commit or suffer to be committed any waste upon the
Leased Premises or any nuisance or other act or thing which may disturb the
quiet enjoyment of any other lessee in the Industrial Facility.
2. Lessor or Lessor's agent shall have the right to enter the Leased
Premises at all reasonable times during business hours upon reasonable notice
to Lessee to examine the same, and to show them to prospective purchasers or
mortgagees of the Industrial Facility, and to make such repairs, alterations,
improvements or additions as Lessor may deem necessary or desirable, and
Lessor shall be allowed to take all material into and upon said premises that
may be required therefor without the same constituting an eviction of Lessee
in whole or in part, provided that there is no substantial interference with
Lessee's right of quiet enjoyment, and the rent reserved shall not abate
while said repairs, alterations, improvements or additions are being made. It
is understood that Lessor will act in a reasonable manner in effecting such
repairs, etc., and if the same affect only Lessee, will discontinue the same
at Lessee's written request however, if failure to promptly effect such
repairs, etc. will have a deleterious effect on the building or other
tenants, then the same will continue in all events. During the six months
prior to the expiration of the term of this Lease or any renewal term, Lessor
may exhibit the premises to prospective tenants and place upon the premises
the usual notices "To Let" or "For Rent", which notices Lessee shall permit
to remain thereon without molestation.
XX. DEFAULTS OF LESSEE
<PAGE>
1. If Lessee shall fail to pay the rental due hereunder within fifteen
(15) days after the same shall be due or if Lessee shall fail to perform any
of the other terms, conditions or covenants of this Lease to be performed or
observed by Lessee for more than ten (10) days after notice of such default
has been given to Lessee by the Lessor, or if Lessee or any guarantor of this
Lease shall be adjudged bankrupt or insolvent or shall make an assignment for
the benefit of creditors, or if a receiver or trustee of Lessee's property or
that of any guarantor of this Lease shall be appointed and such receiver or
trustee, as the case may be, shall not be discharged within thirty (30) days
after such appointment, or if an execution or attachment is levied against
Lessee's property, or that of any guarantor of this Lease, or if this Lease
shall by operation of law devolve upon or pass to any person or persons other
than the Lessee without Lessor's prior written consent then in any such case,
Lessor may, upon notice to Lessee, terminate this Lease and recover
possession of and re-enter the Leased Premises and may expel all persons and
remove all property therefrom without becoming liable to prosecution
therefor. In the event of any such default and the termination of this Lease,
Lessor shall be entitled to recover from Lessee all past due rent and other
charges equivalent to rent plus all other damages sustained by Lessor on
account of the breach of this Lease, including, but not limited to, the
expenses and attorney fees incurred by Lessor in re-entering and recovering
possession of the Leased Premises and for the cost of repairs, alterations
and brokerage and attorney fees connected with the reletting of the Leased
Premises, without affecting Lessee's liability for future rent and other
charges to accrue hereunder. As an alternative, at the election of Lessor,
the Lessor shall have the right by written notice given to the Lessee at any
time after Lessor recovers possession of the premises to declare this Lease
terminated and canceled, without any further rights or obligation on the part
of Lessor or Lessee (other than Lessee's obligation for rent and other
charges due and owing through the date of termination), so that Lessor may
relet the premises without any right on the part of the Lessee to any credit
or payment resulting from any reletting of the premises. In case of a default
under this Lease, Lessor may, in addition to terminating this Lease, or in
lieu thereof, pursue such other remedy or combination of remedies and recover
such other damages for breach of tenancy and/or contract as are available at
law or otherwise.
2. The rights and remedies of Lessor under this Lease shall be
cumulative and the exercise of any of them shall not be exclusive of any
other right or remedy provided by this Lease or allowed by law, and the
waiver by lessor of any breach of any covenant of this Lease shall be limited
to the particular instance and shall not operate or be deemed to waive any
future breach of that or any other covenant or any other occasion, nor
operate as a waiver of Lessor's right to enforce the payment of subsequent
installments of rent or any of Lessor's rights under this lease by such
remedies as may be appropriate.
3. No extension of time, forbearance, neglect or waiver on the part of
Lessor with respect to any one or more of the covenants, terms or conditions
of this Lease, shall be construed as a waiver of any of the other covenants,
terms or conditions of this Lease, or as an estoppel against Lessor, nor
shall any extension of time, forbearance or waivers on the part of Lessor in
any one or more instances or particulars be construed to be a waiver or
estoppel with respect to any other instance or particular covered by this
Lease. After the service of a notice or the commencement of a suit or after
final judgement for possession of the premises, Lessor may
<PAGE>
receive and collect any rent due and apply the same as and for use and
occupancy and the payment and receipt thereof shall not waive or affect any
such notice, suit or judgment.
4. Lessor shall have the right at any time, after ten (10) days notice
to Lessee (or without notice in case of emergency or in case any fine,
penalty, interest or cost may otherwise be imposed or incurred) to make any
payment or perform any act required of Lessee under any provision in this
Lease, and in exercising such right, to incur necessary and incidental costs
and expenses, including reasonable counsel fees. Nothing herein shall imply
any obligation on the part of Lessor to make any payment or perform any act
required of the Lessee, and this exercise of the right to so do shall not
constitute a release of any obligation or a waiver of any default. All
payments made and all costs and expenses incurred in connection with any
exercise of such right shall be reimbursed to Lessor by Lessee within five
(5) days after such payment, together with interest at the rate of Eighteen
Percent (18%) per annum (the "Default Interest Rate"). In the event of
non-payment thereof, Lessor shall have the rights and remedies it would have
hereunder or by law in the case of non-payment of rent.
5. Lessee shall pay all costs, expenses and reasonable attorney fees
that may be incurred or paid by Lessor in enforcing the covenants and
agreements of this Lease.
XXI. SURRENDER
On the last day of the term demised, or any extension thereof, or on
the sooner termination thereof, Lessee shall peaceably and quietly surrender
the Leased Premises in good order, condition and repair. All alterations,
additions, improvements and fixtures (other than trade fixtures, signs and
carpeting installed at Lessee's expense, all of which may be removed by
Lessee), which may be made or installed by either Lessor or Lessee upon the
Leased Premises, and all hard surface bonded or adhesively affixed flooring
shall be the property of Lessor and shall remain upon and be surrendered with
the Leased Premises as a part thereof without disturbance, molestation or
injury at the termination of the term of this Lease, whether by the lapse of
time or otherwise, all without compensation or credit to Lessee; provided,
however, if prior to said termination, or within 15 days thereafter, Lessor
so directs by written notice to Lessee, Lessee shall promptly remove the
additions, improvements, fixtures and installations which were placed in the
Leased Premises by Lessee and which are designated in said notice, and in
default thereof, Lessor may effect said removals and Lessee will pay to
Lessor, on demand, the cost thereof, with interest at the Default Interest
Rate from the date of payment by Lessor of the costs of such removal by
Lessor. On or before such date, Lessee shall also remove all of its other
property from the Leased Premises and Property not so removed shall be deemed
abandoned by Lessee, subject to Lessor's right to cause Lessee to remove the
same pursuant to the preceding sentence. If the Leased Premises be not
surrendered at the end of the term, Lessee shall indemnify Lessor against
loss or liability resulting from delay by Lessee in so surrendering the
premises, including without limitation, any claim made by any succeeding
lessee founded on such delay. ANY DELAY shall cause the provisions of Article
XX, Para 1 and 2 to apply without limiting any other remedies of Lessor.
Lessee shall also surrender all keys for the Leased Premises and shall inform
Lessor of combinations on any locks, safes and vaults, if any, on the Leased
Premises.
<PAGE>
XXII. QUIET ENJOYMENT
If and so long as Lessee pays the rent reserved by this Lease and
performs and observes all of the covenants and provisions hereof, Lessee
shall quietly enjoy the Leased Premises, subject, however, to the terms of
this Lease.
XXIII. HAZARDOUS MATERIAL CONTROL
1. Lessee warrants and represents that no process operations shall be
conducted at the Leased Premises which would release corrosive materials into
the atmosphere which could damage or otherwise adversely affect the heating,
ventilating and air-conditioning equipment and facilities servicing the same.
All such use of the Leased Premises shall be in full compliance with all
laws, ordinances, rules and regulations of all public authorities having
jurisdiction over the premises and no part of the Leased premises shall be
occupied or used for any purpose or in any manner so that, in accordance with
any requirements of law or any public authority, Lessor shall be obligated to
make any addition or alteration to or in the building. Lessee shall perform
no act or activity in connection with its use of the Leased Premises which
shall be a nuisance or, in the opinion of Lessor reasonably exercised,
adversely affect the use and enjoyment of the other occupants of the
Industrial Facility, including, but not limited to, the creation and/or
emission of noxious fumes or odors or noise at unreasonably high sound levels.
2. Lessor shall, at its own cost and expense, comply promptly and
conform with all present and future laws, ordinances, rules, requirements and
regulations of the federal, state, county and city governments and of any and
all other governmental authorities or agencies affecting the Leased Premises
or its use, and Lessee shall, at its own cost and expense, make all
additions, alterations or changes to the Leased Premises or any portion
thereof as may be required by any governmental authority or agency and shall
comply promptly with all present and future orders, rules, rulings,
regulations and directives and of any governmental authority or agency.
Moreover, in such case Lessee shall promptly notify Lessor of any such
changes so required prior to the commencement thereof. Notwithstanding
anything to the contrary contained herein, lessor shall have the obligation
to make any such additions, alterations or changes to the structure of the
Leased Premises unless such additions, alterations or changes are required
solely as a result of the particular use and occupancy of the Leased Premises
by Lessee.
3. Without in any way limiting the foregoing provisions, Lessee
specifically agrees, at Lessee's expense, to comply with all law, rules,
orders, ordinances, directions, regulations and requirements of federal,
state, county and municipal authorities pertaining to air and water equality,
Hazardous Materials (as hereinafter defined), waste disposal, air emissions
and other environmental matters, as well as all zoning and other land use
matters. Lessee shall not cause or permit any Hazardous Material to be
brought upon, kept, or used in or about the Leased Premises by Lessee its
agents, employees, contractors or invitees without the prior written consent
of Lessor, which Lessor shall not unreasonably withhold as long as Lessee
demonstrates to Lessor's reasonable satisfaction that such Hazardous Material
is necessary or
<PAGE>
useful to Lessee's business and will be used, kept and stored in a manner
that complies with all laws regulating any such Hazardous Material so brought
upon or used or kept in or about the Leased Premises. If Lessee breaches the
obligations stated in the preceding sentence, or if the presence of Hazardous
Material on the Leased Premises caused or permitted by Lessee results in
contamination of the Leased Premises, or if contamination of the Leased
Premises by Hazardous Material otherwise occurs for which Lessee is legally
liable or responsible, then Lessee shall indemnify, defend and hold Lessor
harmless from and against any and all claims, judgements, damages, penalties,
fines, costs, liabilities or losses (including without limitation, diminution
in value of the Leased Premises or the Industrial Facility, damages for the
loss or restriction on use of rentable or usable space or of any amenity of
the Leased Premises or the Industrial Facility, damages arising from any
adverse impact on marketing of space, and sums paid in settlement of claims,
and attorney's fees, consultant fees and expert fees which are reasonable and
necessary under the circumstances) which arise during or after the term as a
result of such contamination. This indemnification of Lessor by Lessee
includes, without limitation, costs incurred in connection with any
investigation of site conditions or any clean-up, remedial, removal or
restoration work required by any federal, state or local governmental agency
or political subdivision because of Hazardous Material present in the soil or
groundwater on or under the foregoing. If the presence of any Hazardous
Material on the Leased Premises or the Industrial Facility caused or
permitted by Lessee results in any contamination of the Leased Premises or
the Industrial Facility, Lessee shall promptly take all actions at its sole
expense as are necessary to return the Leased Premises and the industrial
Facility to the condition existing prior to the introduction of any such
Hazardous material; provided that Lessor's approval of such action shall be
first obtained, which approval shall not be unreasonably withheld so long as
such actions would not potentially have any material adverse long-term or
short term effect on the Leased Premises or the Industrial Facility. The
foregoing indemnity shall survive the expiration of the Lease or earlier
termination of thereof.
4. As used herein, "Hazardous Material" means any hazardous or toxic
substance, material or waste, including, but not limited to, those
substances, materials and wastes listed in the United States Department of
Transportation Hazardous Materials Table (49CFR 172.101) or by the
Environmental Protection Agency as hazardous substances (40 CFR Part 302) and
amendments thereto, or such substances, materials and wastes that are or
become regulated by the Wisconsin Department of Natural Resources or any
applicable local, state or federal law.
5. As of the Effective Date, and on each March 1st of each year
thereafter (each such date being hereinafter called a "Disclosure Date"),
including February 1 of the year after the termination of this Lease, Lessee
shall disclose to Lessor the names and amounts of all Hazardous Materials, or
any combination thereof, which were stored, used or disposed of on or about
the Leased Premises. Lessor and its agents shall have the right, but not the
duty, to inspect the Leased Premises at any time upon three (3) days written
notice (which notice shall state the reason and grounds for any such
inspection) to determine whether Lessee is complying with the terms of the
Lease and any extension and modification thereof. If Lessee is not in
compliance with such provisions, Lessor shall have the right to immediately
enter upon the Leased Premises and remedy any contamination caused by
Lessee's failure to comply, notwithstanding any other provision of this
Lease. Lessor shall use its best efforts to minimize
<PAGE>
any interference with Lessee's business but shall not be liable for any
interference caused thereby. Any default of these provisions shall be
conclusively deemed to be material default enabling Lessor to exercise any of
the remedies set forth elsewhere in this Lease, including, but not limited
to, remedies available to Lessor by reason of nonpayment of rent.
6. Notwithstanding any provision hereof, Lessee shall not be
responsible for matters caused solely by the negligent or intentional act of
Lessor or Lessor's agents.
7. Except as expressly provided herein, all of the terms, covenants and
provisions of the Lease shall remain in full force and effect.
XXIV. HOLDING OVER
In the event Lessee remains in possession of the Leased Premises after
the expiration of this Lease, or any extension thereof, and without the
execution of new lease, it shall be deemed to be occupying said premises as a
lessee from month-to month, subject to all of the conditions, provisions and
obligations of this Lease in so far as the same are applicable to a
month-month tenancy.
XXV. MISCELLANEOUS
1. One or more waivers of any covenant or condition by Lessor shall not
be construed as a waiver of a subsequent breach of the same covenant or
condition, and the consent or approval by Lessor to or of any act by Lessee
requiring Lessor's consent or approval shall not be deemed to render
unnecessary Lessor's consent or approval to or of any subsequent similar act
by Lessee. No breach of a covenant or condition of this Lease shall be deemed
to have been waived by Lessor, unless such waiver be in writing signed by
Lessor. These provisions shall be deemed cumulative to those contained in
Article XX.
2. This Lease and the exhibits, if any, attached hereto and forming a
part hereof, set forth all the covenants, promises, agreements, conditions,
and understandings between Lessor and Lessee concerning the Leased Premises
and there are no covenants, promises, agreements, conditions or
understandings, either oral or written, between them other than are herein
set forth. No alteration, amendment, change or addition to this Lease shall
be binding upon Lessor or Lessee unless reduced to writing and signed by each
party.
3. Whenever herein the singular number is used, the same shall include
the plural, and the masculine gender shall include the feminine and neuter
genders.
4. The captions and article numbers appearing in this Lease are
inserted only as a matter of convenience and in no way define, Limit,
construe or describe the scope or intent of such sections or articles of this
Lease nor in any way affect this Lease.
5. "Floor Area" as used in this Lease means, with respect to the Leased
Premises and with respect to each building space area separately leased, the
number of square feet of floor space on all floor levels in the Leased
Premises, measured from the exterior faces of exterior
<PAGE>
walls, corridors and the center line of party walls. No deduction or
exclusion from floor area shall be made by reason of columns or any other
interior construction or equipment.
6. Any amount due from Lessee to Lessor hereunder which is not paid
when due shall bear interest at the Default Interest Rate, of 18%, (as
defined in Article XX. Paragraph 4) from the date due until paid, unless
otherwise specifically provided herein, but the payment of such interest
shall not excuse or cure any default by Lessee under this Lease.
7. The covenant to pay rent is hereby declared to be an independent
covenant on the part of Lessee to be kept and performed, and no offset
thereto shall be permitted or allowed except as otherwise provided herein.
8. In case of an emergency if Lessee shall not be present to permit
entry, Lessor or its representatives may enter the same forcibly without
rendering Lessor or its representatives liable therefor or affecting Lessee's
obligations under this Lease.
9. No payment by Lessee or receipt by Lessor of a lesser amount than
the monthly rent herein stipulated shall be deemed to be other than on
account of the earliest stipulated rent then due, nor shall any endorsement
or statement on any check or any letter accompanying any check or payment as
rent be deemed an accord and satisfaction, and Lessor shall accept such check
or payment without prejudice to Lessor's right to recover the balance of such
rent or pursue any other remedy in this lease provided.
10. The submission of this Lease for examination does not constitute a
reservation of or option for the Leased Premises, and this Lease shall become
effective as a Lease only upon execution and delivery thereof by Lessor and
Lessee.
11. This Lease shall be governed by, and construed in accordance with
the laws of the State of Wisconsin. If any provision of this Lease or the
application thereof to any person or circumstances shall to any extent, be
invalid or unenforceable, the remainder of this Lease shall not be affected
thereby and each provision of the Lease shall be valid and enforceable to the
fullest extent permitted by the law.
12. Lessee shall, in the event of the sale or assignment of Lessor's
interest in the building of which the Leased Premises form a part, or in the
event of any proceedings brought for the foreclosure thereof, or in the event
of exercise of the power of sale under any mortgage made by Lessor covering
the Leased Premises, attorn to the purchaser and recognize such purchaser as
Lessor under this Lease.
13. In the event of any sale or other transfer of the Industrial
Facility or this Lease, or a lease of the entire Industrial Facility, the
named Lessor shall be entirely relieved of all obligations hereunder from and
after the date of the transfer; provided, however, that the transferee shall
assume the same.
14. In the event Lessor desires to obtain mortgage financing and
Lessor's mortgagee or
<PAGE>
mortgagees request modifications or amendments to this Lease, then Lessee
agrees to execute such modifications or amendments as required.
Notwithstanding the foregoing, Lessee shall not be required to execute any
modifications or amendments hereto which shall modify the provisions of this
lease relating to the amount of rent or other charges reserved, the size and
location of the Leased Premises, the duration of the term of this Lease or
which otherwise materially adversely affect Lessee's and or Lessor's rights
and obligations hereunder. Lessee further agrees to otherwise cooperate with
Lessor's efforts in obtaining said mortgage financing.
15. If Lessor shall fail to perform any covenant, term or condition of
this Lease upon Lessor's part to be performed, and if as consequence of such
default, Lessee shall recover a money judgment against Lessor, such judgement
shall be satisfied only out of the proceeds of sale received upon execution
of such judgment and levied thereon against the right, title, and interest of
Lessor in the Industrial Facility Site and out of rents or other income from
such property receivable by Lessor, or out of the consideration received by
Lessor from the sale or other disposition of all or any part of Lessor's
right, title and interest in the Industrial Facility Site, and neither Lessor
nor any of its partners shall be liable for any deficiency.
16. Lessee represents and warrants that the execution and delivery of
this Lease has been duly authorized by the board of directors of Lessee and
the officers of Lessee, who are executing and attesting to this Lease have
full power, authority and right to do so, and the execution of this Lease by
such officers is sufficient and legally binding on Lessee without the joinder
or approval of any other party.
17. Except as expressly otherwise provided, all of the terms covenants
and conditions hereof shall be binding upon and inure to the benefit of the
heirs, personal representatives, successors in interest and assigns of the
parties hereto.
18. Whenever consent or approval of Lessor is required for any act of
Lessee herein, the same shall not be unreasonably withheld by Lessor,
EXCEPTING as to signs, Article XI and subleasing by Lessee, where the
subjective decision of the Lessor to withhold such consent shall be deemed
conclusive. See Article XV.
19. This lease has been executed in four, (4) counterparts or copies,
each of which shall be deemed an original.
20. Unless required by local government or fire authorities to have and
make such keys available, Lessor will not maintain possession of any keys to
Lessee's premises. Should emergency entrance to Lessee's premises become
necessary, and should the lack of keys require that the premises be damaged
in order to gain entry, Lessee shall bear all costs of repairs resulting
therefrom.
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease by their
duly authorized partner/officers as of the date written above.
WITNESS LESSOR: THE INTREPID COMPANY
/s/ Kathryn Linden By:/s/ Paul M. Kolosso
- ----------------------- -----------------------------
Paul M. Kolosso, General Partner
LESSEE: COMPANY 2000, INC.
By:/s/ Wayne O. Gemas its President
------------------
Wayne O. Gemas
Attest:
-------------------------
its
--------- ---------
<PAGE>
STOCK PURCHASE AGREEMENT
BETWEEN
SPORTSSTAR MARKETING, INC.
AND
WAYNE O. GEMAS
EXHIBIT W
WAYNE GEMAS CONSULTING AGREEMENT
<PAGE>
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is made this 29th day of March,
1999, by and between SPORTSSTAR MARKETING, INC. ("Purchaser") and WAYNE 0.
GEMAS ("Consultant").
INTRODUCTION
Pursuant to a Stock Purchase Agreement (the "Stock Purchase Agreement")
dated March 26, 1999, by and between Purchaser and Consultant, the Purchaser
is acquiring the shares of Consultant in College Bound Student-Athletes, Inc.
In connection with the closing of the Stock Purchase Agreement, Purchaser
desires that Consultant enter into this Agreement to provide assistance to
Purchaser following the closing of the Stock Purchase Agreement. To satisfy a
condition of the Stock Purchase Agreement, and in return for the
consideration stated herein, Consultant is willing to enter into this
Agreement.
AGREEMENT
In consideration of the promises and mutual covenants contained herein,
the parties agree as follows:
1. CONSULTING SERVICES. During the five (5) years commencing on the
date that Consultant receives payment of $100,000 pursuant to Section
1(b)(i)(A) of the Stock Purchase Agreement (the "Effective Date"), Consultant
will provide consultative and advisory services to Purchaser on all matters
pertaining to the business acquired by Purchaser pursuant to the Stock
Purchase Agreement. Consultant will make himself available to provide such
services to Purchaser for at least two (2) days each month. Consultant will
devote his reasonable best efforts to the provision of services hereunder to
Purchaser. The services which Consultant will perform will be scheduled by
the parties on a mutually convenient basis, with each party to make
reasonable efforts to accommodate the other's reasonable requests.
2. FEE AND BENEFITS. It is agreed that the fee for the above
services shall begin to accrue on the Effective Date and shall be One
Thousand Five Hundred Dollars ($1,500.00) per month, payable monthly.
Consultant shall also be entitled to participate in Purchaser's health care
plan from the date of the "Closing" as that term is defined in the Stock
Purchase Agreement until May 1, 2003. Such health care coverage shall be
comparable to Consultant's current health care coverage. Consultant's right
to participate in the Purchaser's medical plan until the date set forth
above, shall continue despite termination of this Agreement, unless such
termination is for "cause" by the Purchaser, as defined below.
3. TERMINATION. This Agreement may be terminated by Consultant,
without cause, upon thirty (30) days prior notice at any time on or after
eighteen (18) months from the Effective Date. This Agreement may be
terminated by Purchaser for cause, at any time, effective upon written notice
to Consultant. The term "cause" shall mean only one of the following: (a)
Consultant has materially breached this Agreement, which breach remains
uncured to the reasonable satisfaction of the Board
<PAGE>
of Directors for thirty (30) days after Consultant receives written notice
thereof from the Board of Directors; (b) Consultant has committed willful
misconduct or any willful violation of law in the performance of Consultant's
duties to Purchaser; (c) Consultant has willfully failed to follow
reasonable, lawful and explicit instructions of the Board of Directors of
Company concerning the operations or business of the Purchaser; (d)
Consultant has been convicted of a felony deemed by Purchaser to be adverse
to its business or reputation; (e) Consultant has willfully misappropriated
funds or property of Purchaser; (f) Consultant has willfully obtained a
personal profit from any transaction which constitutes a corporate opportunity
of Purchaser, unless the transaction was approved in writing by Purchaser's
Board of Directors after full disclosure of all details relating to such
transaction; or (g) Consultant has breached the confidentiality or
non-compete provisions of the Stock Purchase Agreement.
4. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and
benefit the parties hereto and their assigns, executors, heirs, or
successors, provided that the Consultant will not assign any obligation
hereunder without Purchaser's prior written consent, which consent may be
withheld for any reason.
5. AMENDMENT, MODIFICATION OR WAIVER. No amendment, modification or
waiver of any condition, provision or term of this Agreement will be valid
or of any effect unless made in writing, signed by the party or parties to be
bound. Any waiver by any party of any default of the other party will not
affect or impair any right arising from any subsequent default.
6. SEVERABLE PROVISIONS. Each provision of this Agreement is intended
to be severable. If any provision hereof is illegal or invalid for any
reason, such illegality or invalidity will not affect the remainder of this
Agreement.
7. ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding of the parties respecting the transaction contemplated hereby
and supersedes all prior agreements and understandings between the parties
respecting the subject matter of this Agreement.
8. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
first above written.
SPORTSSTAR MARKETING, INC.
By: /s/ William Kroske
----------------------------------
Title: President
--------------------------------
WAYNE O. GEMAS
/s/ Wayne O. Gemas
--------------------------------------
2
<PAGE>
EXHIBIT 10.6
STOCK PURCHASE AGREEMENT
BETWEEN
SPORTSSTAR MARKETING, INC.
AND
WAYNE 0. GEMAS
EXHIBIT V
KEVIN GEMAS EMPLOYMENT AGREEMENT
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT is made and entered into as of the 29
day of March, 1999, by and between Kevin W. Gemas (hereinafter referred to as
the "Executive") and SportsStar Marketing, Inc., its subsidiaries, divisions
and affiliated and related companies (hereinafter collectively referred to as
the "Company" or "SSMK").
RECITALS
A. SSMK purchased all of the issued and outstanding capital stock of
College Bound Student-Athletes, Inc. ("CBSA") pursuant to a Stock Purchase
Agreement dated March 26, 1999 (the "Purchase Agreement").
B. The Purchase Agreement provides for the employment of the Executive
to assist in the continuation of the CBSA business under the ownership and
management of SSMK, and the Executive desires to accept employment with SSMK.
C. SSMK has offered employment to Executive for the compensation and
other benefits hereinafter set forth, and the Executive is willing to accept
employment on such terms.
NOW THEREFORE, in consideration of the foregoing premises and of the
covenants and agreements hereinafter contained and contained in the Purchase
Agreement and the Exhibits attached thereto, the parties agree as follows:
EMPLOYMENT AND REMUNERATION
1. EMPLOYMENT RELATIONSHIP. Company agrees to employ Executive for an
initial term of five years, with annual extensions thereafter on the terms
and conditions set forth herein. Company and Executive understand and agree
that Executive is considered to be part of executive and management personnel
of Company and/or professional staff to executive and management personnel of
Company, as contemplated by C.R.S. Section 8-2-113(2)(d), a copy of which is
attached hereto as "Exhibit 1". As a member of Company's executive and
management personnel and/or professional staff to executive and management
personnel, Executive's duties and responsibilities are to include, but not be
limited to, the duties and responsibilities set forth on the attached "Exhibit
2".
2. COMPENSATION. Company agrees that Executive shall be entitled to not
less than the current benefits/compensation enjoyed as well as the bi-monthly
payment of compensation, an annual paid vacation, health and life insurance
coverage, sickness and accident benefits and coverage under any pension plan,
as set forth on the attached "Exhibit 2." It is understood and agreed that
Company may from time to time modify the specific terms and conditions of
these entitlements.
3. EXPENSES. Company agrees that Executive shall be entitled to
reimbursement for traveling, entertainment and other expenses reasonably
incurred by Executive in the performance
- 1 -
<PAGE>
of his employment obligations and responsibilities. It is understood and
agreed that Company's liability in this regard shall be limited by the terms
and conditions of Company policy in effect on the date that the expense is
incurred.
FIDUCIARY OBLIGATIONS
OF EXECUTIVE
4. FULL TIME COMMITMENT. Executive agrees to devote his full energies,
abilities, attention and business time to the performance of his employment
obligations and responsibilities. Executive further agrees that he will not
engage in any activity which conflicts or interferes with, or in any way
compromises, his performance of those obligations and responsibilities.
5. CONFIDENTIALITY. Executive recognizes that by virtue of his
employment by Company, he will be granted otherwise prohibited access to
confidential, proprietary information and data of Company which is not known
either to its competitors or within the collegiate student athlete recruiting
business and academic recruiting and related financial planning business
generally and which has independent economic value to Company. This
information (hereinafter referred to as "Confidential Information") includes
trade secrets, as contemplated by C.R.S. Sections 7-74-102(4) and
8-2-113(2)(b), (a copy of which is attached hereto as Exhibit "1") and also
includes, but is not limited to: the whole or any portion or phase of any
technical information, process, procedure, formula, improvement, confidential
business or financial information, business plan, listing of names,
addresses, or telephone numbers, or other information relating to Company's
business which is secret and of value, including, but not limited to, data
relating to Company's unique marketing and servicing programs, procedures and
techniques; business, management and personnel strategies; the criteria and
formulae used by Company in pricing its product; lists of prospects,
candidates and potential college athletic recruits compiled by Company's
management and research staff; the identity, addresses, telephone numbers,
authority and responsibilities of key contacts at Company accounts,
including, but not limited to, high schools and colleges; details concerning
the academic, athletic and personal backgrounds of student-athlete collegiate
scholarship candidates, including attributes of the scholarship candidates;
commission rates of Company personnel; and other data showing the
particularized requirements and preferences of clients and Company accounts,
including, but not limited to, high schools and colleges. Executive
recognizes that this Confidential Information constitutes a valuable property
of Company, developed over a long period of time and at substantial expense.
Accordingly, Executive agrees that he will not, at any time during his
employment by Company or for a period of five years after termination of
employment, divulge such Confidential Information or make use of such
Confidential Information for his own purposes or the purposes of another.
6. PROPRIETARY INTEREST IN BUSINESS. Executive recognizes that by
virtue of his employment by Company, he will be afforded numerous and
extensive resources to assist him in the solicitation, development,
production and servicing of business clients. Executive understands and
agrees that all efforts that he expends and programs and strategies he
develops in this regard shall be for the permanent and exclusive benefit of
Company, that Company shall
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<PAGE>
secure and retain indefinitely the proprietary interest in all such business
clients, and that Executive will not undertake any action which could in any
way disturb Company's relationship with said business clients and Company
accounts.
TERMINATION OF
EMPLOYMENT RELATIONSHIP
7. DEFINITION OF FOR CAUSE. The term "for cause," as used in this
Agreement, shall mean only one of the following: (a) Executive has materially
breached this Agreement, which breach remains uncured to the reasonable
satisfaction of the Board of Directors for thirty (30) days after Executive
receives written notice thereof from the Board of Directors; (b) Executive
has committed willful misconduct or any willful violation of law in the
performance of Executive's duties to Company; (c) Executive has willfully
failed to follow reasonable, lawful and explicit instructions for the Board
of Directors of Company concerning the operations or business of the Company;
(d) Executive has been convicted of a felony deemed by Company to be adverse
to its business or reputation; (e) Executive has willfully misappropriated
funds or property of Company; (f) Executive has willfully obtained a personal
profit from any transaction which constitutes a corporate opportunity of the
Company, unless the transaction was approved in writing by Company's Board of
Directors after full disclosure of all details relating to such transaction;
or (g) Executive has breached the confidentiality or non-compete provisions
of this Agreement.
8. TERMINATION OF EXECUTIVE FOR CAUSE. If Executive is terminated
for cause by Company, upon the date of termination, Company shall be relieved
of its duties and obligations to pay Executive any additional compensation
that would otherwise be due under Paragraph 2 of this Executive Employment
Agreement. Upon termination, Company will calculate the Compensation due to
Executive as of the date of termination and shall pay to Executive such
compensation within 5 days. Such payment will discharge all further
obligations of Company to Executive. If Executive is terminated for cause by
Company, Executive shall be bound by the provisions of Paragraphs 13 and 14
of this Agreement.
9. VOLUNTARY TERMINATION. In the event Executive elects to
voluntarily terminate his employment pursuant to notice as provided in
paragraph 12 hereof, Company shall pay Executive his prorated compensation to
the date of termination, and Executive will be vested in all earned stock
options which are exercisable as of the date of termination. Upon payment by
Company of such prorated compensation and the exercise by Executive of such
stock options, Company shall be relieved of all further obligations to
Executive under this Agreement. In such event, Executive will be bound by the
provisions of paragraphs 13 and 14 hereof.
10. TERMINATION FOR NON-PERFORMANCE. As a condition to continued
employment, Executive will be expected to substantially meet the operating
goals of the Company, such goals to be determined in writing by the mutual
agreement of the Chief Executive Officer of the Company and Employee by June
15 of each year, commencing June 15, 1999. Failure to meet these performance
standards may, in the discretion of Company, be grounds for termination. In
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<PAGE>
such event, and if Executive is not otherwise in default under the terms of
this Agreement, Company will compensate Executive as follows:
10.1 If such termination occurs during the first year of
employment, Executive will receive a severance payment equal to three (3)
months' salary and any stock options granted and vested to Executive as of
the date of such termination.
10.2 If such termination occurs during the second year of
employment, Executive will receive a severance payment equal to five (5)
months' salary and any stock options granted and vested to Executive as of
the date of such termination.
10.3 If such termination occurs during the third year of
employment or any year thereafter, Executive will receive a severance payment
equal to six (6) months' salary and any stock options granted and vested to
Executive as of the date of such termination.
11. NOTICE PERIOD. Executive and Company understand and agree that
should Executive elect to voluntarily terminate employment, that he will give
Company 30 days' advance written notice (the "Notice Period"). Company may,
at its option, pay Executive for the Notice Period in lieu of active
employment during the Notice Period. It is understood that a party's exercise
of its rights under this paragraph shall be without prejudice to any other
right or remedy which it may have at law, in equity, or under this Agreement,
including, without limitation, Company's right to terminate such employment
without notice for cause.
11.1 Company agrees to continue in effect during the Notice
Period the compensation and benefits to which Executive may be entitled under
Paragraph 2 and 3 of this Agreement.
11.2 Executive agrees that during the Notice Period, he will
cooperate fully with Company in all matters relating to the winding up of any
pending work and the orderly transfer to other Company employees of accounts
and matters for which he has most recently been responsible.
11.3 Executive agrees that, prior to the expiration of the
Notice Period, he will return to Company all lists of prospects, candidates
and potential college athletic recruits compiled by Company's management and
research staff, or by Executive while employed by Company, and all business
records and materials related thereto, whether in tangible form, or on
computer hard disks, diskettes, on tape drives or any electronic media,
computer literature, correspondence, notes, memoranda, reports, summaries,
manuals, proposals, contracts and other documents of any kind which relate in
any way to the business of Company, including specifically all materials
which comprise or refer to Company's Confidential Information. It is
understood and agreed that Executive will not retain any copy, facsimile or
note intended to memorialize any such data. Executive further understands and
agrees that Company's Confidential Information and trade secrets, even if
contained in the memory of Executive, remains the sole and exclusive property
of Company and subject to the terms of this Executive Employment Agreement.
-4-
<PAGE>
11.4 Executive understands and agrees that, at or about the
expiration of the Notice Period, Company may convene an exit interview to
review the status of accounts and manners for which Executive has most
recently been responsible; ensure that Executive has fully obtained his
entitlements under this Agreement; and/or confirm that Executive clearly
understands the nature and scope of his post-employment obligations.
POST-EMPLOYMENT OBLIGATIONS
12. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. Executive recognizes
the highly sensitive nature of the Confidential Information and trade secrets
to which he will have access during his employment and acknowledges Company's
legitimate interest in safeguarding same from disclosure. Accordingly,
Executive agrees that he will not, at any time, either while employed by
Company or for a period of five years following the termination of his
employment, make any independent use of, publish or disclose, or authorize
anyone else to publish or disclose, to any other person or organization, any
of Company's Confidential Information, including, but not limited to, trade
secrets, except as required by Company in the course of Executive's duties as
an employee of Company. The restrictions expressed herein shall not apply,
however, to information that is in the public domain without breach of this
Agreement.
13. NON-COMPETE. Executive recognizes Company's legitimate interest in
promoting, during and for a reasonable period of time following the
termination of Executive's employment, those Company accounts and business
contacts with which Executive will be associated during his employment and
acquired by Company pursuant to the Purchase Agreement. Accordingly,
Executive understands and agrees that while employed by Company and for a
period of three years following the termination of his employment by the
Executive or for cause by the Company, he will not, directly or indirectly,
engage in the activities prohibited in Section 4.(a)(i) through (iii) of the
Purchase Agreement. The geographic limitation within which the Executive
shall not compete includes any states in which Company conducts its business
as of the date of the termination of Executive's employment with the Company.
Notwithstanding this location limitation, Executive will not, during the
noncompetition period, solicit or perform work for any of Company's existing
customers or clients as of the date of termination of Executive's employment,
regardless of the location from which such work is performed. If the
geographic limitation set forth herein is deemed to be unreasonable,
Executive agrees to abide by the maximum geographic limitation decided by a
court of competent jurisdiction. In the event that Company abandons the
business acquired pursuant to the Purchase Agreement, or that the rights to
the CBSA Mark, College Bound Student-Athletes (CBSA) name and Software
revert back to the Seller under the terms of the Purchase Agreement, the
restrictions in this Section 13 will be null and void and of no effect in
restricting the Executive.
-5-
<PAGE>
ENFORCEMENT
14. BREACH OF AGREEMENT. Executive and Company understand and agree
that any breach or evasion of any term of this Executive Employment Agreement
will potentially give rise to actions for breach of contract or tort, which
may be brought in any court of competent jurisdiction. Executive recognizes
that the rights and privileges granted to him by this Agreement, his services
and his corresponding covenants to Company, are of a special, unique and
extraordinary character, the loss of which cannot reasonably or adequately be
solely compensated for in damages in any action at law or through the offset
or withholding of any monies to which he otherwise might be entitled from
Company. Accordingly, Executive understands and agrees that Company shall
also be entitled to equitable relief, including a temporary restraining order
and preliminary and permanent injunctive relief, to prevent a breach of this
Agreement. The remedies available to Company under this Executive Employment
Agreement are cumulative. Company may, in its sole discretion, elect to
pursue all or any of such remedies. Such remedies are in addition to any
given by law or equity and may be enforced successively or concurrently.
14.1 This Agreement shall be governed by and construed in
accordance with the laws of the state of Colorado.
14.2 The provisions of this Agreement are intended to be
interpreted and construed in a manner which makes such provisions valid,
legal and enforceable. In the event any provision of this Agreement is found
to be partially or wholly invalid, illegal or unenforceable, such provision
shall be modified or restricted to the extent and in the manner necessary to
render such provision valid, legal and enforceable. It is expressly
understood and agreed between the parties that this modification or
restriction may be accomplished by mutual accord between the parties or,
alternatively, by disposition of a court of law. If such provision cannot
under any circumstances be so modified or restricted, it shall be excised
from this Agreement without affecting the validity, legality or
enforceability of any remaining provisions.
14.3 In the event a legal action is commenced by either party
hereto to enforce or determine the meaning of any term or provision of this
Executive Employment Agreement, the substantially prevailing party in such
action will be entitled to recover reasonable attorneys' fees and costs
incurred in the prosecution of such action.
MISCELLANEOUS
15. Except as hereinafter provided, this Agreement supersedes all
existing Company policies, and all previous agreements between the parties;
to the extent that such policies and agreements consider subject matters
herein addressed. Any and all prior covenants entered into by Executive for
the benefit of Company and relating to restrictions on Executive's business
activities after termination of employment with Company remain in full force
and effect.
-6-
<PAGE>
16. This Agreement shall inure to the benefit of and shall be binding
upon the successors and assigns of Company and may be enforced by any
subsidiary of Company for whom Executive has provided services hereunder.
17. As used in this Agreement, all terms of masculine gender shall be
construed, where appropriate, to be of the feminine gender.
ACKNOWLEDGMENT
Executive and Company, by its designated representative, hereby
acknowledge that they have read and understand each of the provisions of this
Agreement, that they have had the opportunity to discuss the terms and
conditions of this Executive Employment Agreement, prior to signing, with
independent counsel, that they have executed this Agreement voluntarily and
with full knowledge of its significance, and that they intend to be fully
bound by the same.
KEVIN W. GEMAS SPORTSSTAR MARKETING, INC.
/s/ Kevin W. Gemas By: /s/ William Kroske
- ---------------------------------- -------------------------------
Title: President
----------------------------
Witness: Attest:
- ---------------------------------- ----------------------------------
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<PAGE>
EXHIBIT 1
TO
EXECUTIVE EMPLOYMENT AGREEMENT
OF
KEVIN W. GEMAS
<PAGE>
LABOR RELATIONS SECTION 8-2-113
(4) The provision of such employment information shall not constitute a
violation of the prohibition against blacklisting as provided in sections
8-2-110 and 8-2-111, nor shall it constitute an unfair labor practice in
violation of any provision of article 3 of this title.
(5) In order for the immunity from civil liability and the
nonapplicability of the blacklisting prohibitions provided in this section to
apply, a copy of the employment reference must be sent by the institution
providing such reference to the last-known address of the applicant for whom
the reference is given. An individual who is the subject of such a reference
may secure a copy of the employment reference without charge from the
institution providing such reference by appearing in person and requesting
such copy.
Laws 1989, H.B.1133, Section 1.
SECTION 8-2-112. UNLAWFUL TO PUBLISH NOTICE OF BOYCOTT
It is unlawful to print or circulate any notice of boycott, boycott
card, sticker, banner, sign, or dodger publishing or declaring that a boycott
or ban exists, or has existed or is contemplated against any person, firm, or
corporation doing a lawful business, or publish the name of any judicial
officer or other public officer upon any notice of boycott, boycott card,
sticker, banner, sign, or other similar list because of any lawful act or
decision of such official.
Laws 1905, H.B. 158, Section 2.
PRIOR COMPILATIONS: Rev.St.1908, Section 399; Comp.Laws 1921, Section 4163;
C.S.A.1935, C. 97, Section 91; C.R.S.1953, Section 80-4-12; C.R.S.1963,
Section 80-11-12.
LIBRARY REFERENCES
Labor Relations KEY 301.
WESTLAW Topic No. 232A.
C.J.S. Labor Relations Section 286.
NOTES OF DECISIONS
CONSTRUCTION AND APPLICATION 1
JURISDICTION 2
---------------
1. CONSTRUCTION AND APPLICATION
Colorado boycott statute applied to all persons, including plaintiffs,
though neither of them was an employee, employer or labor organization and
plaintiffs would not lack standing on that ground to bring action seeking
declaratory judgment and temporary and permanent injunction against
enforcement of Colorado boycott statute. Resident Participation of Denver,
Inc. v. Love, D.C.Colo.1971, 322 F.Supp. 1100.
2. JURISDICTION
Where request had not been made by industrial commission or its director
that action be taken against plaintiffs for violation of Colorado boycott
statute but statute's prohibition against printing or circulating boycott
notices would apply to plaintiffs' proposed conduct and offices of both
attorney general and district attorney had indicated willingness to
prosecute, three-judge district court would retain jurisdiction in suit
seeking declaratory judgment and temporary and permanent injunction against
enforcement of statute, over claim that case was not ripe for adjudication.
Resident Participation of Denver, Inc. v. Love, D.C.Colo.1971, 322 F.Supp.
1100.
SECTION 8-2-113. UNLAWFUL TO INTIMIDATE WORKMAN--AGREEMENT NOT TO COMPETE
(1) It shall be unlawful to use force, threats, or other means of
intimidation to prevent any person from engaging in any lawful occupation at
any place he sees fit.
41
<PAGE>
SECTION 8-2-113 LABOR AND EMPLOYMENT
(2) Any covenant not to compete which restricts the right of any person
to receive compensation for performance of skilled or unskilled labor for any
employer shall be void, but this subsection (2) shall not apply to:
(a) Any contract for the purchase and sale of a business or the assets
of a business;
(b) Any contract for the protection of trade secrets;
(c) Any contractual provision providing for recovery of the expense of
educating and training an employee who has served an employer for a period of
less than two years;
(d) Executive and management personnel and officers and employees who
constitute professional staff to executive and management personnel.
(3) Any covenant not to compete provision of an employment,
partnership, or corporate agreement between physicians which restricts the
right of a physician to practice medicine, as defined in section 12-36-106,
C.R.S., upon termination of such agreement, shall be void; except that all
other provisions of such an agreement enforceable at law, including
provisions which require the payment of damages in an amount that is
reasonably related to the injury suffered by reason of termination of the
agreement, shall be enforceable. Provisions which require the payment of
damages upon termination of the agreement may include, but not be limited to,
damages related to competition.
Laws 1905, H.B.158, Section 3; Laws 1973, H.B.1215, Section 1; Laws 1982,
H.B.1174, Section 1.
PRIOR COMPILATIONS: Rev.St.1908, Section 400; Comp.Laws 1921, Section 4164;
C.S.A.1935, c. 97, Section 92; C.R.S.1953, Section 80-4-13; C.R.S.1963,
Section 80-11-13.
HISTORICAL AND STATUTORY NOTES
The 1982 amendment added subsec. (3).
CROSS REFERENCES
Uniform Trade Secrets Act, see Section 7-74-101 et seq.
LAW REVIEW COMMENTARIES
Buying or Selling a Small Business in Colorado. Andrew B. Shaffer and
Brian D. Wylie, 15 Colo.Law. 2171 (Dec.1986).
Drafting a noncompetition clause for the Colorado contract. Michael J.
Katz, 20 Colo.Law. 703 (1991).
Drafting Noncompete Covenants: Statutory and Common Law Constraints.
Kathryn L. Powers, 13 Colo.Law. 757 (May 1984).
Noncompetition Covenants in Colorado. James R. Krendl, Cathy S. Krendl.
52 Den.L.J. 499 (1975).
Protecting Technical Information: The Role of the General Practitioner.
Gregory B. Abbott and Glenn K. Beaton, 12 Colo.Law. 1215 (Aug. 1983).
Trade Secret Litigation: Injunctions and Other Equitable Remedies.
Jack W. Berryhill, 48 U.Colo.L.Rev. 189 (1977).
LIBRARY REFERENCES
Extortion and Threats KEY 25.
WESTLAW Topic No. 165.
C.J.S. Threats and Unlawful Communications Sections 2 to 9.
Colorado Methods of Practice, Rev.3d Ed., Vol. 1 (1989), Krendl,
Section 267.
Colorado Personal Injury Practice, Vol. 7 (1989), Miller, Section 29.4.
NOTES OF DECISIONS
EXECUTIVE AND MANAGEMENT PERSONNEL, NONCOMPETE AGREEMENTS 9
INJUNCTIVE RELIEF, NONCOMPETE AGREEMENTS 12
MONETARY RELIEF, NONCOMPETE AGREEMENTS 13
42
<PAGE>
UNIFORM TRADE SECRETS ACT SECTION 7-74-102
Invention assignment agreements in Colorado. Ben Sparks and David
Steigerwald, 26 Colo.Law. 47 (Jan. 1997).
Protecting trade secrets in a world without borders. Elissa Safer, 27
Colo.Law. 67 (April 1998).
LIBRARY REFERENCES
Colorado Methods of Practice, 4th Ed., Vol. 1 (1997), Krendl, Section 5.6.
Colorado Methods of Practice, 4th Ed., Vol. 1B (1997), Krendl, Section 19.25.
UNITED STATES CODE ANNOTATED
Public officers and employees, disclosure of confidential information,
sanctions, see 18 U.S.C.A. Section 1905.
SECTION 7-74-101. SHORT TITLE
This article shall be known and may be cited as the "Uniform Trade Secrets
Act".
Added by Laws 1986, H.B.1260, Section 1.
HISTORICAL AND STATUTORY NOTES
UNIFORM LAW:
This section is similar to Section 9 of the Uniform Trade Secrets Act. See
14 Uniform Laws Annotated, Master Edition.
LIBRARY REFERENCES
Master and Servant KEY 60.
WESTLAW Topic No. 255.
C.J.S. Master and Servant Sections 123 to 126.
SECTION 7-74-102. DEFINITIONS
As used in this article, unless the context otherwise requires:
(1) "Improper means" includes theft, bribery, misrepresentation, breach or
inducement of a breach of a duty to maintain secrecy, or espionage through
electronic or other means.
(2) "Misappropriation" means:
(a) Acquisition of a trade secret of another by a person who knows or has
reason to know that the trade secret was acquired by improper means; or
(b) Disclosure or use of a trade secret of another without express or
implied consent by a person who:
(I) Used improper means to acquire knowledge of the trade secret; or
(II) At the time of disclosure or use, knew or had reason to know that his
knowledge of the trade secret was:
(A) Derived from or through a person who had utilized improper means to
acquire it;
(B) Acquired under circumstances giving rise to a duty to maintain its
secrecy or limit its use; or
453
<PAGE>
SECTION 7-74-102 TRADE SECRETS
(C) Derived from or through a person who owed a duty to the person seeking
relief to maintain its secrecy or limit its use; or
(III) Before a material change of his position, knew or had reason to know
that it was a trade secret and that knowledge of it had been acquired by
accident or mistake.
(3) "Person" means a natural person, corporation, business trust, estate,
trust, partnership, association, joint venture, government, governmental
subdivision or agency, or any other legal or commercial entity.
(4) "Trade secret" means the whole or any portion or phase of any
scientific or technical information, design, process, procedure, formula,
improvement, confidential business or financial information, listing of names,
addresses, or telephone numbers, or other information relating to any business
or profession which is secret and of value. To be a "trade secret" the owner
thereof must have taken measures to prevent the secret from becoming available
to persons other than those selected by the owner to have access thereto for
limited purposes.
Added by Laws 1986, H.B.1260, Section 1.
HISTORICAL AND STATUTORY NOTES
UNIFORM LAW:
This section is similar to Section 1 of the Uniform Trade Secrets Act. See
14 Uniform Laws Annotated, Master Edition.
LAW REVIEW AND JOURNAL COMMENTARIES
Drafting a noncompetition clause for the Colorado contract. Michael J.
Katz, 20 Colo.Law. 703 (1991).
Introduction to the law of trade secrets. Daniel P. Powell, 23 Colo.Law.
2125 (1994).
LIBRARY REFERENCES
Master and Servant (Key)60.
WESTLAW Topic No. 255.
C.J.S. Master and Servant Sections 123 to 126.
Colorado Civil Procedure Forms and Commentary, Vol. 12 (1996), Knapp, Sections
26.33, 42.16, 42.18.
Colorado Methods of Practice, 4th Ed., Vol. 1B (1997), Krendl, Section 19.25.
NOTES OF DECISIONS
COMPUTER PROGRAMS, TRADE SECRET 6
CONSTRUCTION AND APPLICATION 1
CONSTRUCTION WITH OTHER LAWS 2
INJUNCTION 8
LIABILITY 7
MISAPPROPRIATION 3
SALES AND MARKETING INFORMATION,
TRADE SECRET 5
TRADE SECRET 4-6
IN GENERAL 4
COMPUTER PROGRAMS 6
SALES AND MARKETING INFORMATION 5
1. CONSTRUCTION AND APPLICATION
Use of device for recovering gold particles from sand and gravel to produce
copies was unauthorized use sufficient to render those involved in copying and
production of copies liable for misappropriation of trade secret, where device
had been lent for express purpose of testing product to determine whether
multiple copies of the device would be purchased; under those circumstances,
there was implied duty to preserve device in its original condition and to not
use it for purposes other than testing. Mineral Deposits Ltd. v. Zigan,
App.1988, 773 P.2d 606, certiorari denied.
454
<PAGE>
EXHIBIT 2
TO
EXECUTIVE EMPLOYMENT AGREEMENT
OF
KEVIN W. GEMAS
TERMS OF EMPLOYMENT
BEGINNING 4/16/99, 1999
--------
COMMENCEMENT OF EMPLOYMENT: Upon the closing of SSMK's purchase of all
issued and outstanding shares of common
stock of College Bound Student -
Athletes, Inc.
TITLE: Chief Operating Officer - Profile Division
of SSMK
RESPONSIBILITIES: Responsible for efficient profile
fulfillment and profitability of the Profile
Division. Also responsible for maximizing
sales and marketing activities in
coordination with SSMK with direct
responsibility for meeting corporate
sponsorship and athletic director contract
revenue goals. Duties to be provided at
Cedarburg, Wisconsin office during the
initial 24 months of employment.
REPORTING RESPONSIBILITY: CEO of SSMK
COMPENSATION:
ANNUAL SALARY: $90,000, subject to annual review.
BENEFITS: Standard benefit package for Executive
Management but not less than current benefit
package; and automobile allowance of $1,100
per month.
INCENTIVE COMPENSATION: After one (1) year, entitled to participate
in SSMK executive management bonus and stock
option plans.
<PAGE>
GOALS: The following goals are established for the
initial 12-month period, but are subject to
modification upon mutual written agreement
of Employee and Chief Executive Officer of
Company:
1. Achieve an average of 150 units at an
average of $795 per unit in retail profile
sales per month for one year after April 1,
or until such time as the Media Program
generates at least $50,000 in additional
sales per month, whichever is the earlier to
occur.
2. Obtain and collect fees from new
corporate sponsorships at an average of
$25,000 per month and a total amount of not
less than $300,000 for the twelve month
period commencing ninety days after the
effective date of this Agreement.
3. Obtain 24 new college athletic
director contracts during the initial 15
month period, at an aggregate of $50,000.
4. Reduce the fulfillment cost per
profile to $100 per unit during the 12
months.
5. Achieve a minimum 90% satisfaction
rate during the 12 month period, provided
that an average of 150 units at an average
of $795 per unit in retail profiles per
month are sold during this period.
<PAGE>
ARTHUR HARRISON & CO.
4290 S. HUDSON PARKWAY
ENGLEWOOD, COLORADO 80110
TELEPHONE (303) 753-6410
FAX (303) 727-6271
Mr. John J. Grace
Chartwell International , Inc.
5275 DTC Parkway, Suite 110
Englewood, Colorado 80111
Dear John,
This will outline my offer to represent Sports Star Marketing, Inc. as
acting Chief Financial Officer. My services will be performed on an as needed
basis and are estimated to average approximately 60 hours per month.
Billings will be submitted monthly based on actual time worked as follows:
$15.00 per hour payable on receipt of billings.
$35.00 per hour payable upon receipt of financing of $750,000 or more.
$90.00 per hour in the form of a warrant or stock option based on current
offering valuation.
All travel and authorized business expenses will be reimbursed by Sports
Star consistant with the policy for Company employees.
If this meets with approval, please sign below.
Sincerely,
/s/ [ILLEGIBLE] /s/ Arthur D. Harrison
- ------------------------------
Accepted Chair of Board
<PAGE>
SPORTSSTAR MARKETING, INC.
Term Sheet for Rick Newton
as Chairman of the Board
April 19, 1999
POSITION: Chairman of the Board, SportsStar Marketing, Inc.
RESPONSIBILITIES:
> > Review and approve Senior Executive appointments.
> > Review and approve business plans, strategic plans, budgets, and
product lines.
> > Recruit one or two strategic Board Members who will invest or bring
capital to the Company.
> > Initiate leads and assist in closing acquisition candidates and
funding sources if and as needed.
> > Introduce media and other contacts to promote and expand
SportsStar's business opportunities, particularly BLUECHIP
ILLUSTRATED.
> > Usual Chairman functions, including conducting at least four Board
Meetings per year.
ESTIMATED TIME REQUIREMENTS: 5days / month
> > 30,000 shares of SportsStar common stock as signing bonus.
> > 25,000 shares of SportsStar as Chairman.
> > Five year option to purchase 1,000,000 shares of SportsStar common
shares at $0.50 per share to be vested at the rate of 200,000 shares
per year; initial estimated `Chairman' time period is 6 months.
> > Participation fee based on the Lehman Formula for obtaining and
closing any acquisitions or financing for SportsStar, except no
"double-up" on American Express.
> > Upon reaching $100,000 of profitability on an operating basis, an
annual salary of $25,000 commences, if still in role as Chairman.
> > If change from Chairman to regular Board Member, normal compensation
rates of Board Members replaces above compensation, and
participation fee set, as with other Board Members, based on level
of contribution to the deal.
OTHER:
> > Normal indemnification from liabilities for SportsStar until
Directors and Officers liability insurance is obtained.
> > All pre-approved out of pocket expenses reimbursed two to three
weeks after submission of documentation.
<PAGE>
PROMISSORY NOTE
$5,000 Englewood, Colorado
June 15, 1999
For value received the undersigned, SportsStar Marketing, Inc. ("SSMK"),
hereby promises to pay to Arthur D. Harrison ("the Holder") at 4290 S.
Hudson Parkway, Englewood, Colorado 80110 the sum of five thousand dollars
($5,000) with a simple interest rate of 10% per annum, payable quarterly, in
lawful money of the United States.
This Note is due and payable in full on or before December 15, 1999 or at the
option of the Holder at the time any financing is received by SSMK.
This Note shall be considered in default if not paid in full on or before
December 15,1999, or if interest due is not paid within five (5) days written
notice. Should default occur, the entire amount of unpaid principal and
interest shall, at the option of the Holder, become immediately due and
payable.
In addition, this Note is convertible into restricted SSMK common shares at
the option of the Holder after September 15, 1999. The number of shares to be
received by the Holder shall be calculated as the amount of principal
outstanding on this Note divided by the average of the Bid/Ask price ("strike
price") on the date the Holder notifies SSMK of his intention to exercise
this option. This option is not exercisable if the strike price falls below
$0.30 per share.
The undersigned agrees, in the event of default, to pay reasonable costs of
collection, including attorney's fees incurred by the Holder, in connection
with the collection of this Note. The undersigned hereby waives presentment,
demand, protest, notice of protest, notice of dishonor, notice of nonpayment,
and notice of any kind with respect to this Note or any guarantee of it.
This Note is assignable by the Holder and the benefits and rights hereunder
inure to the benefit of the Holder's assigns, heirs, and beneficiaries.
SPORTSSTAR MARKETING, INC.
a Colorado Corporation
/s/ Rick N. Newton
-------------------------------------------
Rick N. Newton, Chairman of the Board
In addition, this Note shall be personally guaranteed by Rick N. Newton and
Dr. Janice A. Jones, as an individuals, should default occur or SSMK files
bankruptcy.
/s/ Rick N. Newton /s/ Janice A. Jones
- ----------------------------- --------------------------------
Rick N. Newton Dr. Janice A. Jones
<PAGE>
EMPLOYMENT AND STOCK OPTION AGREEMENT
THIS AGREEMENT ("Agreement") is effective August 9,1999, by and between
COLLEGE BOUND STUDENT ALLIANCE, INC., a Colorado corporation ("CBSA"), and
JEROME M. LAPIN ("Employee").
AGREEMENT
1. EMPLOYMENT AND DUTIES.
(a) EMPLOYMENT. CBSA hereby employs Employee, and Employee hereby
accepts employment as Chief Executive Officer ("CEO") of CBSA upon the terms
stated in this Agreement. Employee shall also serve as a director and the
parties anticipate that Employee will be appointed as Chairman of the Board of
Directors before December 31, 1999.
(b) DUTIES. Employee is engaged as the CEO of CBSA, subject to the
direction of the Board of Directors and in accordance with the Bylaws of CBSA to
perform such duties as he shall reasonably be directed by the Board of the
Directors of CBSA to perform.
(c) SERVICES. Employee shall: (i) devote up to the equivalent of
three (3) working days per week to the business and affairs CBSA; (ii) use his
best efforts, skills and abilities to promote CBSA's best interests; and (iii)
perform the duties described in Section 1(b) and such other duties as may be
assigned to him by CBSA in compliance with all applicable laws and regulations
and in accordance with the industry standards.
2. TERM OF EMPLOYMENT.
The term of Employee's employment under this Agreement (the "Term") shall
commence on August 9, 1999, and shall end on August 1, 2000, unless sooner
terminated pursuant to Section 9 of this Agreement. The Term shall be
automatically renewed for one-year periods ("Subsequent Terms") unless thirty
(30) days before August 1, 2000 and all subsequent one-year periods of this
Agreement either party gives notice in writing to the other of its intention not
to renew the Term. Unless otherwise stated, Term shall also refer to Subsequent
Terms.
3. BASE COMPENSATION.
CBSA agrees to pay Employee for his services hereunder compensation on
an annualized basis in the amount of $60,000.00 from August 9, 1999 through
August 1, 2000. Employee's compensation for the period from August 9, 1999
through December 31, 1999 shall be payable on January 3, 2000. Thereafter,
Employee's compensation shall be payable in accordance with CBSA's
then-existing general payroll procedures. Employee's base salary will be
re-negotiated by the parties no later than June 1, 2000, to be effective
August 1, 2000. Thereafter, the annual salary shall be reviewed by CBSA and
Employee, on or before June 1 of each year during the term of this Agreement
and may be adjusted by mutual agreement of Employee and CBSA. CBSA shall
withhold from the compensation to Employee federal and state withholding
taxes, federal FICA and FUTA payments and any other usual payroll deductions.
4. PERFORMANCE BONUSES. CBSA, from time to time, may pay to Employee
additional compensation or bonuses upon such terms and conditions as CBSA shall
deem to be in its business interest. The board of directors of CBSA, in its sole
and absolute discretion, shall determine the payment and the amount of any
additional compensation or bonuses, if any, and the board of directors
determination shall be final and conclusive.
5. STOCK OPTIONS.
(a) Employee is hereby granted the option, for a period of five
(5) years, to purchase 500,000 shares of CSBA common stock at eighty percent
(80%) of the stock's fair market value as of June 1, 1998 as follows: (i)
250,000 shares on execution of this Agreement, and (ii) 250,000 shares on the
one-year anniversary of the effective date of this Agreement. Employee must
exercise any stock options granted within five (5) years of the effective date
of this Agreement or as otherwise provided in this Agreement.
<PAGE>
(b) The option price shall be paid in full in cash each time the
option is exercised by Employee for part or all of the 500,000 shares of stock,
as provided in this Section 5.
(c) Employee must be employed by CBSA at the time the option is
exercised in order to be eligible for any stock options pursuant to this Section
5, except as otherwise provided in this Section 5.
(e) In the event Employee is terminated "for cause" as provided in
this Agreement, Employee shall not be eligible for any stock option regardless
of the date of termination.
(f) In the event Employee is terminated "without cause" as
provided in this Agreement, Employee shall be eligible for the stock options
granted as provided in Section 5(a) on the date of termination.
(g) In the event Employee elects to terminate his employment for
any reason, Employee shall not thereafter be eligible to exercise any stock
option regardless of the date of termination.
(h) In the event of a Change in Control in CBSA, as defined below,
Employee shall be eligible for all stock options as provided in Section 5(a)
regardless of the date of termination. For purposes of this Agreement, Change in
Control shall mean: (aa) sale of substantially all of the assets of CBSA, or
(bb) the acquisition by any corporation or group of associated persons acting in
concert, of an aggregate of one hundred percent (100%) of the outstanding shares
of voting stock coupled with or followed by the election as directors of CBSA of
persons who were not directors at the time of such acquisition if such persons
shall become a majority of the Board of Directors of CBSA, or (cc) the
effectiveness of a registration statement filed by CBSA under the Securities Act
of 1933, as amended with respect to any shares of stock of CBSA.
(i) The aggregate number of shares of stock available pursuant to
this Section 5, the stock subject to option, and the price per share of stock
all shall be proportionately adjusted for any increase or decrease in authorized
or issued shares of CBSA resulting from: (aa) a subdivision or consolidation of
shares or any other capital adjustment, or (bb) any other increase or decrease
in such stock effected without receipt of full and fair consideration by CBSA.
Upon dissolution or liquidation of CBSA, or upon a merger or consolidation in
which CBSA is not the surviving corporation, all options shall terminate, except
as provided in Section 5(i).
(j) Employee acknowledges that the potential options granted and
securities to be issued pursuant to this Agreement, including stock to be issued
upon exercise of any option granted hereunder, have not been and will not be
registered under the Securities Act of 1933, as amended or applicable State
Securities Acts, and in addition to all other transfer restrictions provided in
this Agreement shall not be sold, pledged, hypothecated, donated or otherwise
transferred (whether or not for consideration) by the holder except by Employee
upon the issuance to CBSA of a favorable opinion of Employee's counsel which
shall be subject to the review and acceptance by CBSA, and the submission to
CBSA of such other evidences may be satisfactory to counsel for CBSA, in each
such case to the effect that any transfer shall not be in violation of such
acts. Employee further acknowledges that all shares of stock issued pursuant to
this Agreement will contain a conspicuous restrictive legend containing the
information above and any other information now or hereafter included on CBSA's
standard restrictive stock legends.
6. TRANSFER RESTRICTIONS ON STOCK.
(a) RESTRICTIONS ON TRANSFER. Employee shall not, during the term
of this Agreement, transfer any of the stock, or any interest therein, unless
Employee shall have procured an effective current registration statement
relating to the stock under the Securities Act of 1933 (the "Act") or an opinion
of counsel, in form and substance satisfactory to the CBSA, to the effect that
registration is not required because Employee has satisfied all of the
requirements set forth under Rule 144 promulgated under the Act by the
Securities and Exchange Commission ("Rule 144"). Any attempted disposition of
the stock or any interest therein while it is restricted shall be null and void
and of no effect.
2
<PAGE>
(b) OBLIGATIONS OF TRANSFEREES. Each transferee or any subsequent
transferee of stock or any interest in such stock shall hold such stock or
interest in the stock subject to all of the provisions of this Agreement and
shall make no further transfers except as provided in this Agreement.
7. OTHER BENEFITS.
Employee shall be allowed to participate in CBSA's medical, dental and
disability insurance, and other benefits, if any, in accordance with CBSA's
policy as in effect from time to time. Employee's vacation, holidays and sick
leave shall be determined by mutual agreement of the parties.
8. FACILITIES: EXPENSES.
CBSA shall provide Employee with such facilities, equipment, services and
supplies as CBSA reasonably determines are suitable to Employee's position and
adequate for the performance of Employee's duties under this Agreement. However,
Employee shall have, maintain and use, when appropriate, an automobile, home
telephone and other facilities and equipment reasonably needed in connection
with employment under this Agreement. The Company shall reimburse Employee for
any and all reasonable ordinary course travel, entertainment or other
business-related out of pocket expenses incurred by Employee. Any extraordinary
travel, entertainment or other business-related expenses outside the ordinary
course shall require the prior written consent of CBSA.
9. TERMINATION.
(a) UPON DEATH. This Agreement shall terminate upon the death of
Employee. Upon termination by reason of Employee's death, CBSA shall pay to the
personal representative of the estate of Employee the base compensation owed to
Employee under the terms of Section 3 of this Agreement to the date of death.
(b) UPON ILLNESS OR DISABILITY. This Agreement shall terminate
immediately following three (3) months in any twelve (12) month period during
which Employee is unable to perform his duties as a result of illness, injury or
other incapacity.
(c) TERMINATION BY CBSA "FOR CAUSE". In the event of the
occurrence of any of the following and upon written notice to Employee, CBSA, at
any time, may immediately terminate the term of Employee's employment hereunder
"for cause": (i) gross negligence or willful misconduct by Employee in
performing his duties here under, (ii) dishonesty or theft by Employee; (ii)
conviction of Employee of any felony, or of any lesser crime or offense
involving the property of CBSA; (iv) repeated refusal of Employee to follow the
reasonable directions of the Board of Directors of CBSA; or (v) any other
material breach of this Agreement by the Employee which is not cured after ten
(10) days written notice. Upon termination of Employee's employment for cause,
CBSA shall pay to Employee his base compensation for services performed by him
to the date of termination as provided in Section 3 of this Agreement.
(d) TERMINATION BY EMPLOYEE. Notwithstanding any other provision
of this Agreement to the contrary, Employee may terminate his employment with
CBSA upon thirty (30) days prior written notice.
(e) TERMINATION DUE TO LACK OF FUNDING. Either party may terminate
this Agreement if CBSA fails to achieve its bridge financing or other funding of
at least $750,000 on or before December 31, 1999. Until such funding is
obtained, Employee's salary shall accrue but remain unpaid.
10. COVENANT AGAINST COMPETITION. Without the express written consent of
CBSA, during the term of Employee's employment with CBSA and for a period of
three (3) years from the termination of Employee's employment with CBSA,
Employee will not, directly or indirectly, own, manage, operate, control, be
employed by, perform services for, consult with, solicit business for,
participate in, or be connected with the ownership, management, operation, or
control of: (i) any business which is materially similar to or competitive with
CBSA's business in the United States, or (ii) with any of CBSA's then-existing
vendors, affiliates or customers in the United States.
3
<PAGE>
11. COVENANT AGAINST DISCLOSURE OF CONFIDENTIAL INFORMATION. During the
term of Employee's employment with CBSA and for a period of three (3) years
after termination of Employee's employment with CBSA, Employee shall not use for
any purpose or disclose to any person or entity any confidential information
acquired during the course of employment with CBSA. Employee shall not, directly
or indirectly, copy, take, or remove from CBSA's premises, any of CBSA's books,
records, customer lists, or any other documents, materials or confidential
information.
12. MISCELLANEOUS.
(a) AMENDMENT. No modification, waiver, amendment, discharge or
change to this Agreement shall be valid unless the same is in writing and signed
by the party against which the enforcement of said modification, waiver,
amendment, discharge or change is sought.
(b) NOTICE. All notices, demands or other communications given
hereunder shall be in writing and shall be deemed to have been duly given upon
personal delivery or on the first business day after mailing by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
To CBSA: College Bound Student Alliance, Inc.
Attn: Janice A. Jones
5275 DTC Parkway, Suite 110
Englewood, CO 80111
To the Employee: Jerome M. Lapin
3019 South Lakeridge Trail
Boulder, CO 80302
or to such other address or to such other person as any party shall designate to
the other for such purpose in the manner hereinafter set forth.
(c) ENTIRE AGREEMENT. This Agreement contains the entire agreement
and understanding by and between CBSA and Employee with respect to the covenants
contained herein, and no representations, promises, agreements, or
understandings, written or oral, not herein contained shall be of any force or
effect. No valid waiver of any provision of this Agreement at any time shall be
deemed a waiver of any other provision of this Agreement at such time or will be
deemed a valid waiver of such provision at any other time.
(d) SURVIVAL. Upon any termination of this Agreement, neither
party shall have any further rights, duties or obligations to the other under
this Agreement except for: (i) Employee's covenants, obligations and duties to
be performed after any such termination, inclusive of Section 10 hereof, and
(ii) the parties' liability to each other for their obligations, duties and
responsibilities under this Agreement prior to such termination.
(e) ENFORCEMENT: SEVERABILITY. It is the intention of the parties
that the provisions of this Agreement shall be enforceable to the fullest extent
permissible under applicable law, but that the unenforceability (or modification
to conform to such law) of any provision or provisions hereof shall not render
unenforceable, or impair, the remainder thereof. If any provision or provisions
of this Agreement shall be deemed invalid or unenforceable, either in whole or
in part, this Agreement shall be deemed amended to delete or modify, as
necessary, the offending provision or provisions and to alter the bounds thereof
in order to render it valid and enforceable to the fullest extent permissible.
The noncompetition, nondisclosure, and nonsolicitation obligations of Employee
contained in this Agreement are intended to be extended by the length of time
during which Employee shall have been in breach of any of those provisions.
(f) GOVERNING LAW AND VENUE. This Agreement shall be construed in
accordance with the laws of the State of Colorado and any proceeding arising
between the parties in any matter pertaining or related to this Agreement only
shall be held in a court of competent jurisdiction for Boulder, Colorado.
(g) LITIGATION. In any action between the parties to enforce any
of the terms of this Agreement or any other matter arising from this Agreement,
the prevailing party shall be entitled to recover
4
<PAGE>
its costs and expenses, including reasonable attorney's fees, incurred up to and
including all negotiations, trials and appeals, whether or not litigation is
initiated.
(h) BENEFIT OF AGREEMENT. This Agreement may be assigned only by
CBSA, the Employee's duties being of a personal nature. Subject to the
restrictions on transferability and assignment contained herein, the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties, their successors, permitted assigns, personal representatives,
estates, heirs and legatees.
(i) CAPTIONS. The captions in this Agreement are for convenience
and reference only and in no way define, describe, extend or limit the scope of
this Agreement or the intent of any provisions hereof.
(j) NUMBER AND GENDER. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular or plural,
as the identity of the party or parties, or their personal representatives,
successors and assigns may require.
(k) FURTHER ASSURANCES. The parties agree to do, execute,
acknowledge and deliver or cause to be done, executed, acknowledged or delivered
and to perform all such acts and deliver all such deeds, assignments, transfers,
conveyances, powers of attorney, assurances, stock certificates and other
documents, as may, from time to time, be required herein to effect the intent
and purpose of this Agreement.
(l) STATUS. Nothing in this Agreement shall be construed or shall
constitute a partnership, joint venture, agency, or lessor-lessee relationship;
but rather, the relationship established hereby is that of employer-employee.
(m) COUNTERPARTS. This Agreement may be executed in any number of
counterparts. All executed counterparts shall constitute one Agreement
notwithstanding that all signatories are not signatories to the original or the
same counterpart.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
effective as of the date first above written.
CBSA:
COLLEGE BOUND STUDENT ALLIANCE, INC.
a Colorado corporation
By: /s/ Rick Newton
--------------------------------------
WITNESSES: Name: Rick Newton
------------------------------------
/s/ Katherine Hoch Title: CHAIR OF BOARD
- -------------------------------- -----------------------------------
- --------------------------------
(as to CBSA)
EMPLOYEE:
/s/ Jerome M. Lapin
-----------------------------------------
Jerome M. Lapin
WITNESSES:
/s/ Janice Jones
- --------------------------------
- --------------------------------
(as to Employee)
5
<PAGE>
NON-TRANSFERABLE STOCK OPTION
COLLEGE BOUND STUDENT ALLIANCE, INC. (FORMERLY SPORTSSTAR MARKETING,
INC.), a Colorado corporation, 5275 DTC Parkway, Suite 110, Englewood, Colorado
80111 ("Company"), for and in consideration of $10.00 and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, irrevocable grants unto JEROME LAPIN ("Optionee"), the option
("Option") to purchase up to 250,000 shares ("Shares") of the Company's no par
value common stock ("Common Stock") subject to the following terms and
conditions:
1. PURCHASE PRICE. The purchase price for Shares pursuant to this
Option is 250,000 shares at eighty percent (80%) of the stocks fair
market value as of June 1, 1999 per share which payment shall be
made at the time of exercise by:
(a) Delivery to the Company of cash or a certified check payable
to the order of the Company in the amount equal to the
purchase price of the Shares; or
(b) Delivery to the Company of Common Stock of the Company then
owned by the Optionee having a fair market value equal in
amount to the purchase price of such Shares; or
(c) Any combination of any such method of payment.
Optionee shall have no rights with respect to dividends or have any
other rights as a shareholder with respect to Shares subject to this
Option until he has given written notice of the exercise of this
Option and has paid in full for such Shares.
2. TIME OF EXERCISE. This Option may be exercised any time on or before
August 9, 2004. This Option shall expire five (5) years from the
date the Option becomes exercisable. The period of time during which
the Option may be exercised is referred to herein as the "Option
Period."
3. CHANGE OF CAPITALIZATION. If prior to the exercise of this Option,
the Company effects one or more stock split-ups, stock dividends, or
there are increases or reductions of the number of shares of its
Common Stock outstanding without receiving compensation therefore in
money, services or property, other than pursuant to any executive or
employee option plan which shall have been or is thereafter approved
by the shareholders of the Company within one year of the issuance
pursuant thereto, the number of shares of Common Stock subject to
the Option hereby granted shall (a) if a net increase shall have
been affected in the number of outstanding shares of the Company's
Common Stock, be proportionately increase, and the cash
consideration payable per share shall be proportionately reduced;
and (b) if a net reduction shall have been affected in the number or
outstanding shares of the Company's Common Stock, be proportionately
reduced and the cash consideration payable per share be
proportionately increased. In the event that the Company is
dissolved, liquidated, merged, consolidated with another
<PAGE>
corporation, sells all or substantially all of the Company's assets
or enters into some other type of corporate reorganization in which
the Company is not the surviving corporation or in which the Company
is the surviving corporation but holders of the Company's Common
Stock receive securities of another corporation, this Option shall
terminate as of the effective date of such event provided that
immediately prior to such event, Optionee shall have the right to
exercise this Option in whole or in part; however, such exercise
shall be subject to the restrictions contained in this Option.
4. NOTICE OF EXERCISE. This Option may be exercise in whole or in part
at any time and from time to time by the delivery of written notice
to the Company together with payment for the number of Shares
purchased. This notice shall state the election to exercise the
Option, the number of Shares in respect of which the Option is being
exercised, and shall be signed by the person exercising the Option.
5. NON-TRANSFERABLE. This Option may not be transferred by Optionee
other than by will or laws of descent and distribution. During
Optionee's lifetime this Option shall be exercisable only by
Optionee.
6. RESTRICTED SECURITIES. Optionee, by the acceptance of this Option,
represents and acknowledges that because of Optionee's relationship
with the Company, Optionee has available full information concerning
the Company's affairs. Further, Optionee agrees that before Optionee
purchases any stock pursuant to this Option, Optionee will represent
to the Company in writing such stock is being purchased for
investment and not for purposes of distribution, the stock will
constitute restricted securities as defined in Rule 144 promulgated
pursuant to the Securities Act of 1933, as amended, and Optionee
agrees that (I) the Company may place a stop order against the
transfer of the Shares with its transfer agent and (ii) the stock
certificate evidencing such stock may be stamped with a legend
substantially as follows:
"The securities represented by this Certificate may not be
offered for sale, sold or otherwise transferred except
pursuant to an effective registration statement under the
Securities Act of 1933 (the "Act"), or pursuant to an
exemption from registration under the Act, the availability of
which is to be established to the satisfaction of the
Company."
7. SHARES RESERVED. The Company shall at all times during the duration
of this Option reserve and keep available such number of shares of
its stock as will be sufficient to satisfy the requirements of this
Option.
8. COLORADO LAW. This Option shall be construed according to Colorado
law.
<PAGE>
Dated: SEPTEMBER 13, 1999
COLLEGE BOUND STUDENT ALLIANCE, INC.
a Colorado corporation
By:
---------------------------------------
Title:
------------------------------------
Attest: SEAL
------------------------------------
, Secretary
------------------------
Accepted by Optionee:
----------------------------
Jerome Lapin
<PAGE>
PROMISSORY NOTE
$52,500.00 U.S. Englewood, Colorado
March 1, 2000
College Bound Student Alliance, Inc., a Colorado corporation, with
address at 5275 DTC Parkway, Suite 110, Englewood, Colorado 80111 ("Maker"),
promises to pay to the order of Chartwell International, Inc., a Nevada
corporation, with address at 5275 DTC Parkway, Suite 110, Englewood, Colorado
80111 ("Holder"), on order, at such place as the holder of this Note shall
designate in writing, the principal sum of FIFTY-TWO THOUSAND FIVE HUNDRED
DOLLARS ($52,500.00), with interest commencing on February 1, 2000 at the
rate of ten percent (10%) per annum payable monthly. The principal sum, plus
all accrued and unpaid interest, shall be due and payable the earlier of
March 1, 2001 or receipt of $1,000,000 of long-term financing obtained by the
Maker, unless extended by Holder, at its sole discretion. Any partial
payments by Maker to Holder shall be credited first on the interest then due,
and the remainder of such payments shall be credited on the principal sum,
and interest shall thereupon cease upon the amount so credited on said
principal sum.
This Note amends and replaces the note of same amount dated January 28,
2000.
The Holder of this Note may accelerate this Note, that is, declare the
entire unpaid balance due and payable, upon the failure to pay when due, any
installment of principal or interest due hereunder or the insolvency of
Maker, or guarantor of this Note. Protest is hereby waived.
Upon any default hereunder, the undersigned Maker agrees to pay all
costs of collection and attorney's fees incurred by the note holder in
collecting this Note, or in exercising any judicial or non-judicial remedies
available to such note holder. Venue for any such collection or enforcement
action shall be solely in Arapahoe County, Colorado.
Maker:
College Bound Student Alliance, Inc.
a Colorado Corporation
By: /s/ Rick Newton
-------------------------------
Rick Newton, Chairman
<PAGE>
PROMISSORY NOTE
$17,500.00 U.S. Englewood, Colorado
March 1, 2000
College Bound Student Alliance, Inc., a Colorado corporation, with
address at 5275 DTC Parkway, Suite 110, Englewood, Colorado 80111 ("Maker"),
promises to pay to the order of Chartwell International, Inc., a Nevada
corporation, with address at 5275 DTC Parkway, Suite 110, Englewood, Colorado
80111 ("Holder"), on order, at such place as the holder of this Note shall
designate in writing, the principal sum of SEVENTEEN THOUSAND FIVE HUNDRED
DOLLARS ($17,500.00), with interest commencing on February 1, 2000 at the
rate of ten percent (10%) per annum payable monthly. The principal sum, plus
all accrued and unpaid interest, shall be due and payable the earlier of
March 1, 2001 or receipt of $1,000,000 of long-term financing obtained by the
Maker, unless extended by Holder, at its sole discretion. Any partial
payments by Maker to Holder shall be credited first on the interest then due,
and the remainder of such payments shall be credited on the principal sum,
and interest shall thereupon cease upon the amount so credited on said
principal sum.
This Note amends and replaces the Note of same amount dated February 1,
2000.
The Holder of this Note may accelerate this Note, that is, declare the
entire unpaid balance due and payable, upon the failure to pay when due, any
installment of principal or interest due hereunder or the insolvency of
Maker, or guarantor of this Note. Protest is hereby waived.
Upon any default hereunder, the undersigned Maker agrees to pay all
costs of collection and attorney's fees incurred by the Holder in collecting
this Note, or in exercising any judicial or non-judicial remedies available
to such Holder. Venue for any such collection or enforcement action shall be
solely in Arapahoe County, Colorado.
Maker:
College Bound Student Alliance, Inc.
a Colorado Corporation
By: /s/ Rick Newton
-------------------------------
Rick Newton, Chairman
<PAGE>
SUBSIDIARIES OF THE REGISTRANT
The only subsidiary of College Bound Student Alliance, Inc. is College Bound
Student-Athletes, Inc., a Wisconsin corporation which does business under
that name.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTHS ENDED JANUARY 31, 2000 AND THE
AUDITED FINANCIAL STATEMENTS AS OF AND FOR THE FISCAL YEARS ENDED JULY 31, 1999
AND 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR YEAR
<FISCAL-YEAR-END> JUL-31-2000 JUL-31-1999 JUL-31-1998
<PERIOD-START> AUG-01-1999 AUG-01-1998 AUG-01-1997
<PERIOD-END> JAN-01-2000 JUL-31-1999 JUL-31-1998
<CASH> 11,624 82,383 173,832
<SECURITIES> 0 0 0
<RECEIVABLES> 49,692 49,052 0
<ALLOWANCES> 28,000 28,000 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 49,290 118,245 252,012
<PP&E> 103,735 103,735 46,923
<DEPRECIATION> 30,344 20,449 10,299
<TOTAL-ASSETS> 1,395,401 1,557,226 465,827
<CURRENT-LIABILITIES> 1,190,436 909,217 61,476
<BONDS> 751,592 751,976 0
0 0 0
0 0 0
<COMMON> 18,562 17,785 15,987
<OTHER-SE> (565,189) (121,752) 388,364
<TOTAL-LIABILITY-AND-EQUITY> 1,395,401 1,557,226 465,827
<SALES> 0 0 0
<TOTAL-REVENUES> 655,481 706,886 194,672
<CGS> 0 0 0
<TOTAL-COSTS> 435,003 413,015 0
<OTHER-EXPENSES> 747,553 1,055,181 842,895
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 35,041 41,014 9,204
<INCOME-PRETAX> (562,116) (793,990) (657,427)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (562,116) (793,990) (657,427)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (562,116) (793,990) (657,427)
<EPS-BASIC> (0.03) (0.05) (0.04)
<EPS-DILUTED> (0.03) (0.05) (0.04)
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
College Bound Student Alliance, Inc.:
We consent to the use of our report included herein.
KPMG LLP
Denver, Colorado
April 7, 2000
